Exhibit 1.1
Draft of , 1999
------
[Execution Copy]
[Conformed Copy]
[3,000,000] Shares
Creditrust Corporation
Common Stock
Underwriting Agreement
dated [ ], 1999
TABLE OF CONTENTS
Section 1. Representations and Warranties....................................2
A. Representations and Warranties of the Company....................2
(a) Compliance with Registration Requirements...................2
(b) Offering Materials Furnished to Underwriters................2
(c) Distribution of Offering Material by the Company............3
(d) The Underwriting Agreement..................................3
(e) Authorization of the Common Shares..........................3
(f) No Applicable Registration or Other Similar Rights..........3
(g) No Material Adverse Change..................................3
(h) Independent Accountants.....................................3
(i) Preparation of the Financial Statements.....................3
(j) Incorporation and Good Standing of the Company
and its Subsidiaries........................................4
(k) Capitalization and Other Capital Stock Matters..............4
(l) Stock Exchange Listing......................................4
(m) Non-Contravention of Existing Instruments; No
Further Authorizations or Approvals Required................5
(n) No Material Actions or Proceedings..........................5
(o) Intellectual Property Rights................................6
(p) All Necessary Permits, etc..................................6
(q) Title to Properties.........................................6
(r) Tax Law Compliance..........................................6
(s) Company Not an Investment Company...........................6
(t) Insurance...................................................7
(u) No Price Stabilization or Manipulation......................7
(v) Related Party Transactions..................................7
(w) Compliance with Law.........................................7
(x) Licenses....................................................7
(y) No Unlawful Contributions or Other Payments.................8
(z) Company's Accounting System.................................8
(aa) Compliance with Environmental Laws.........................8
(bb) ERISA Compliance...........................................9
(cc) Year 2000..................................................9
B. Representations and Warranties of the Selling Shareholder......10
(a) The Underwriting Agreement.................................10
(b) The Custody Agreement and Power of Attorney................10
(c) Title to Common Shares to be Sold; All Authorizations
Obtained...................................................10
(d) Delivery of the Common Shares to be Sold...................10
(e) Non-Contravention; No Further Authorizations or
Approvals Required.........................................10
(f) No Registration or Other Similar Rights....................11
(g) No Further Consents, etc...................................11
(h) Disclosure Made by Such Selling Shareholder in the
Prospectus.................................................11
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(i) No Price Stabilization or Manipulation.....................11
(j) Confirmation of Company Representations and Warranties.....11
Section 2. Purchase, Sale and Delivery of the Common Shares.................11
The Firm Common Shares.........................................12
The First Closing Date.........................................12
The Optional Common Shares; the Second Closing Date............12
Public Offering of the Common Shares...........................13
Payment for the Common Shares..................................13
Delivery of the Common Shares..................................13
Delivery of Prospectus to the Underwriters.....................14
Section 3. Additional Covenants.............................................14
A. Covenants of the Company........................................14
(a) Underwriters' Review of Proposed Amendments
and Supplements............................................14
(b) Securities Act Compliance..................................14
(c) Amendments and Supplements to the Prospectus and
Other Securities Act Matters...............................14
(d) Copies of any Amendments and Supplements to the Prospectus.15
(e) Blue Sky Compliance........................................15
(f) Use of Proceeds............................................15
(g) Transfer Agent.............................................15
(h) Earnings Statement.........................................15
(i) Periodic Reporting Obligations.............................15
(j) Agreement Not To Offer or Sell Additional Securities.......15
(k) Future Reports to the Underwriters.........................16
B. Covenants of the Selling Shareholder............................16
(a) Agreement Not to Offer or Sell Additional Securities.......16
(b) Delivery of Forms W-8 and W-9..............................16
Section 4. Payment of Expenses..............................................17
Section 5. Conditions of the Obligations of the Underwriters................17
(a) Accountants' Comfort Letter................................18
(b) Compliance with Registration Requirements; No Stop
Order; No Objection from NASD..............................18
(c) No Material Adverse Change or Ratings Agency Change........18
(d) Opinion of Counsel for the Company.........................19
(e) Opinion of Counsel for the Underwriters....................19
(f) Officers' Certificate......................................19
(g) Bring-down Comfort Letter..................................19
(h) Opinion of Counsel for the Selling Shareholder.............19
