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EXHIBIT 1.1
COMMERCE CASUALTY GROUP, INC.
2,000,000 UNITS, EACH UNIT CONSISTING OF
ONE SHARE OF COMMON STOCK,
ONE SERIES A REDEEMABLE COMMON STOCK PURCHASE WARRANT, AND
ONE SERIES B REDEEMABLE COMMON STOCK PURCHASE WARRANT,
(AND 4,000,000 SHARES OF COMMON STOCK ISSUABLE UNDER THE WARRANTS)
UNDERWRITING AGREEMENT
Dallas, Texas
______, 1998
First London Securities Corporation
As Representative of the Several
Underwriters named in Schedule A
c/o First London Securities Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Commerce Casualty Group, Inc. (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell to such Underwriters as named in Schedule A (the
"Underwriters") to this Underwriting Agreement (the "Agreement"), for whom First
London Securities Corporation ("First London") is acting as the Representative
(the "Representative"), pursuant to the terms of this Agreement, on a"firm
commitment" basis, 2,000,000 Units (the "Units") at $5.1875 per Unit (the
"Initial Public Offering Price"). Each Unit consists of one share (the "Shares")
of Common Stock, $.001 par value per share (the "Common Stock"); one Redeemable
Series A Common Stock Purchase Warrant (the "Series A Warrants"); and one
Redeemable Series B Common Stock Purchase Warrant (the "Series B Warrants"). The
Series A Warrants and the Series B Warrants may sometimes be collectively
referred to as the "Warrants." The Units, the Shares and the Warrants offered
hereby are referred to collectively as the "Securities." The Shares and Warrants
included in the Units may be not be traded separately until ________, 1999 (180
days from the date of this Prospectus) unless earlier separated upon three days
notice from the Representative (as hereinafter defined) to the Company. The
Warrants may not be exercised until they are separated from the Units.
Each Series A Warrant entitles the holder to purchase one share of
Common Stock at a price of $ 6.00 per share during the five-year period
commencing on the date of the Prospectus. The Series A Warrants are redeemable
by the Company for $9.00 per Warrant. Each Series B Warrant entitles the holder
to purchase one share of Common Stock at a price of $ 7.00 per share during the
five-year period commencing on the date of the Prospectus. The Series B Warrants
are redeemable by the Company for $10.00 per Warrant. Redemption requires not
less than 30 nor more than 60 days written notice provided there is then in
effect a current registration statement under the Securities
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Act of 1933, as amended (the "Act"), with respect to the issuance and sale of
the Common Stock upon the exercise of the Warrants. Any redemption of the
Warrants during the one-year period commencing on the date of this Prospectus
shall require the written consent of First London. In addition, the Company
proposes to grant to the Underwriters (or, at the option of the Representative,
to the Representative, individually) the option referred to in Section 2(b) to
purchase all or any part of an aggregate of 300,000 additional Units (the
"Option Securities").
You have advised the Company that you and the other Underwriters desire
to purchase, severally, the Securities, and that you have been authorized by the
Underwriters to execute this Agreement on their behalf. The Company confirms the
agreements made by it with respect to the purchase of the Securities by the
several Underwriters on whose behalf you are signing this Agreement, as follows:
1. Representations and Warranties of the Company.
The Company, jointly and severally with each of its wholly owned
subsidiaries, represents and warrants to, and agrees with each of the
Underwriters as of the Effective Date (as defined above), the date of this
Agreement, the Closing Date (as hereinafter defined) and the Option Closing Date
(as hereinafter defined) that:
(a) A registration statement (File No. 333-______) on Form SB-2
relating to the public offering of the Securities, including a preliminary form
of the prospectus, copies of which have heretofore been delivered to you, has
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations (the "Rules and Regulations") of the Commission
thereunder, and has been filed with the Commission under the Act. The Company
has prepared in the same manner and proposes to file, prior to the Effective
Date of such registration statement, an additional amendment or amendments to
such registration statement, including a final form of Prospectus, copies of
which shall be delivered to you. "Preliminary Prospectus" shall mean each
prospectus filed pursuant to the Rules and Regulations under the Act prior to
the Effective Date. The registration statement (including all financial
schedules and exhibits) as amended at the time it becomes effective and the
final prospectus included therein are respectively referred to as the
"Registration Statement" and the "Prospectus," except that (i) if the prospectus
first filed by the Company pursuant to Rule 424(b) of the Rules and Regulations
shall differ from said prospectus as then amended, the term "Prospectus" shall
mean the prospectus first filed pursuant to Rule 424(b), and (ii) if such
registration statement or prospectus is amended or such prospectus is
supplemented, after the effective date of such registration statement and prior
to the Option Closing Date (as hereinafter defined), the terms "Registration
Statement" and "Prospectus" shall include such registration statement and
prospectus as so amended, and the term "Prospectus" shall include the prospectus
as so supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent thereto up to the
Option Closing Date, if any, and during such longer period as the Prospectus may
be required to be delivered in connection with sales by the Underwriters or any
selected dealers: (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and Regulations;
and (ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make statements therein, in light of the
circumstances under which they are made, not misleading;
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provided, however, that the Company makes no representations, warranties or
agreement as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by the Underwriters specifically for use in
the preparation thereof. It is understood that the statements set forth in the
Prospectus with respect to stabilization, under the heading "Underwriting" and
regarding the identity of counsel to the Underwriters under the heading "Legal
Matters" constitute the only information furnished in writing by the
Underwriters for inclusion in the Prospectus.
(c) The Company and each subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions in which the nature of its business
or the character or location of its properties requires such qualification,
except where failure to so qualify will not materially affect the Company's
business, properties or financial condition.
(d) The authorized, issued and outstanding securities of the Company as
of the date of the Prospectus is as set forth in the Prospectus under
"Capitalization;" all of the issued and outstanding securities of the Company
have been, or will be when issued as set forth in the Prospectus, duly
authorized, validly issued and fully paid and non-assessable; the issuances and
sales of all such securities complied in all material respects with applicable
federal and state securities laws; the holders thereof have no rights of
rescission against the Company with respect thereto, and are not subject to
personal liability by reason of being such holders; none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any securities of the Company have been granted or
entered into by the Company; and all of the securities of the Company, issued
and to be issued as set forth in the Registration Statement, conform to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and paid
for pursuant to this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights of any security holder of
the Company. Neither the filing of the Registration Statement nor the offering
or sale of the Shares as contemplated in this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any securities of the Company, except as described in the
Registration Statement and Prospectus.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form filed
as an exhibit to the Registration Statement. The shares of Common Stock issuable
upon exercise of the Warrants have been reserved for issuance and when issued in
accordance with the terms of the Warrants and Warrant Agreement, will be duly
and validly authorized, validly issued, fully paid and non-assessable, free of
preemptive rights and no personal liability will attach to the ownership
thereof.
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The Warrant exercise period and the Warrant exercise price may not be changed or
revised by the Company without the prior written consent of First London. The
Warrant Agreement has been duly authorized and, when executed and delivered
pursuant to this Agreement will constitute the valid and legally binding
obligation of the Company enforceable in accordance with its terms.
The Units underlying the Representative Warrants and the Securities
constituting a part thereof, (each of which as defined in the Representative's
Warrant Agreement described in Section 12 herein and all of which shall be
collectively referred to as the "Representative's Warrants") have been duly
authorized and, when issued, delivered and paid for pursuant to the
Representative's Warrant Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding instruments of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the Representative's Warrant Agreement. The Shares and the Warrants,
as well as the Shares of Common Stock underlying the Warrants, have been
reserved for issuance and when issued in accordance with the terms thereof, will
be duly and validly authorized, validly issued, fully paid and non-assessable,
free of preemptive rights and no personal liability will attach to the ownership
thereof. The exercise period and the exercise price for each of the
Representatives Warrants and the Underlying Warrants may not be changed or
revised by the Company without the prior written consent of First London.
(f) This Agreement, the Warrant Agreement and the Representative's
Warrant Agreement have been duly and validly authorized, executed and delivered
by the Company, and assuming due execution of this Agreement by the other party
hereto, constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency or other laws affecting the rights of
creditors generally. The Company has full power and lawful authority to
authorize, issue and sell the Securities to be sold by it hereunder on the terms
and conditions set forth herein, and no consent, approval, authorization or
other order of any third party or any governmental authority is required in
connection with such authorization, execution and delivery or with the
authorization, issuance and sale of the Securities or the securities to be
issued pursuant to the Representative's Warrant Agreement, except such as may be
required under the Act or state securities laws, or as otherwise have been
obtained.