(i) Selling Shareholder's Certificate..........................20
(j) Selling Shareholder's Documents............................20
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(k) Lock-Up Agreement from Certain Securityholders of the
Company Other Than the Selling Shareholder.................20
(l) Additional Documents.......................................20
Section 6. Reimbursement of Underwriters' Expenses..........................20
Section 7. Effectiveness of this Agreement..................................21
Section 8. Indemnification..................................................21
(a) Indemnification of the Underwriters........................21
(b) Indemnification of the Company, its Directors
and Officers...............................................22
(c) Notifications and Other Indemnification Procedures.........23
(d) Settlements................................................24
Section 9. Contribution.....................................................24
Section 10. Default of One or More of the Several Underwriters..............25
Section 11. Termination of this Agreement...................................26
Section 12. Representations and Indemnities to Survive Delivery.............27
Section 13. Notices.........................................................27
Section 14. Successors......................................................28
Section 15. Partial Unenforceability........................................28
Section 16. Governing Law Provisions........................................28
Section 17. Failure of the Selling Shareholder to Sell and Deliver Common
Shares..........................................................29
Section 18. General Provisions..............................................29
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Underwriting Agreement
[Date], 1999
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, INCORPORATED
As Underwriters
c/o NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Introductory. Creditrust Corporation, a Maryland corporation (the
"Company), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [2,400,000] shares of its Common
----------
Stock, par value $0.01 per share (the "Common Stock"); and the shareholder of
the Company named in Schedule B (the "Selling Shareholder") proposes to sell to
----------
the Underwriters an aggregate of [600,000] shares of Common Stock. The
[2,400,000] shares of Common Stock to be sold by the Company and the [600,000]
shares of Common Stock to be sold by the Selling Shareholder are collectively
called the "Firm Common Shares". In addition, the Selling Shareholder has
granted to the Underwriters an option to purchase up to an additional [450,000]
shares (the "Optional Common Shares") of Common Stock, as provided in Section 2.
The Firm Common Shares and, if and to the extent such option is exercised, the
Optional Common Shares are collectively called the "Common Shares".
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-l (File No.
333-[ ]), which contains a form of prospectus to be used in connection with the
public offering and sale of the Common Shares. Such registration statement, as
amended, including the financial statements and exhibits thereto, in the form in
which it was declared effective by the Commission under the Securities Act of
1933 and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), including any information deemed to be a part thereof at the
time of effectiveness pursuant to Rule 430A or Rule 434 under the Securities
Act, is called the "Registration Statement". Any registration statement filed by
the Company pursuant to Rule 462(b) under the Securities Act is called the "Rule
462(b) Registration Statement", and from and after the date and time of filing
of the Rule 462(b) Registration Statement the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. Such prospectus, in the
form first used by the Underwriters to confirm sales of the Common Shares, is
called the "Prospectus"; provided, however, if the Company has, with the consent
of NMS, elected to rely upon Rule 434 under the Securities Act, the term
"Prospectus" shall mean the Company's prospectus subject to completion (each, a
"preliminary prospectus") dated [ ], 1999 (such preliminary prospectus is called
the "Rule 434 preliminary prospectus"), together with the applicable term sheet
(the "Term Sheet") prepared and filed by the Company with the Commission under
Rules 434 and 424(b) under the Securities Act and all references in this
Agreement to the date of the Prospectus shall mean the date of the Term Sheet.
All references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a preliminary prospectus, the Prospectus or the Term
Sheet, or any
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amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("▇▇▇▇▇").
The Company and the Selling Shareholder hereby confirm their respective
agreements with the Underwriters as follows:
Section 1. Representations and Warranties
A. Representations and Warranties of the Company. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to ▇▇▇▇▇ (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Common Shares.
Each of the Registration Statement, any Rule 462(b) Registration Statement and
any post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus, as
amended or supplemented, as of its date and at all subsequent times, did not and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Underwriters expressly
for use therein. There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Underwriters [ ] complete manually signed copies of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Underwriters have
reasonably requested.
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(c) Distribution of Offering Material by the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Common Shares, any offering material in connection with the
offering and sale of the Common Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Common Shares. The Common Shares to be
purchased by the Underwriters from the Company have been duly authorized for
issuance and sale pursuant to this Agreement and, when issued and delivered by
the Company pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is given
in the Prospectus: (i) there has been no material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business,
operations or prospects, whether or not arising from transactions in the
ordinary course of business, of the Company and its subsidiaries, considered as
one entity (any such change is called a "Material Adverse Change"); (ii) the
Company and its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company or,
except for dividends paid to the Company or other subsidiaries, any of its
subsidiaries on any class of capital stock or repurchase or redemption by the
Company or any of its subsidiaries of any class of capital stock.
(h) Independent Accountants. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) filed with the Commission as
a part of the Registration Statement and included in the Prospectus, are
independent public or certified public accountants as required by the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its subsidiaries as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. Such
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financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes thereto. No
other financial statements or supporting schedules are required to be included
in the Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Selected Financial Data",
"Selected Financial Data" and "Capitalization" fairly present the information
set forth therein on a basis consistent with that of the audited financial
statements contained in the Registration Statement.
(j) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus and, in the case of the Company, to enter into
and perform its obligations under this Agreement. Each of the Company and each
subsidiary is duly qualified as a foreign corporation to transact business and
is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except for such jurisdictions where the failure to so
qualify or to be in good standing would not, individually or in the aggregate,
result in a Material Adverse Change. All of the issued and outstanding capital
stock of each subsidiary has been duly authorized and validly issued, is fully
paid and nonassessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim. The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 21.1 to the Registration Statement.
(k) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Stock (including the Common Shares) conforms in all
material respects to the description thereof contained in the Prospectus. All of
the issued and outstanding shares of Common Stock (including the shares of
Common Stock owned by the Selling Shareholder) have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. None of the outstanding
shares of Common Stock were issued in violation of any preemptive rights, rights
of first refusal or other similar rights to subscribe for or purchase securities
of the Company. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company or any of its subsidiaries other than those
accurately described in the Prospectus. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted thereunder, set forth in the Prospectus accurately and
fairly presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(l) Stock Exchange Listing. The Common Stock (including the Common
Shares) is registered pursuant to Section 12(g) of the Exchange Act and is
listed on the Nasdaq National Market, and the Company has taken no action
designed to, or likely to have the effect of
4
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Nasdaq National Market, nor has the Company
received any notification that the Commission or the National Association of
Securities Dealers, LLC (the "NASD") is contemplating terminating such
registration or listing.
(m) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default (or,
with the giving of notice or lapse of time, would be in default) ("Default")
under any indenture, mortgage, loan or credit agreement, note, contract,
franchise, lease or other instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound (including,
without limitation, the (1) Indenture and Servicing Agreement, dated as of June
1, 1998, by and among Creditrust SPV2, LLC, Norwest Bank Minnesota, National
Association, the Company and Asset Guaranty Insurance Company, (2) Indenture and
Servicing Agreement, dated as of September 1, 1998, by and among Creditrust
Funding I LLC, Norwest Bank Minnesota, National Association, the Company and
Asset Guaranty Insurance Company, (3) Credit Agreement, dated as of October 28,
1998, between the Company, the lenders party thereto and Sunrock Capital Corp.
and (4) Indenture and Servicing Agreement, dated as of December 29, 1998, by and
among Creditrust SPV98-2 LLC, Norwest Bank Minnesota, National Association, the
Company and Asset Guaranty Insurance Company), or to which any of the property
or assets of the Company or any of its subsidiaries is subject (each, an
"Existing Instrument"), except for such Defaults as would not, individually or
in the aggregate, result in a Material Adverse Change. The Company's execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus (i) have been duly authorized by all
necessary corporate action and will not result in any violation of the
provisions of the charter or by-laws of the Company or any subsidiary, (ii) will
not conflict with or constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to, or require the
consent of any other party to, any Existing Instrument, except for such
conflicts, breaches, Defaults, liens, charges or encumbrances as would not,
individually or in the aggregate, result in a Material Adverse Change and (iii)
will not result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any subsidiary. No
consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental or regulatory authority or agency, is
required for the Company's execution, delivery and performance of this Agreement
and consummation of the transactions contemplated hereby and by the Prospectus,
except such as have been obtained or made by the Company and are in full force
and effect under the Securities Act, applicable state securities or blue sky
laws and from the NASD.