(g) Except as described in the Prospectus, the Company is not in
material violation, breach of or default under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach of, or constitute a
material default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the property or assets of the Company or any
of the terms or provisions of any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or by
which the Company may be bound or to which any of the property or assets of the
Company is subject, nor will such action result in any material violation of the
provisions of the certificate of incorporation or bylaws as amended of the
Company, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental body
having jurisdiction over the Company.
(h) Subject to the qualifications stated in the Prospectus, the Company
have good and marketable title to all properties and assets described in the
Prospectus as owned by each of them, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially
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significant or important in relation to its business; all of the material leases
and subleases under which the Company is the lessor or sublessor of properties
or assets or under which the Company holds properties or assets as lessee or
sublessee as described in the Prospectus are in full force and effect, and,
except as described in the Prospectus, the Company is not in default in any
material respect with respect to any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone, adverse to rights
of the Company as lessor, sublessor, lessee, or sublessee under any of the
leases or subleases mentioned above, or affecting or questioning the right of
the Company to continued possession of the leased or subleased premises or
assets under any such lease or sublease except as described or referred to in
the Prospectus; and the Company own or lease all such properties described in
the Prospectus as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus.
(i) ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company, P.C., which has examined the financial
statements, together with the related schedules and notes, for the Company and
any subsidiary of it for the periods therein stated, which have been filed with
the Commission as a part of the Registration Statement, which are included in
the Prospectus, are with respect to the Company independent accountants within
the meaning of the Act and the Rules and Regulations.
(j) The financial statements, together with the related notes and
schedules forming a part of the Registration Statement and the Prospectus,
fairly present the financial position and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply; and all audited financial statements, together with the related notes and
schedules, and the unaudited financial consolidated financial information of the
Company have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except as may be
otherwise stated therein. The selected and summary financial and statistical
data included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the audited financial
statements presented therein. No other financial statements or schedules are
required to be included in the Registration Statement. The Company's internal
accounting controls and procedures are sufficient to cause the Company to
prepare financial statements which comply in all material respects with
generally accepted accounting principles applied on a basis which is consistent
during the periods involved. Since the inception of the Company, nothing has
been brought to the attention of the Company's management that would result in
any reportable condition relating to the Company's internal accounting
procedures, weaknesses or controls.
(k) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus and to and including the
Option Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) the Company has not incurred and will not have
incurred any material liabilities or obligations, direct or contingent, and has
not entered into and will not have entered into any material transactions other
than in the ordinary course of business and/or as contemplated in the
Registration Statement and the Prospectus; (ii) the Company has not and will not
have paid or declared any dividends or have made any other distribution on its
capital stock; (iii) there has not been any change in the capital stock of, or
any incurrence of long-term debt by the Company; (iv) the Company has not issued
any options, warrants or other rights to purchase the capital stock of the
Company; and (v) there has not been and will not have been any material adverse
change in the business, financial condition or results of
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operations of the Company, or in the book value of the assets of the Company,
arising for any reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending or, to
the knowledge of the Company, threatened, any material action, suit, proceeding,
inquiry, arbitration or investigation against the Company, or any of the
officers or directors of the Company, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth, or properties of the Company.
(m) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state and foreign income and franchise tax returns and has
paid all taxes shown as due thereon; and there is no tax deficiency which has
been or to the knowledge of the Company might be asserted against the Company
that has not been provided for in the financial statements.
(n) Except as set forth in the Prospectus, each of the Company has
material licenses, permits and other governmental authorizations currently
required for the conduct of its business or the ownership of its property as
described in the Prospectus and is in all material respects in compliance
therewith and owns or possesses adequate right to use all material patents,
patent applications, trademarks, service marks, trade-names, trademark
registrations, service ▇▇▇▇ registrations, copyrights, and licenses necessary
for the conduct of such business and has not received any notice of conflict,
with the asserted rights of others in respect thereof. To the best of the
Company's knowledge, none of the activities or business of the Company are in
violation of, or cause the Company to violate, any law, rule, regulation or
order of the United States, any state, county or locality, or of any agency or
body of the United States or of any state, county or locality, the violation of
which would have a material adverse impact upon the condition (financial or
otherwise), business, property, prospective results of operations, or net worth
of the Company.
(o) The Company has not, directly or indirectly, at any time (i) made
any contributions to any candidate for political office, or failed to disclose
fully any such contribution, in violation of law or (ii) made any payment to any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other taxes
(including franchise, capital stock or other tax, other than income taxes,
imposed by any jurisdiction), if any, that are required to be paid in connection
with the sale and transfer of the Securities to the several Underwriters will
have been fully paid or provided for by the Company and all laws imposing such
taxes will have been fully complied with.
(q) All contracts and other documents which are required to be
described in or filed as exhibits to the Registration Statement have been so
described and/or filed.
(r) Except as described in the Registration Statement and Prospectus,
no holders of Common Stock or of any other securities of the Company have the
right to include such Common Stock or other securities in the Registration
Statement and Prospectus.
(s) Except as set forth in or contemplated by the Registration
Statement and the
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Prospectus, the Company has not any material contingent liabilities.
(t) Except for its subsidiaries, the Company has no equity interest in
any corporation, limited liability company, partnership, joint venture, trust or
other entity and has not entered into any binding agreements to obtain any such
equity interest.
(u) The Commission has not issued an order preventing or suspending the
use of any Preliminary Prospectus with respect to the offer and sale of the
Securities and each Preliminary Prospectus, as of its date, has conformed fully
in all material respects with the requirements of the Act and the Rules and
Regulations and did not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein not
misleading.
(v) The Company, nor, to the Company's knowledge, any of its officers,
directors, employees or stockholders, have taken or will take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any of the securities of the Company.
(w) Item 26 of Part II of the Registration Statement accurately
discloses all unregistered securities sold by the Company within the three year
period prior to the date as of which information is presented in the
Registration Statement. All of such securities were sold in transactions which
were exempt from the registration provisions of the Act and not in violation of
Section 5 thereof.
(x) Other than as set forth in the Prospectus, the Company has not
entered into any agreement pursuant to which any person is entitled, either
directly or indirectly, to compensation from the Company for services as a
finder in connection with the proposed offering, and the Company agrees to
indemnify and hold harmless the Underwriters against any losses, claims, damages
or liabilities, joint or several, which shall include, but not be limited to,
all costs to defend against any such claim, so long as such claim arises out of
agreements made or allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or 5% or greater stockholder of the Company has any direct or
indirect affiliation or association with any member of the National Association
of Securities Dealers, Inc. ("NASD"), except as disclosed to the Representative
in writing, and no beneficial owner of the Company's unregistered securities has
any direct or indirect affiliation or association with any NASD member except as
disclosed to the Representative in writing. The Company will advise the
Representative and the NASD if any 5% or greater shareholder of the Company is
or becomes an affiliate or associated person of an NASD member participating in
the distribution.
(z) The Company is in compliance in all material respects with all
federal, state and local laws and regulations respecting the employment of its
employees and employment practices, terms and conditions of employment and wages
and hours relating thereto. There are no pending investigations involving the
Company by the U.S. Department of Labor, or any other governmental agency
responsible for the enforcement of such federal, state or local laws and
regulations. There is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or to the knowledge of
the Company, threatened against or involving the Company or any predecessor
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entity. No question concerning representation exists respecting the employees of
the Company and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company.
(aa) The Company maintains, sponsors and contributes to a 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(i) and 3(37), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company has not
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA. All requirements and obligations of the Company have been fulfilled
thereunder.
(bb) Based upon written representations received from the officers and
directors of the Company, except as disclosed in the Prospectus, during the past
five years, none of the officers or directors of the Company have been:
(1) The subject of a petition under the federal bankruptcy
laws or any state insolvency law filed by or against them, or by a
receiver, fiscal agent or similar officer appointed by a court for
their business or property, or any partnership in which either or them
was a general partner at or within two years before the time of such
filing, or any corporation or business association of which either of
them was an executive officer at or within two years before the time of
such filing;
(2) Convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining either of them from,
or otherwise limiting, any of the following activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant, any
other person regulated by the Commodity Futures Trading
Commission, or an associated person of any of the foregoing,
or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee
of any investment company, bank, savings and loan association
or insurance company, or engaging in or continuing any conduct
or practice in connection with any such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection
with any violation of federal or state securities law or
federal commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or state
authority barring, suspending or otherwise limiting for more than 60
days either of their right to engage in any activity described in
paragraph (3)(i) above, or be associated with persons engaged in any
such activity;
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(5) Found by any court of competent jurisdiction in a civil
action or by the Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the
Commission has not been subsequently reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated
any federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated.