(n) No Material Actions or Proceedings. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or any of
its subsidiaries, (ii) which has as the subject thereof any officer or director
of, or property owned or leased by, the Company or any of its subsidiaries or
(iii) relating to environmental or discrimination matters, where in any such
case (A) there is a reasonable possibility that such action, suit or proceeding
might be determined adversely to the Company or such subsidiary and (B) any such
action, suit or proceeding, if so determined adversely, would reasonably be
expected to result in a Material Adverse Change or adversely
5
affect the consummation of the transactions contemplated by this Agreement. No
material labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's knowledge, is threatened or
imminent.
(o) Intellectual Property Rights. The Company and its subsidiaries own
or possess sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their businesses
as now conducted and as described in the Prospectus, and the expected expiration
of any of such Intellectual Property Rights would not result in a Material
Adverse Change. Neither the Company nor any of its subsidiaries has received any
notice of infringement or conflict with asserted Intellectual Property Rights of
others, which infringement or conflict, if the subject of an unfavorable
decision, would result in a Material Adverse Change.
(p) All Necessary Permits, etc. The Company and each subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses, and neither the Company nor any subsidiary
has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(q) Title to Properties. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as owned in
the financial statements referred to in Section 1(A)(i) above, in each case free
and clear of any security interests, mortgages, liens, encumbrances, equities,
claims and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or such subsidiary. The real
property, improvements, equipment and personal property held under lease by the
Company or any subsidiary are held under valid and enforceable leases, with such
exceptions as are not material and do not materially interfere with the use made
or proposed to be made of such real property, improvements, equipment or
personal property by the Company or such subsidiary.
(r) Tax Law Compliance. The Company and its consolidated subsidiaries
have filed all necessary federal, state and foreign income and franchise tax
returns or have properly requested extensions thereof and have paid all taxes
required to be paid by any of them and, if due and payable, any related or
similar assessment, fine or penalty levied against any of them. The Company has
made adequate charges, accruals and reserves in the applicable financial
statements referred to in Section 1(A)(i) above in respect of all federal, state
and foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its consolidated subsidiaries has not been
finally determined.
(s) Company Not an Investment Company. The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Common Shares will not be, an "investment company" within the meaning of
Investment Company Act and will not take any action that it would cause it to
become subject to the Investment Company Act.
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(t) Insurance. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes. The Company has no reason to believe that it or any subsidiary will
not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar institutions
as may be necessary or appropriate to conduct its business as now conducted and
at a cost that would not result in a Material Adverse Change. Neither of the
Company nor any subsidiary has been denied any insurance coverage which it has
sought or for which it has applied.
(u) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Common Shares.
(v) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
(w) Compliance with Law. Neither the Company nor any of its
subsidiaries is in violation of any federal, state or local statute,
administrative regulation, order or other law ("Applicable Law") including,
without limitation, the Fair Debt Collection Practices Act, the Federal
Truth-In-Lending Act (and the Federal Reserve Board's Regulation S issued
thereunder), the Fair Debt Billing Act, the Equal Credit Opportunity Act (and
the Federal Reserve Board's Regulation B issued thereunder), the Fair Credit
Reporting Act or the Electronic Fund Transfer Act, and comparable state
statutes, the consequences of which violations(s) would, individually or in the
aggregate, result in a Material Adverse Change. The Company has not received any
notice of, and to the best knowledge of the Company, has not been threatened
with and is not under investigation with respect to, any violation or a possible
violation of any Applicable Law, except such violation(s) as would not,
individually or in the aggregate, result in a Material Adverse Change.