(cc) Based upon written representations received from the officers and
directors of the Company, each of the officers and directors of the Company has
reviewed the sections in the Prospectus relating to their biographical data and
equity ownership position in the Company, and all information contained therein
is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement and upon the
basis of the representations, warranties and agreements herein contained, the
Company hereby agrees to issue and sell to the Underwriters an aggregate of
2,000,000 Units at $4.67 per Unit, (the public offering price less 10%), at the
place and time hereinafter specified, in accordance with the number of Units set
forth opposite the names of the Underwriters in Schedule A attached hereto plus
any additional Securities which such Underwriters may become obligated to
purchase pursuant to the provisions of Section 9 hereof. The Securities shall
consist of 2,000,000 Units, (each Unit of which consisting of One Share, One
Series A Warrant and One Series B Warrant) to be purchased from the Company, and
the price at which the Underwriters shall sell the Securities to the public
shall be $5.1875 per Unit (consisting of $5.00 per share, $.125 per Series A
Warrant and $.0625 per Series B Warrant.).
Delivery of the Securities against payment therefor shall take place at
the offices of First London Securities Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as may be designated by the Representative)
at 10:00 a.m., Eastern Time, on such date after the Effective Date as the
Representative shall designate, but not later than ten business days (holidays
excepted) following the first date that any of the Securities are released to
you, such time and date of payment and delivery for the Securities being herein
called the "Closing Date."
(b) In addition, subject to the terms and conditions of this Agreement,
and upon the basis of the representations, warranties and agreements herein
contained, the Company hereby grants the "Option" to the Underwriters (or, at
the option of the Representative, to the Representative, individually) to
purchase all or any part of an aggregate of an additional 300,000 Units at the
same price per Unit as the Underwriters shall pay for the Securities being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Securities being referred to herein as the "Option Securities"). This Option may
be exercised within 45 days after the Effective Date upon notice by the
Underwriters (or the Representative, individually) to the Company advising as to
the amount of
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Option Securities as to which the Option is being exercised, the names and
denominations in which the certificates for such Option Securities are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by the Underwriters (or the
Representative, individually) but shall not be later than ten full business days
after the exercise of the Option, nor in any event prior to the Closing Date,
and such time and date is referred to herein as the "Option Closing Date."
Delivery of the Option Securities against payment therefor shall take place at
the offices of First London Securities Corporation. The Option granted hereunder
may be exercised only to cover over-allotments in the sale by the Underwriters
of the Securities referred to in subsection (a) above. In the event the Company
declares or pays a dividend or distribution on its Common Stock, whether in the
form of cash, shares of Common Stock or any other consideration, prior to the
Option Closing Date, such dividend or distribution shall also be paid on the
Option Securities on the Option Closing Date.
(c) The Company will make the certificates for the Securities to be
sold hereunder available to you for inspection at least two full business days
prior to the Closing Date and the Option Closing Date, respectively, at the
offices of First London, and such certificates shall be registered in such names
and denominations as you may request. Time shall be of the essence and delivery
at the time and place specified in this Agreement is a further condition to the
obligations of the Company to each Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriters hereunder will be delivered by the Company to you
for the accounts of the several Underwriters against payment of the respective
purchase prices by the several Underwriters, by certified or bank cashier's
checks in New York Clearing House funds, payable to the order of the Company or
by wire transfer in New York Clearing House funds.
In addition, in the event the Underwriters (or the Representative,
individually) exercise the Option to purchase from the Company all or any
portion of the Option Securities pursuant to the provisions of subsection (b)
above, payment for such Securities shall be made payable in New York Clearing
House funds at the offices of First London Securities Corporation, or by wire
transfer, at the time and date of delivery of such Securities as required by the
provisions of subsection (b) above, against receipt of the certificates for such
Securities by the Representative for the respective accounts of the several
Underwriters registered in such names and in such denominations as the
Representative may request.
It is understood that the Representative, individually and not as
Representative of the several Underwriters, may (but shall not be obligated to)
make any and all payments required pursuant to this Section 2 on behalf of any
Underwriters whose check or checks shall not have been received by the
Representative at the time of delivery of the Securities to be purchased by such
Underwriter or Underwriters. Any such payment by the Representative shall not
relieve any such Underwriter or Underwriters of any of its or their obligations
hereunder. It is also understood that the Representative individually, rather
than all of the Underwriters, may (but shall not be obligated to) purchase the
Option Securities referred to in subsection (b) of this Section 2, but only to
cover over-allotments.
It is understood that the several Underwriters propose to offer the
Securities to be purchased hereunder to the public upon the terms and conditions
set forth in the Registration Statement, after the Registration Statement is
declared effective by the Commission.
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3. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not at
any time, whether before or after the Effective Date, file any amendment to the
Registration Statement or supplement to the Prospectus of which you shall not
previously been advised and furnished with a copy or to which you or your
counsel shall have objected in writing, acting reasonably, or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to the
later of (i) the completion by the Underwriters of the distribution of the
Securities as contemplated hereby; or (ii) 25 days after the date on which the
Registration Statement shall have become or been declared effective, the Company
will prepare and file with the Commission, promptly upon your request, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary or advisable in connection with the distribution of the Securities
and as mutually agreed to by the Company and the Representative.
After the Effective Date and as soon as the Company is advised thereof,
the Company will advise you, and confirm the advice in writing, of the receipt
of any comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission for
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order, and, if
issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus and Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriters and the selected dealers to use the
Prospectus in connection with the sale of the Securities for such period as in
the opinion of counsel to the Underwriters the use thereof is required to comply
with the applicable provisions of the Act and the Rules and Regulations. In case
of the happening, at any time within such period as a Prospectus is required
under the Act to be delivered in connection with sales by the Underwriters or
the selected dealers, of any event of which the Company has knowledge and which
materially affects the Company or the securities of the Company, or which in the
opinion of counsel for the Company or counsel for the Underwriters, should be
set forth in an amendment to the Registration Statement or a supplement to the
Prospectus, in order to make the statements therein not then misleading, in
light of the circumstances existing at the time the Prospectus is required to be
delivered to a purchaser of the Securities, or in case it shall be necessary to
amend or supplement the Prospectus to comply with law or with the Act and the
Rules and Regulations, the Company will notify you promptly and forthwith
prepare and furnish to you copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue
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statement of a material fact or omit to state any material facts necessary in
order to make the statements in the Prospectus, in the light of the
circumstances under which they are made, not misleading. The preparation and
furnishing of any such amendment or supplement to the Registration Statement or
amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriters.
The Company will comply with the Act, the Rules and Regulations
thereunder, the Securities Exchange Act of 1934 (the "1934 Act"), and the rules
and regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will qualify to register the Securities for sale under
the securities or "blue sky" laws of such jurisdictions as the Representative
may designate and will make such applications and furnish such information as
may be required for that purpose and to comply with such laws, provided the
Company shall not be required to qualify as a foreign corporation or a dealer in
securities or to execute a general consent to service of process in any
jurisdiction in any action other than one arising out of the offering or sale of
the Securities. The Company will, from time to time, prepare and file such
statements and reports as are or may be required to continue such qualification
in effect for so long a period as the Underwriters may reasonably request.
(c) If the sale of the Securities provided for herein is not
consummated, the Company shall pay all costs and expenses incident to the
performance of the Company's obligations hereunder, including, but not limited
to, all such expenses itemized in Section 8(a) and 8(c) hereof, and the
out-of-pocket expenses of $25,000 previously paid to the Representative, if the
offering for any reason is terminated. For the purposes of this sub-paragraph,
the Representative shall be deemed to have assumed such expenses when they are
billed or incurred, regardless of whether such expenses have been paid. The
Representative shall not be responsible for any expenses of the Company or
others, or for any charges or claims relative to the proposed public offering
whether or not consummated.
(d) The Company will deliver to you at or before the Closing Date two
signed copies of the Registration Statement, including all financial statements
and exhibits filed therewith, and of each amendment or supplement thereto. The
Company will deliver to or upon the order of the several Underwriters, from time
to time until the Effective Date of the Registration Statement, as many copies
of any Preliminary Prospectus filed with the Commission prior to the Effective
Date of the Registration Statement as the Underwriters may reasonably request.