(x) Licenses. The Company has full right, power and authority and has
obtained and holds all licenses, consents, authorizations, approvals, orders,
certificates and permits (collectively, "Licenses") of and from, and has made
all declarations and filings with all courts, regulatory bodies, administrative
agencies, or other governmental bodies, necessary to own, lease, license and use
its properties and assets and to conduct its business in the manner described in
or contemplated by the Prospectus, except as otherwise described therein, and
except where the failure to so obtain or hold or to so make or file would, not
individually or in the aggregate, result in a Material Adverse Change. The
Company has not received any notice of proceedings relating to, and to its best
knowledge, no governmental body is considering limiting, suspending, modifying
or revoking, any such License which would, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, result in a Material
Adverse Change. The Prospectus fairly and accurately describes each License the
absence of which would, individually or in the aggregate, result in a Material
Adverse Change, or which
7
would materially and adversely affect the Company's ability to acquire and
collect on the "Receivables" (as such term is defined in the Prospectus) and
otherwise to expand the business operations of the Company as described in or
contemplated by the Prospectus. The Company has filed with the appropriate
governmental authorities each and every statement, report, information or form
required to be filed by it pursuant to any Applicable Law, except where the
failure(s) to so file would not, individually or in the aggregate, result in a
Material Adverse Change, and all such filings or submissions were in compliance
with Applicable Law in all material respects when filed, and no deficiencies
have been asserted by any regulatory commission, agency or authority with
respect to such filings or submissions, except where the failure(s) to so file
or cure would not, individually or in the aggregate, result in a Material
Adverse Change. To the Company's best knowledge, except as disclosed in the
Registration Statement and the Prospectus, there are not pending any changes
under any Applicable Law or License that would have, individually or in the
aggregate, a Material Adverse Effect.
(y) No Unlawful Contributions or Other Payments. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(z) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(aa) Compliance with Environmental Laws. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its subsidiaries is in violation of any federal,
state, local or foreign law or regulation relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products (collectively, "Materials of Environmental Concern"), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern
(collectively, "Environmental Laws"), which violation includes, but is not
limited to, noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or its subsidiaries
under applicable Environmental Laws, or noncompliance with the terms and
conditions thereof, nor has the Company or any of its subsidiaries received any
written communication, whether from a governmental authority, citizens group,
employee or otherwise, that alleges that the Company or any of its subsidiaries
is in violation of any Environmental Law; (ii) there is no claim, action or
cause of action filed with a court or governmental authority, no investigation
with respect to which the Company has received written notice, and no written
8
notice by any person or entity alleging potential liability for investigatory
costs, cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising out
of; based on or resulting from the presence, or release into the environment, of
any Material of Environmental Concern at any location owned, leased or operated
by the Company or any of its subsidiaries, now or in the past (collectively,
"Environmental Claims"), pending or, to the best of the Company's knowledge,
threatened against the Company or any of its subsidiaries or any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by operation of
law; and (iii) to the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that reasonably could result
in a violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has retained or assumed either contractually or by
operation of law.
(bb) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company, its subsidiaries or their "ERISA Affiliates" (as defined below) are
in compliance in all material respects with ERISA. "ERISA Affiliate" means, with
respect to the Company or a subsidiary, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such subsidiary is a member. No "reportable
event" (as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its subsidiaries or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would have
any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither
the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of; or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(cc) Year 2000. All material disclosure regarding year 2000 compliance
that is required to be described under the Securities Act and the regulations
and pronouncements of the Commission has been included in the Prospectus. The
Company will not incur material operating expenses or costs to ensure that its
information systems will be year 2000 complaint, other than as disclosed in the
Prospectus.
Any certificate signed by an officer of the Company and delivered to
the Underwriters or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
9
B. Representations and Warranties of the Selling Shareholder. The
Selling Shareholder represents, warrants and covenants to each Underwriter as
follows:
(a) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling Shareholder
and is a valid and binding agreement of such Selling Shareholder, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(b) The Custody Agreement and Power of Attorney. Each of the (i)
Custody Agreement signed by such Selling Shareholder and Creditrust Corporation,
as custodian (the "Custodian"), relating to the deposit of the Common Shares to
be sold by such Selling Shareholder (the "Custody Agreement") and (ii) Power of
Attorney appointing certain individuals named therein as such Selling
Shareholder's attorneys-in-fact (each, an "Attorney-in-Fact") to the extent set
forth therein relating to the transactions contemplated hereby and by the
Prospectus (the "Power of Attorney"), of such Selling Shareholder has been duly
authorized, executed and delivered by such Selling Shareholder and is a valid
and binding agreement of such Selling Shareholder, enforceable in accordance
with its terms, except as rights to indemnification thereunder may be limited by
applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(c) Title to Common Shares to be Sold; All Authorizations Obtained.
Such Selling Shareholder has, and on the First Closing Date and the Second
Closing Date (as defined below) will have, good and valid title to all of the
Common Shares which may be sold by such Selling Shareholder pursuant to this
Agreement on such date and the legal right and power, and all authorizations and
approvals required by law to enter into this Agreement and its Custody Agreement
and Power of Attorney, to sell, transfer and deliver all of the Common Shares
which may be sold by such Selling Shareholder pursuant to this Agreement and to
comply with its other obligations hereunder and thereunder.
(d) Delivery of the Common Shares to be Sold. Delivery of the Common
Shares which are sold by such Selling Shareholder pursuant to this Agreement
will pass good and valid title to such Common Shares, free and dear of any
security interest, mortgage, pledge, lien, encumbrance or other claim.
(e) Non-Contravention; No Further Authorizations or Approvals Required.
The execution and delivery by such Selling Shareholder of, and the performance
by such Selling Shareholder of its obligations under, this Agreement, the
Custody Agreement and the Power of Attorney will not contravene or conflict
with, result in a breach of, or constitute a Default under, or require the
consent of any other party to any agreement or instrument to which such Selling
Shareholder is a party or by which it is bound or under which it is entitled to
any right or benefit, any provision of applicable law or any judgment, order,
decree or regulation applicable to such Selling Shareholder of any court,
regulatory body, administrative agency, governmental body or arbitrator having
jurisdiction over such Selling Shareholder. No consent, approval, authorization
10
or other order of, or registration or filing with, any court or other
governmental authority or agency, is required for the consummation by such
Selling Shareholder of the transactions contemplated in this Agreement, except
such as have been obtained or made and are in full force and effect under the
Securities Act, applicable state securities or blue sky laws and from the NASD.
(f) No Registration or Other Similar Rights. Such Selling Shareholder
does not have any registration or other similar rights to have any equity or
debt securities registered for sale by the Company under the Registration
Statement or included in the offering contemplated by this Agreement, except for
such rights as are described in the Prospectus under "Shares Eligible for Future
Sale".
(g) No Further Consents, etc. No consent, approval or waiver is
required under any instrument or agreement to which such Selling Shareholder is
a party or by which it is bound or under which it is entitled to any right or
benefit, in connection with the offering, sale or purchase by the Underwriters
of any of the Common Shares which may be sold by such Selling Shareholder under
this Agreement or the consummation by such Selling Shareholder of any of the
other transactions contemplated hereby.
(h) Disclosure Made by Such Selling Shareholder in the Prospectus. All
information furnished by or on behalf of such Selling Shareholder in writing
expressly for use in the Registration Statement and Prospectus is, and on the
First Closing Date and the Second Closing Date will be, true, correct, and
complete in all material respects, and does not, and on the First Closing Date
and the Second Closing Date will not, contain any untrue statement of a material
fact or omit to state any material fact necessary to make such information not
misleading. Such Selling Shareholder confirms as accurate the number of shares
of Common Stock set forth opposite such Selling Shareholder's name in the
Prospectus under the caption "Principal Stockholders and Selling Stockholder"
(both prior to and after giving effect to the sale of the Common Shares).
(i) No Price Stabilization or Manipulation. Such Selling Shareholder
has not taken and will not take, directly or indirectly, any action designed to
or that might be reasonably expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Common Shares.
(j) Confirmation of Company Representations and Warranties. Such
Selling Shareholder is not aware that any of the representations and warranties
of the Company contained in Section 1(A) hereof is untrue or inaccurate in any
material respect and is not prompted to sell shares of Common Stock by any
information concerning the Company which is not set forth in the Registration
Statement and the Prospectus.
Any certificate signed by or on behalf of the Selling Shareholder and
delivered to the Underwriters or to counsel for the Underwriters shall be deemed
to be a representation and warranty by such Selling Shareholder to each
Underwriter as to the matters covered thereby.
11
Section 2. Purchase, Sale and Delivery of the Common Shares.
The Firm Common Shares. Upon the terms herein set forth, (i) the
Company agrees to issue and sell to the several Underwriters an aggregate of
[2,400,000] Firm Common Shares and (ii) the Selling Shareholder agrees to sell
to the several Underwriters an aggregate of [600,000] Firm Common Shares. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase from the Company and the Selling
Shareholder the respective number of Firm Common Shares set forth opposite their
names on Schedule A. The purchase price per Firm Common Share to be paid by the
several Underwriters to the Company and the Selling Shareholder shall be $[ ]
per share.