The Company will deliver to the Underwriters on the Effective Date of the
Registration Statement and thereafter for so long as a Prospectus is required to
be delivered under the Act, from time to time, as many copies of the Prospectus,
in final form, or as thereafter amended or supplemented as the several
Underwriters may from time to time reasonably request.
(e) For so long as the Company is a reporting company under either
Section 12 or 15 of the 1934 Act, the Company, at its expense, will furnish to
the Representative during the period ending five years from the Effective Date,
(i) as soon as practicable after the end of each fiscal year, a balance sheet of
the Company and any of its subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and cash flow of the Company and any
subsidiaries for such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent accountants; (ii) as
soon as they are available, a copy of all reports (financial or other) mailed to
security holders; (iii) as soon as they are available, a copy of all
non-confidential
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documents, including annual reports, periodic reports and financial statements,
furnished to or filed with the Commission under the Act and the 1934 Act; (iv)
copies of each press release, news item and article with respect to the
Company's affairs released by the Company; and (v) such other information as you
may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will make generally available to its stockholders and
to the registered holders of its Warrants and deliver to you as soon as it is
practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (which need
not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the necessary
action to become a reporting company under Section 12 of the 1934 Act, and the
Company will make all filings required to, and will have obtained approval for,
the listing of the Shares and Warrants on The Nasdaq SmallCap Market, the
Pacific Tier II Exchange or a listing on a national market, and will use its
best efforts to maintain such listing for at least five years from the date of
this Agreement.
(i) For such period as the Company's securities are registered under
the 1934 Act, the Company will hold an annual meeting of stockholders for the
election of directors within 180 days after the end of each of the Company's
fiscal years and, within 150 days after the end of each of the Company's fiscal
years will provide the Company's stockholders with the audited financial
statements of the Company as of the end of the fiscal year just completed prior
thereto. Such financial statements shall be those required by Rule 14a-3 under
the 1934 Act and shall be included in an annual report pursuant to the
requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption "Use
of Proceeds" in the Prospectus, and will file such reports with the Commission
with respect to the sale of the Securities and the application of the proceeds
therefrom as may be required by Sections 12, 13 and/or 15 of the 1934 Act and
pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and file with
the Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
reasonable opinion of counsel to the Underwriters and the Company may be
reasonably necessary or advisable in connection with the distribution of the
Securities and will use its best efforts to cause the same to become effective
as promptly as possible.
(l) On the Closing Date the Company shall execute and deliver to you
the Representative" Warrant Agreement. The Representative's Warrant Agreement
and Warrant Certificates will be substantially in the form of the
Representative's Warrant Agreement and Warrant Certificates filed as an exhibit
to the Registration Statement.
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(m) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued securities which are issuable upon
exercise of the warrants issuable pursuant to the Representative's Warrant
Agreement outstanding from time to time.
(n) Each beneficial owner of the Company's securities (including
Warrants, Options and Common Stock of the Company), as of the Effective Date,
shall agree in writing, in a form satisfactory to the Representative and Nasdaq,
not to sell, transfer or otherwise dispose of any of such securities or
underlying securities (except in a transaction other than on the open market
with a transferee who agrees to be bound by this provision) during the period of
time, commencing on the Effective Date, stated for each such beneficial owner on
Schedule B (the "lock-up period"), or any longer period required by any state or
required by Nasdaq as a condition to listing on The Nasdaq SmallCap Market,
without the prior written consent of First London and Nasdaq. Without the prior
written consent of Nasdaq, the Company shall not, directly or indirectly,
release any individual from his lock-up agreement or effect the transfer on its
books of any shares sold in contravention of a lock-up agreement. Any of such
securities that are originally registered in a name of a original beneficial
owner and are subsequently registered under a different name will be subject to
such original beneficial owner's lock-up period. Sales of the Company's
securities by officers and/or directors of the Company prior to the expiration
of their respective lock-up periods shall be effected through the
Representative.
(o) The Company shall pay to the Representative upon the exercise of
Warrants a fee equal to 5% of the gross proceeds received by the Company from
the exercise of the Warrants. Such fee will be paid to the Representative or
their designees no sooner than 12 months after the Effective Date. Additionally,
the Representative or their designees must be designated in writing by the
Warrant holder as having solicited the Warrant in order to receive the fee and
such fee shall not be paid with respect to Warrants held in a discretionary
account without the prior written approval of such exercise by the discretionary
account holder.
(p) Prior to the Closing Date, the Company shall at its own expense,
undertake to list the Company's securities in the appropriate recognized
securities manual or manuals published by Standard & Poor's Corporation and such
other manuals as the Representative may designate, such listings to contain the
information required by such manuals and the Uniform Securities Act. The Company
hereby agrees to use its best efforts to maintain such listing for a period of
not less than five years unless the Company's securities otherwise qualify for a
secondary market trading exemption. The Company shall take such action as may be
reasonably requested by the Representative to obtain a secondary market trading
exemption in such states as may be reasonably requested by the Representative.
(q) During the one year period commencing on the Closing Date, the
Company will not, without the prior written consent of First London, offer,
sell, contract to sell grant options or warrants to purchase or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock except for securities issued in
connection with an acquisition or merger by the Company or upon the issuance of
Common Stock upon the exercise of Warrants.
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(r) Prior to the Closing Date, the Company will not issue, directly or
indirectly, without the prior consent of First London, any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering of the Securities other than routine customary
advertising of the Company's products and services, and except as required by
any applicable law or the directives of any relevant regulatory authority in any
relevant jurisdiction.
(s) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the financial
statements to be included in any registration statement or similar disclosure
document to be filed by the Company hereunder, or any amendment or supplement
thereto. For a period of five years from the Effective Date, the Company, at its
expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit) the Company's financial statements for
each of the first three fiscal quarters prior to the announcement of quarterly
financial information, the filing of the Company's quarterly report and the
filing of quarterly financial information to stockholders.
(t) The Company shall retain First Union Transfer & Trust Company as
the transfer agent for the securities of the Company, or such other transfer
agent as First London may agree to in writing. In addition, the Company shall
direct such transfer agent to furnish the Representative with daily transfer
sheets as to each of the Company's securities as prepared by the Company's
transfer agent and copies of lists of stockholders and warrantholders as
reasonably requested by the Representative, for a five year period commencing
from the Closing Date.
(u) The Company shall cause the Depository Trust Company, or such other
depository of the Company's securities, to deliver a "special security position
report" to the Representative on a daily and weekly basis at the expense of the
Company, for a five year period from the Effective Date.
(v) Following the Effective Date, the Company shall, at its sole cost
and expense, prepare and file such Blue Sky applications with such jurisdictions
as the Representative shall designate and the Company may reasonably agree.
(w) On the Effective Date and for a period of three years thereafter,
the Company's Board of Directors shall consist of a minimum of seven persons,
two of whom shall be independent and not otherwise affiliated with the Company
or associated with any of the Company's affiliates. First London Securities
Corporation shall have the right for a period of two years from the Effective
Date to nominate one advisory director to the Board of Directors. The advisory
director shall have the same privileges as a normal director, including equal
compensation, but will not have the right to vote on issues presented to the
Board of Directors.
(x) For such period as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement or a new Registration Statement to become effective in compliance with
the Act and without any lapse of time between the effectiveness of any such
post-effective amendments and cause a copy of each Prospectus, as then amended,
to be delivered to each holder of record of a Warrant and to furnish to each of
the Underwriters and each dealer as many copies of each such Prospectus as such
Underwriter or such dealer may reasonably request. Such post-effective
amendments or new Registration Statements shall also register the
Representative" Warrant and all the securities underlying the Representative'
Warrant. The Company shall not call for redemption of any of the Warrants unless
a Registration Statement covering the securities underlying the Warrants or
Representative'
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Warrant has been declared effective by the Commission and remains current at
least until the date fixed for redemption. In addition, the Warrants or
Representative' Warrant shall not be redeemable during the first year after the
Effective Date without the written consent of First London.
(y) Until such time as the securities of the Company are listed or
quoted on either the New York Stock Exchange, Nasdaq National Market or the
American Stock Exchange, the Company shall engage the Company's legal counsel to
deliver to the Representative a written opinion detailing those states in which
the Shares and Warrants of the Company may be traded in non-issuer transactions
under the Blue Sky laws of the fifty states ("Secondary Market Trading
Opinion"). The initial Secondary Market Trading opinion shall be delivered to
the Representative on the Effective Date, and the Company shall continue to
update such opinion and deliver same to the Representative on a timely basis,
but in any event at the beginning of each fiscal year, for a five year period,
if requested.