The First Closing Date. Delivery of certificates for the Firm Common
Shares to be purchased by the Underwriters and payment therefor shall be made at
the offices of the managing Underwriter, NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
("NMS"), ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (or such other place
as may be agreed to by the Company and the Underwriters) at 6:00 a.m. San
Francisco time, on the third [fourth] full business day after the date of this
Agreement, or such other time and date not later than 10:30 a.m. San Francisco
time, on the date ten full business days after the date of this Agreement as the
Underwriters shall designate by notice to the Company (the time and date of such
closing are called the "First Closing Date"). The Company and the Selling
Shareholder hereby acknowledge that circumstances under which the Underwriters
may provide notice to postpone the First Closing Date as originally scheduled
include, but are in no way limited to, any determination by the Company , the
Selling Shareholder or the Underwriters to recirculate to the public copies of
an amended or supplemented Prospectus or a delay as contemplated by the
provisions of Section 10.
The Optional Common Shares; the Second Closing Date. In addition, on
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Selling
Shareholder hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of [450,000] Optional Common
Shares from such Selling Shareholder at the purchase price per share to be paid
by the Underwriters for the Firm Common Shares. The option granted hereunder is
for use by the Underwriters solely in covering any over-allotments in connection
with the sale and distribution of the Firm Common Shares. The option granted
hereunder may be exercised at any time (but not more than once) upon notice by
the Underwriters to the Selling Shareholder (with a copy to the Company), which
notice may be given at any time within 30 days from the date of this Agreement.
Such notice shall set forth (i) the aggregate number of Optional Common Shares
as to which the Underwriters are exercising the option, (ii) the names and
denominations in which the certificates for the Optional Common Shares are to be
registered and (iii) the time, date and place at which such certificates will be
delivered (which time and date may be simultaneous with, but not earlier than,
the First Closing Date, and in such case the term "First Closing Date" shall
refer to the time and date of delivery of certificates for the Firm Common
Shares and the Optional Common Shares). Such time and date of delivery, if
subsequent to the First Closing Date, is called the "Second Closing Date" and
shall be determined by the Underwriters and shall not be earlier than three nor
later than five full business days after delivery of such notice of exercise. If
any Optional Common Shares are to be purchased, (a) each Underwriter agrees,
severally and not jointly, to purchase the number of Optional Common Shares
(subject to such adjustments to eliminate fractional shares as the Underwriters
may determine) that bears the same proportion to the total number of Optional
Common Shares to be purchased as the number
12
of Firm Common Shares set forth on Schedule A opposite the name of such
----------
Underwriter bears to the total number of Firm Common Shares and (b) the Selling
Shareholder agrees to sell the Optional Common Shares (subject to such
adjustments to eliminate fractional shares as the Underwriters may determine).
The Underwriters may cancel the option at any time prior to its expiration by
giving written notice of such cancellation the Selling Shareholder (with a copy
to the Company).
Public Offering of the Common Shares. The Underwriters hereby advise
the Company and the Selling Shareholder that the Underwriters intend to offer
for sale to the public, as described in the Prospectus, their respective
portions of the Common Shares as soon after this Agreement has been executed and
the Registration Statement has been declared effective as the Underwriters, in
their sole judgment, have determined is advisable and practicable.
Payment for the Common Shares. Payment for the Common Shares to be sold
by the Company shall be made at the First Closing Date by wire transfer of
immediately available funds to the order of the Company. Payment for the Common
Shares to be sold by the Selling Shareholder shall be made at the First Closing
Date (and, if applicable, at the Second Closing Date) by wire transfer of
immediately available funds to the order of the Custodian.
NMS, individually and not on behalf of the Underwriters, may (but shall
not be obligated to) make payment for any Common Shares to be purchased by any
Underwriter whose funds shall not have been received by the Underwriters by the
First Closing Date or the Second Closing Date, as the case may be, for the
account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
The Selling Shareholder hereby agrees that (i) it will pay all stock
transfer taxes, stamp duties and other similar taxes, if any, payable upon the
sale or delivery of the Common Shares to be sold by such Selling Shareholder to
the several Underwriters, or otherwise in connection with the performance of
such Selling Shareholder's obligations hereunder and (ii) the Custodian is
authorized to deduct for such payment any such amounts from the proceeds to such
Selling Shareholder hereunder and to hold such amounts for the account of such
Selling Shareholder with the Custodian under the Custody Agreement.