4. Conditions of Underwriters, Obligations. The obligations of the
several Underwriters to purchase and pay for the Securities which they have
agreed to purchase hereunder from the Company are subject, as of the date hereof
and as of the Closing Date and the Option Closing Date, as the case may be, to
the continuing accuracy of, and compliance with, the representations and
warranties of the Company herein, to the accuracy of statements of officers of
the Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or at such
later time or on such later date as you may agree to in writing; (ii) at or
prior to the Closing Date or Option Closing Date, as the case may be, no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the Commission and no proceeding for that purpose shall have been
initiated or pending, or shall be threatened, or to the knowledge of the
Company, contemplated by the Commission; (iii) no stop order suspending the
effectiveness of the qualification or registration of the Securities under the
securities or "blue sky" laws of any jurisdiction (whether or not a jurisdiction
which you shall have specified) shall be threatened or to the knowledge of the
Company contemplated by the authorities of any such jurisdiction or shall have
been issued and in effect; (iv) any request for additional information on the
part of the Commission or any such authorities shall have been complied with to
the satisfaction of the Commission and any such authorities, and to the
satisfaction of counsel to the Underwriters; and (v) after the date hereof no
amendment or supplement to the Registration Statement or the Prospectus shall
have been filed unless a copy thereof was first submitted to the Underwriters
and the Underwriters did not object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any material adverse change in the long-term debt
of the Company except as set forth in or contemplated by the Registration
Statement, (ii) there shall not have been any material adverse change in the
general affairs, business, properties, condition (financial or otherwise),
management, or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth
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in or contemplated by the Registration Statement or Prospectus; (iii) the
Company shall not have sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or not covered
by insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Registration
Statement and Prospectus; and (iv) the Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstance under
which they are made, not misleading.
(c) Except as set forth in the Prospectus, there is not pending or, to
the knowledge of the Company, threatened, any material action, suit, proceeding,
inquiry, arbitration or investigation against the Company, or any of the
officers or directors of the Company, or any material action, suit, proceeding,
inquiry, arbitration, or investigation, which might result in any material
adverse change in the condition (financial or other), business prospects, net
worth, or properties of the Company.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct as of this date and at the Closing Date as if
made at the Closing Date, and all covenants and agreements herein contained to
be performed on the part of the Company and all conditions herein contained to
be fulfilled or complied with by the Company at or prior to the Closing Date and
Option Closing Date shall have been duly performed, fulfilled or complied with.
(e) At each Closing Date, you shall have received the opinion, together
with copies of such opinion for each of the other several Underwriters, dated as
of each Closing Date, from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company and any subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their jurisdictions of incorporation with full
corporate power and authority to own their properties and conduct their
business as described in the Registration Statement and Prospectus and
are duly qualified or licensed to do business as a foreign corporation
and are in good standing in each other jurisdiction in which the
ownership or leasing of their properties or conduct of their business
requires such qualification except for jurisdictions in which the
failure to so qualify would not have a material adverse effect on the
Company as a whole;
(ii) the authorized capitalization of the Company is as set
forth under "Capitalization" in the Prospectus; all shares of the
Company's outstanding stock and other securities requiring
authorization for issuance by the Company's Board of Directors have
been duly authorized, validly issued, are fully paid and non-assessable
and conform to the description thereof contained in the Prospectus; the
outstanding shares of Common Stock of the Company and other securities
have not been issued in violation of the preemptive rights of any
shareholder and the shareholders of the Company do not have any
preemptive rights or, to such counsel's knowledge, other rights to
subscribe for or to purchase securities of the Company, nor, to such
counsel's knowledge, are there any restrictions upon the voting or
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transfer of any of the securities of the Company, except as disclosed
in the Prospectus; the Common Stock, the Shares, the Warrants, and the
securities contained in the Representative' Warrant Agreement conform
to the respective descriptions thereof contained in the Prospectus; the
Common Stock, the Shares, the Warrants, the Representative Warrants,
the shares of Common Stock to be issued upon exercise of the Warrants,
and the Securities underlying the Representative's Warrants, have been
duly authorized and, when issued, delivered and paid for, will be duly
authorized, validly issued, fully paid, non-assessable, free of
preemptive rights and no personal liability will attach to the
ownership thereof; all prior sales by the Company of the Company's
securities have been made in compliance with or under an exemption from
registration under the Act and applicable state securities laws and no
shareholders of the Company have any rescission rights against the
Company with respect to the Company's securities; a sufficient number
of shares of Common Stock has been reserved for issuance upon exercise
of the Warrants, the Representative Warrants, and the Warrants
underlying the Representative's Warrants, and to the best of such
counsel's knowledge, neither the filing of the Registration Statement
nor the offering or sale of the Securities as contemplated by this
Agreement gives rise to any registration rights or other rights, other
than those which have been waived or satisfied or described in the
Registration Statement;
(iii) this Agreement, the Representative' Warrant Agreement
and the Warrant Agreement have been duly and validly authorized,
executed and delivered by the Company and, assuming the due
authorization, execution and delivery of this Agreement by the
Representative, are the valid and legally binding obligations of the
Company, enforceable in accordance with their terms, except (a) as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws from time to time in effect
which effect creditors, rights generally; and (b) no opinion is
expressed as to the enforceability of the indemnity provisions or the
contribution provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding securities
of the Company, the Shares, the Common Stock, the Warrants and the
Representative' Warrants are in valid and proper legal form;
(v) to the best of such counsel's knowledge, except as set
forth in the Prospectus, there is not pending or threatened, any
material action, suit, proceeding, inquiry, arbitration or
investigation against the Company or any of the officers or directors
of the Company, nor any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might materially and adversely
affect the condition (financial or otherwise), business prospects, net
worth, or properties of the Company;
(vi) the execution and delivery of this Agreement, the
Representative' Warrant Agreement, the Warrant Agreement, and the
incurrence of the obligations herein and therein set forth and the
consummation of the transactions herein or therein contemplated, will
not result in a violation of, or constitute a default under (a) the
Articles of Incorporation or Bylaws of the Company; (b) to the best of
such counsel's knowledge, any material obligations, agreement, covenant
or condition contained in any bond, debenture, note or other evidence
of indebtedness or in any contract, indenture, mortgage, loan
agreement,
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lease, joint venture or other agreement or instrument to which the
Company is a party or by which it or any of its properties is bound; or
(c) to the best of such counsel's knowledge, any material order, rule,
regulation, writ, injunction, or decree of any government, governmental
instrumentality or court, domestic or foreign;
(vii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been instituted or are
pending before, or threatened by, the Commission; the Registration
Statement and the Prospectus (except for the financial statements and
other financial data contained therein, or omitted therefrom, as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
Rules and Regulations;
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in
connection with the authorization, issuance, transfer, sale or delivery
of the Securities by the Company, in connection with the execution,
delivery and performance of this Agreement by the Company or in
connection with the taking of any action contemplated herein, or the
issuance of the Representative' Warrants or the securities underlying
the Representative' Warrants, other than registrations or
qualifications of the securities under applicable state or foreign
securities or Blue Sky laws and registration under the Act; and
Such opinion shall also cover such matters incident to the transactions
contemplated hereby as the Representative or counsel for the Representative
shall reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law, upon opinions of counsel
satisfactory to you and counsel to the Underwriters. The opinion of such counsel
to the Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and that the Representative and they are justified
in relying thereon.
Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment thereto
at the time it became effective contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading or that the Prospectus or any supplement
thereto contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make
statements therein, in light of the circumstances under which they are made, not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial information and
statistical data contained therein, as to which such counsel need express no
opinion).
(f) You and the several Underwriters shall have received on each
Closing Date a certificate dated as of each Closing Date, signed by the Chief
Executive Officer and the Chief Financial Officer of the Company and such other
officers of the Company as the Underwriters may request, certifying that:
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(i) No order suspending the effectiveness of the
Registration Statement or stop order regarding the sale of the
Securities in effect and no proceedings for such purpose are pending or
are, to their knowledge, threatened by the Commission;
(ii) To their knowledge there is no litigation instituted or
threatened against the Company, or any officer or director of the
Company of a character required to be disclosed in the Registration
Statement which is not disclosed therein; to their knowledge there are
no contracts which are required to be summarized in the Prospectus
which are not so summarized; and to their knowledge there are no
material contracts required to be filed as exhibits to the Registration
Statement which are not so filed;
(iii) They have each carefully examined the Registration
Statement and the Prospectus and, to the best of their knowledge,
neither the Registration Statement nor the Prospectus nor any amendment
or supplement to either of the foregoing contains an untrue statement
of any material fact or omits to state any material fact required to be
stated therein or necessary to make the statement therein, in light of
the circumstances under which they are made, not misleading; and since
the Effective Date, to the best of their knowledge, there has occurred
no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth;
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change in the condition of the Company,
financial or otherwise, or in the results of its operations, except as
reflected in or contemplated by the Registration Statement and the
Prospectus and except as so reflected or contemplated since such date,
there has not been any material transaction entered into by the
Company;
(v) The representations and warranties set forth in this
Agreement are true and correct in all material respects and the Company
has complied with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is delinquent in
the filing of any federal, state and municipal tax return or the
payment of any federal, state or municipal taxes; they know of no
proposed re-determination or reassessment of taxes, adverse to the
Company, and the Company has paid or provided by adequate reserves for
all known tax liabilities except such delinquency that will not have a
material adverse affect on the Company;
(vii) They know of no material obligation or liability of the
Company, contingent or otherwise, not disclosed in the Registration
Statement and Prospectus;
(viii) This Agreement, the Representative' Warrant Agreement
and the Warrant Agreement, the consummation of the transactions herein
or therein contemplated, and the fulfillment of the terms hereof or
thereof, will not result in a breach by the Company of any terms of, or
constitute a default under, its Certificate of Incorporation or Bylaws,
any
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indenture, mortgage, lease, deed of trust, bank loan or credit
agreement or any other material agreement or undertaking of the Company
including, by way of specification but not by way of limitation, any
agreement or instrument to which the Company is now a party or pursuant
to which the Company has acquired any right and/or obligations by
succession or otherwise;
(ix) The financial statements, together with the related
notes and schedules forming a part of the Registration Statement and
the Prospectus, fairly present the financial position and the results
of operations of the Company at the respective dates and for the
respective periods to which they apply; and all audited financial
statements, together with the related notes and schedules, and the
unaudited financial consolidated financial information of the Company
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except
as may be otherwise stated therein. The selected and summary financial
and statistical data included in the Registration Statement present
fairly the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein.
Since the respective dates of such financial statements, there have
been no material adverse change in the condition or general affairs of
the Company, financial or otherwise, other than as referred to in the
Prospectus;
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
except as may otherwise be indicated therein, the Company has not,
prior to the Closing Date, either (i) issued any securities or incurred
any material liability or obligation, direct or contingent, for
borrowed money, or (ii) entered into any material transaction other
than in the ordinary course of business. The Company has not declared,
paid or made any dividend or distribution of any kind on its capital
stock;
(xi) Based upon written representation from the officers and
directors of the Company they have reviewed the sections in the
Prospectus relating to their biographical data and equity ownership
position in the Company, and all information contained therein is true
and accurate; and
(xii) Based upon written representation from the officers and
directors of the Company except as disclosed in the Prospectus, during
the past five years, they have not been:
(1) Subject of a petition under the federal
bankruptcy laws or any state insolvency law filed by or
against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property,
or any partnership in which any of them was a general partner
at or within two years before the time of such filing, or any
corporation or business association of which any of them was
an executive officer at or within two years before the time of
such filing;
(2) Convicted in a criminal proceeding or a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining
either of them from, or otherwise limiting, any of the
following activities:
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(i) acting as a futures commission
merchant, introducing broker, commodity trading
advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person
regulated by the Commodity Futures Trading
Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated
person, director or employee of any investment
company, bank, savings and loan association or
insurance company, or engaging in or continuing any
conduct or practice in connection with any such
activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection
with the purchase or sale of any security or
commodity or in connection with any violation of
federal or state securities law or federal commodity
laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any federal or
state authority barring, suspending or otherwise limiting for
more than 60 days any of their right to engage in any activity
described in paragraph (3) (i) above, or be associated with
persons engaged in any such activity;
(5) Found by any court of competent jurisdiction in a
civil action or by the Commission to have violated any federal
or state securities law, and the judgment in such civil action
or finding by the Commission has not been subsequently
reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to
have violated any federal commodities law, and the judgment in
such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
(g) The Underwriters shall have received from ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
Company, P.C., independent auditors to the Company, certificates or letters, one
dated and delivered on the date hereof and one dated and delivered on the
Closing Date, in form and substance satisfactory to the Underwriters, stating,
that:
(i) they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
Rules and Regulations;
(ii) the financial statements and the schedules included in
the Registration Statement and the Prospectus were examined by them
and, in their opinion, comply as to form in all material respects with
the applicable accounting requirements of the Act, the Rules and
Regulations and instructions of the Commission with respect to
Registration Statements on Form SB-2;
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(iii) on the basis of inquiries and procedures conducted by
them (not constituting an examination in accordance with generally
accepted auditing standards), including a reading of the latest
available unaudited interim financial statements or other financial
information of the Company (with an indication of the date of the
latest available unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for financial and
accounting matters, review of minutes of all meetings of the
shareholders and the Board of Directors of the Company and other
specified inquiries and procedures, nothing has come to their attention
as a result of the foregoing inquiries and procedures that causes them
to believe that:
(a) during the period from (and including) the date
of the financial statements in the Registration Statement and
the Prospectus to a specified date not more than five days
prior to the date of such letters, there has been any change
in the Common Stock, long-term debt or other securities of the
Company (except as specifically contemplated in the
Registration Statement and Prospectus) or any material
decreases in net current assets, net assets, shareholder's
equity, working capital or in any other item appearing in the
Company's financial statements as to which the Underwriters
may request advice, in each case as compared with amounts
shown in the balance sheet as of the date of the financial
statement in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or will occur;
(b) during the period from (and including) the date
of the financial statements in the Registration Statement and
the Prospectus to such specified date there was any material
decrease in revenues or in the total or per share amounts of
income or loss before extraordinary items or net income or
loss, or any other material change in such other items
appearing in the Company's financial statements as to which
the Underwriters may request advice, in each case as compared
with the corresponding period in the preceding year, except in
each case for increases, changes or decreases which the
Prospectus discloses have occurred or will occur;
(iv) they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set
forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may
be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring
an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not
constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found
them to be in agreement.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriters. Any changes, increases or decreases
in the items set forth in such letters which, in the judgment of the several
Underwriters, are materially adverse with respect to the financial position or
results of operations of the Company shall be deemed to constitute a failure of
the Company to comply with the conditions of the obligations to the several
Underwriters hereunder.
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(h) Upon exercise of the Option provided for in Section 2(b) hereof,
the obligation of the several Underwriters (or, at its option, the
Representative, individually) to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
satisfaction of counsel to the Underwriters.
(ii) At the Option Closing Date, there shall have been
delivered to you the signed opinion from counsel for the Company, dated
as of the Option Closing Date, in form and substance satisfactory to
counsel to the Underwriters, which opinion shall be substantially the
same in scope and substance as the opinion furnished to you at the
Closing Date pursuant to Section 4 (e) hereof, except that such
opinion, where appropriate, shall cover the Option Securities.
(iii) At the Option Closing Date, there shall have been
delivered to you a certificate of the Chief Executive Officer and Chief
Financial Officer of the Company, dated the Option Closing Date, in
form and substance satisfactory to counsel to the Underwriters,
substantially the same in scope and substance as the certificate
furnished to you at the Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been
delivered to you a letter in form and substance satisfactory to you
from ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company, P.C., independent auditors to the
Company, dated the Option Closing Date and addressed to the several
Underwriters confirming the information in their letter referred to in
Section 4(g) hereof and stating that nothing has come to their
attention during the period from the ending date of their review
referred to in said letter to a date not more than five business days
prior to the Option Closing Date, which would require any change in
said letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Securities
shall be satisfactory in form and substance to the Underwriters, and
the Underwriters and counsel to the Underwriters shall have been
furnished with all such documents, certificates, and opinions as you
may request in connection with this transaction in order to evidence
the accuracy and completeness of any of the representations, warranties
or statements of the Company or its compliance with any of the
covenants or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD, the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Common Stock and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the several Underwriters
or the Company, shall be contemplated by the Commission or the NASD. The
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Company represents that at the date hereof it has no knowledge that any such
action is in fact contemplated by the Commission or the NASD. The Company shall
advise the Representative of any NASD affiliations of any of its officers,
directors, or stockholders or their affiliates in accordance with paragraph 1(y)
of this Agreement.
(j) At the date of this Agreement, you shall have received from counsel
to the Company, dated as of the date hereof, in form and substance satisfactory
to counsel for the Underwriter, a written Secondary Market Trading Opinion
detailing those states in which the Shares and Warrants may be traded in
non-issuer transactions under the Blue Sky laws of the 50 states after the
Effective Date, in accordance with Section 3(y) of this Agreement.
(k) The authorization and issuance of the Securities and delivery
thereof, the Registration Statement, the Prospectus, and all corporate
proceedings incident thereto shall be satisfactory in all respects to counsel
for the several Underwriters, and such counsel shall be furnished with such
documents, certificates and opinions as they may reasonably request to enable
them to pass upon the matters referred to in this subparagraph.
(l) Prior to the Effective Date, the Representative shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Representative, as described in the Registration Statement.
(m) If any of the conditions herein provided for in this Section shall
not have been fulfilled as of the date indicated, this Agreement and all
obligations of the several Underwriters under this Agreement may be canceled at,
or at any time prior to, the Closing Date and/or the Option Closing Date by the
Representative and/or the Underwriters notifying the Company of such
cancellation in writing or by telegram at or prior to the applicable Closing
Date. Any such cancellation shall be without liability of the several
Underwriters to the Company.
5. Conditions of the Obligations of the Company. The obligation of the
Company to sell and deliver the Securities is subject to the following
conditions:
(i) The Registration Statement shall have become effective not
later than 5:00 p.m., Eastern Time, on the date of this Agreement, or
on such later time or date as the Company and the Representative may
agree in writing; and
(ii) At the Closing Date and the Option Closing Date, no stop
orders suspending the effectiveness of the Registration Statement shall
have been issued under the Act or any proceedings therefore initiated
or threatened by the Commission.
If the conditions to the obligations of the Company provided for in
this Section have been fulfilled on the Closing Date but are not fulfilled after
the Closing Date and prior to the Option Closing Date, then only the obligation
of the Company to sell and deliver the Securities on exercise of the Option
provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds harmless each
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this
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Agreement, include but not be limited to, all reasonable costs of defense and
investigation and all attorneys' fees), to which the Underwriter or such
controlling person may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (i) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(ii) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company and filed in any state or other jurisdiction in order to qualify any or
all of the Securities under the securities laws thereof (any such application,
document or information being hereinafter called a "Blue Sky Application"), or
arise out of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment
or supplement thereto, or in any Blue Sky Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such cases to the
extent, but only to the extent, that any such losses, claim, damages or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Underwriters specifically for use in the preparation of the Registration
Statement or any such amendment or supplement thereof or any such Blue Sky
Application or any such Preliminary Prospectus or the Prospectus or any such
amendment or supplement thereto. Notwithstanding the foregoing, the Company
shall have no liability under this Section if such untrue statement or omission
made in a Preliminary Prospectus is cured in the Prospectus and the Prospectus
is not delivered within the time required by the Act to the person or persons
alleging the liability upon which indemnification is being sought. This
indemnity will be in addition to any liability which the Company may otherwise
have.
(b) Each Underwriter, severally, but not jointly, indemnifies and holds
harmless the Company, each of its directors, each nominee (if any) for director
named in the Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages or liabilities (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statements or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by you or by any Underwriter through you specifically
for use in the preparation thereof. Notwithstanding the foregoing, the
Underwriters shall have no liability under this Section if such untrue statement
or omission made in a Preliminary Prospectus is cured in the Prospectus and the
Prospectus is not delivered to the person or persons alleging the liability upon
which indemnification is being sought through no fault of the Underwriter. This
indemnity will be in addition to any liability which the Underwriter may
otherwise have.
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(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls such Underwriter within the meaning of the Act, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the reasonable judgment of
the Representative, it is advisable for the Representative or such Underwriters
or controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Underwriter or such controlling person, it being understood,
however, that the indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall be
designated in writing by you). No settlement of any action against an
indemnified party shall be made without the consent of the indemnifying party,
which shall not be unreasonably withheld in light of all factors of importance
to such indemnifying party.
7. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) each Underwriter makes claim
for indemnification pursuant to Section 6 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that the express provisions of Section 6 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys, fees) in either
such case (after contribution from others) in such proportions that all such
Underwriters are responsible in the aggregate for that portion of such losses,
claims, damages or liabilities represented by the percentage that the
underwriting discount per Share appearing on the cover page of the Prospectus
bears to the public offering price appearing thereon,
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and the Company shall be responsible for the remaining portion, provided,
however, that (a) if such allocation is not permitted by applicable law then the
relative fault of the Company and the Underwriter and controlling persons, in
the aggregate, in connection with the statements or omissions which resulted in
such damages and other relevant equitable considerations shall also be
considered. The relative fault shall be determined by reference to, among other
things, whether in the case of an untrue statement of a material fact or the
omission to state a material fact, such statement or omission relates to
information supplied by the Company, or the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if the respective obligations of
the Company and the Underwriters to contribute pursuant to this Section 7 were
to be determined by pro rata or per capita allocation of the aggregate damages
(even if the Underwriters and their controlling persons in the aggregate were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
first sentence of this Section; and (b) that the contribution of each
contributing Underwriter shall not be in excess of its proportionate share
(based on the ratio of the number of Securities purchased by such Underwriter to
the number of Securities purchased by all contributing Underwriters) of the
portion of such losses, claims, damages or liabilities for which the
Underwriters are responsible. No person ultimately determined to be guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not ultimately
determined to be guilty of such fraudulent misrepresentation. As used in this
paragraph, the term "Underwriter" includes any officer, director, or other
person who controls the Underwriter within the meaning of Section 15 of the Act,
and the word "Company" includes any officer, director, or person who controls
the Company within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this Section is not permitted by law, then the
Underwriter and each person who controls the Underwriter shall be entitled to
contribution from the Company, its officers, directors and controlling persons
to the full extent permitted by law. This foregoing agreement shall in no way
affect the contribution liabilities of any persons having liability under
Section 11 of the Act other than the Company and the Underwriter. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement; provided, however, that such
consent shall not be unreasonably withheld in light of all factors of importance
to such party.
8. Costs and Expenses. (a) Whether or not this Agreement becomes
effective or the sale of the Securities to the Underwriters is consummated, the
Company will pay all costs and expenses incident to the performance of this
Agreement by the Company including but not limited to the fees and expenses of
the counsel to the Company or of the Company's accountants; the costs and
expenses incident to the preparation, printing, filing and distribution under
the Act of the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), Preliminary Prospectus and the
Prospectus, as amended or supplemented; the fee of the NASD in connection with
the filing required by the NASD relating to the offering of the Securities
contemplated hereby; all state filing fees, expenses and disbursements and legal
fees of counsel to the Company who shall serve as Blue Sky counsel to the
Company in connection with the filing of applications to register the Securities
under the state securities or blue sky laws; the cost of printing and furnishing
to the several Underwriters copies of the Registration Statement, each
Preliminary Prospectus, the Prospectus, this Agreement, the Selected Dealers
Agreement, the Agreement Among Underwriters, Underwriters Questionnaire,
Underwriters Power of Attorney and the Blue Sky Memorandum; the cost of printing
the certificates evidencing the securities comprising the
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Securities; the cost of preparing and delivering to the Underwriters and its
counsel of their bound volumes containing copies of all documents and
appropriate correspondence filed with or received from the Commission and the
NASD and all closing documents; and the fees and disbursements of the transfer
agent for the Company's securities. The Company shall pay any and all taxes
(including any original issue, transfer, franchise, capital stock or other tax
imposed by any jurisdiction) on sales to the Underwriters hereunder. The Company
will also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus. The Company
shall also engage the Company's counsel to provide the Representative with a
written Secondary Market Trading Opinion in accordance with paragraphs 3(y) and
4(j) of this Agreement.
(b) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Representative a non-accountable expense allowance equal
to 2% of the gross proceeds received from the sale of the Securities, of which
an advance of $25,000 has been paid to date. In the event the over-allotment
option is exercised, the Company shall pay to the Representative at the Option
Closing Date an additional amount equal to 2% of the gross proceeds received
upon exercise of the over-allotment option.
(c) Other than as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Representative or from any other person for services as a finder in
connection with the proposed offering, and the Company agrees to indemnify and
hold harmless the Representative and the other Underwriters against any losses,
claims, damages or liabilities, joint or several which shall, for all purposes
of this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys, fees, to which the Representative or such other
Underwriter may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
claim of any person (other than an employee of the party claiming indemnity) or
entity that he or it is entitled to a finder's fee in connection with the
proposed offering by reason of such person's or entity's influence or prior
contact with the indemnifying party.
9. Substitution of Underwriters. If any of the Underwriters shall for
any reason not permitted hereunder cancel their obligations to purchase the
Securities hereunder, or shall fail to take up and pay for the number of
Securities set forth opposite their respective names in Schedule A hereto upon
tender of such Securities in accordance with the terms hereof, then:
(a) If the aggregate number of Securities which such Underwriter or
Underwriters agreed but failed to purchase does not exceed 10% of the total
number of Securities, the other Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Securities
which such defaulting Underwriter or Underwriters agreed but failed to purchase.
(b) If any Underwriter or Underwriters so default and the agreed number
of Securities with respect to which such default or defaults occurs is more than
10% of the total number of Securities, the remaining Underwriters shall have the
right to take up and pay for (in such proportion as may be agreed upon among
them) the Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase. If such remaining Underwriters do not, at the Closing Date,
take up and pay for the Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase, the time for delivery of the
Securities shall be extended to the next business day to allow the several
Underwriters the privilege of substituting within twenty-four hours (including
non-
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business hours) another Underwriter or Underwriters satisfactory to the Company.
If no such Underwriter or Underwriters shall have been substituted as aforesaid,
within such twenty-four period, the time of delivery of the Securities may, at
the option of the Company, be again extended to the next following business day,
if necessary, to allow the Company the privilege of finding within twenty-four
hours (including non-business hours) another Underwriter or Underwriters to
purchase the Securities which the defaulting Underwriter or Underwriters agreed
but failed to purchase. If it shall be arranged for the remaining Underwriters
or substituted Underwriters to take up the Securities of the defaulting
Underwriter or Underwriters as provided in this Section, (i) the Company or the
Representative shall have the right to postpone the time of delivery for a
period of not more than seven business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary; and (ii) the respective numbers
of Securities to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken at the basis of the underwriting obligation for all
purposes of this Agreement.
If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the Securities agreed
to be purchased by the defaulting Underwriters or substitute another Underwriter
or Underwriters as aforesaid, and the Company shall not find or shall not elect
to seek another Underwriter or Underwriters for such Securities as aforesaid,
then this Agreement shall terminate.
If, following exercise of the Option provided in Section 2(b) hereof,
any Underwriter or Underwriters shall for any reason not permitted hereunder
cancel their obligations to purchase Option Securities at the Option Closing
Date, or shall fail to take up and pay for the number of Option Securities,
which they become obligated to purchase at the Option Closing Date upon tender
of such Option Securities in accordance with the terms hereof, then the
remaining Underwriters or substituted Underwriters may take up and pay for the
Option Securities of the defaulting Underwriters in the manner provided in
Section 9(b) hereof. If the remaining Underwriters or substituted Underwriters
shall not take up and pay for all Option Securities, the Underwriters shall be
entitled to purchase the number of Option Securities for which there is no
default or, at their election, the option shall terminate, the exercise thereof
shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. In the event of termination,
there shall be no liability on the part of any non-defaulting Underwriter to the
Company, provided that the provisions of this Section 9 shall not in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
10. Effective Date. The Agreement shall become effective upon its
execution except that you may, at your option, delay its effectiveness until
11:00 a.m., Eastern time, on the first full business day following the effective
date of the Registration Statement, or at such earlier time after the effective
date of the Registration Statement as you in your discretion shall first
commence the public offering by the Underwriters of any of the Securities. The
time of the public offering shall mean the time after the effectiveness of the
Registration Statement when the Securities are first generally offered by you to
the other Underwriters and the selected dealers. This Agreement may be
terminated by you at any time before it becomes effective as provided above,
except that Sections 3(c), 6, 7, 8, 13, 14, 15, 16, 17 and 18 shall remain in
effect notwithstanding such termination.
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11. Termination. (a) This Agreement, except for Sections 3(c), 6, 7, 8,
13, 14, 15, 16, 17, and 18 hereof, may be terminated at any time prior to the
Closing Date, and the Option referred to in Section 2(b) hereof, if exercised,
may be canceled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriters for the resale of the Securities agreed to be purchased
hereunder by reason of: (i) the Company having sustained a material adverse
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action, order
or decree; (ii) trading in securities on the New York Stock Exchange or the
American Stock Exchange having been suspended or limited; (iii) material
governmental restrictions having been imposed on trading in securities generally
(not in force and effect on the date hereof); (iv) a banking moratorium having
been declared by federal or New York or Florida state authorities; (v) an
outbreak of major international hostilities or other national or international
calamity having occurred which is reasonably believed likely by the
Representative to have a material adverse impact on the business, financial
condition or financial statements of the Company or the market for the
securities offered hereby; (vi) the passage by the Congress of the United States
or by any state legislative body of similar impact, of any act or measure, or
the adoption of any orders, rules or regulations by any governmental body or any
authoritative accounting institute or board, or any governmental executive;
(vii) any material adverse change in the financial or securities markets beyond
normal market fluctuations having occurred since the date of this Agreement;
(viii) a pending or threatened legal or governmental proceeding or action
relating generally to the Company's business, or a notification having been
received by the Company of the threat of any such proceeding or action, which
could, in the reasonable judgment of the Representative, materially adversely
affect the Company; (ix) except as contemplated by the Prospectus, the Company
is merged or consolidated into or acquired by another company or group or there
exists a binding legal commitment for the foregoing or any other material change
of ownership or control occurs; or (x) the Company shall not have complied in
all material respects with any term, condition or provisions on its part to be
performed, complied with or fulfilled (including but not limited to those set
forth in this Agreement) within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section, the Company shall be
promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
12. Representative' Warrant Agreement. At the Closing Date, the Company
will issue to the Representative and/or persons related to the Representative,
for an aggregate purchase price of $100, and upon the terms and conditions set
forth in the form of Representative' Warrant Agreement annexed as an exhibit to
the Registration Statement, Representative' Warrants to purchase up to an
aggregate of 200,000 Units, in such denominations as the Representative shall
designate. In the event of conflict in the terms of this Agreement and the
Representative' Warrant Agreement, the language of the form of Representative'
Warrant Agreement shall control.
13. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its principal officers, where appropriate, and the
Underwriters set forth in or made pursuant to this
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Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriters, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment for
the Securities and the termination of this Agreement.
14. Notice. All communications hereunder will be in writing and, except
as otherwise expressly provided herein, will be mailed, delivered or telegraphed
and confirmed:
If to the Underwriters: First London Securities Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to the Company: Commerce Casualty Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇, III, Chief Operating
Officer
Copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
15. Parties in Interest. This Agreement herein set forth is made solely
for the benefit of the several Underwriters, the Company and, to the extent
expressed, any person controlling the Company or any of the Underwriters, and
directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser of the Securities, as
such purchaser, from the several Underwriters. All of the obligations of the
Underwriters hereunder are several and not joint.
16. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas applicable to contracts made and
to be performed entirely within the State of Texas.
17. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counter-parts shall together constitute but one and the
same instrument.
18. Entire Agreement. This Agreement and the agreements referred to
within this Agreement constitute the entire agreement of the parties, and
supersedes all prior agreement, understanding, negotiations and discussions,
whether written or oral, of the parties hereto.
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19. Representative as Underwriter. In the event the Representative act
as the sole Underwriters ("Underwriters") in connection with the underwriting of
the securities being offered pursuant to the Registration Statement, all
references to the Representative in this Agreement shall be replaced by
reference to the "Underwriters," and (i) any consents required to be obtained
from the Representative shall be required to be obtained solely from the
Underwriters; (ii) all compensation to be received by the Representative shall
instead be received by the Underwriters; and (iii) the provisions of Section 9
of this Agreement shall not apply.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the several Underwriters in accordance
with its terms.
Very truly yours,
Commerce Casualty Group, Inc.
BY:
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▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇, III
Chief Operating Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
FIRST LONDON SECURITIES CORPORATION
BY:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
For themselves and as Representative of the
several Underwriters