Delivery of the Common Shares. The Company and the Selling Shareholder
shall deliver, or cause to be delivered, to the Underwriters for the accounts of
the several Underwriters certificates for the Firm Common Shares to be sold by
them at the First Closing Date, against the irrevocable release of a wire
transfer of immediately available funds for the amount of the purchase price
therefor. The Selling Shareholder shall also deliver, or cause to be delivered,
to the Underwriters for the accounts of the several Underwriters, certificates
for the Optional Common Shares the Underwriters have agreed to purchase from
such Selling Shareholder at the First Closing Date or the Second Closing Date,
as the case may be, against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price therefor. The
certificates for the Common Shares shall be in definitive form and registered in
such names and denominations as the Underwriters shall have requested at least
two full business days prior to the First Closing Date (or the Second Closing
Date, as the case may be) and shall be made available for inspection on the
business day preceding the First Closing Date (or the Second Closing Date, as
the case may be) at a location in New York City as the Underwriters
13
may designate. 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
Underwriters.
Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m.
on the second business day following the date the Common Shares are first
released by the Underwriters for sale to the public, the Company shall deliver
or cause to be delivered, copies of the Prospectus in such quantities and at
such places as the Underwriters shall request.
Section 3. Additional Covenants.
A. Covenants of the Company. The Company further covenants and agrees
with each Underwriter as follows:
(a) Underwriters' Review of Proposed Amendments and Supplements. During
such period beginning on the date hereof and ending on the later of the First
Closing Date or such date as in the opinion of counsel for the Underwriters, the
Prospectus is no longer required by law to be delivered in connection with sales
by an Underwriter or dealer (the "Prospectus Delivery Period"), prior to
amending or supplementing the Registration Statement (including any registration
statement filed under Rule 462(b) under the Securities Act) or the Prospectus,
the Company shall furnish to the Underwriters for review a copy of each such
proposed amendment or supplement, and the Company shall not file any such
proposed amendment or supplement to which the Underwriters reasonably object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Underwriters in writing (i) of the receipt of
any comments of, or requests for additional or supplemental information from,
the Commission, (ii) of the time and date of any filing of any post-effective
amendment to the Registration Statement or any amendment or supplement to any
preliminary prospectus or the Prospectus, (iii) of the time and date that any
post-effective amendment to the Registration Statement becomes effective and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any of
such purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such order at the
earliest possible moment. Additionally, the Company agrees that it shall comply
with the provisions of Rules 424(b), 430A and 434, as applicable, under the
Securities Act and will use its reasonable efforts to confirm that any filings
made by the Company under such Rule 424(b) were received in a timely manner by
the Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if in the opinion of the Underwriters or counsel for the Underwriters it is
otherwise necessary to amend or supplement the Prospectus to comply with
14
law, the Company agrees to promptly prepare (subject to Section 3(A)(a) hereof),
file with the Commission and furnish at its own expense to the Underwriters and
to dealers, amendments or supplements to the Prospectus so that the statements
in the Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Underwriters, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any amendments
and supplements thereto as the Underwriters may request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Underwriters and counsel for the Underwriters to qualify or register the Common
Shares for sale under (or obtain exemptions from the application of) the state
securities or blue sky laws or Canadian provincial Securities laws of those
jurisdictions designated by the Underwriters, shall comply with such laws and
shall continue such qualifications, registrations and exemptions in effect so
long as required for the distribution of the Common Shares. The Company shall
not be required to qualify as a foreign corporation or to take any action that
would subject it to general service of process in any such jurisdiction where it
is not presently qualified or where it would be subject to taxation as a foreign
corporation. The Company will advise the Underwriters promptly of the suspension
of the qualification or registration of (or any such exemption relating to) the
Common Shares for offering, sale or trading in any jurisdiction or any
initiation or threat of any proceeding for any such purpose, and in the event of
the issuance of any order suspending such qualification, registration or
exemption, the Company shall use its best efforts to obtain the withdrawal
thereof at the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Common Shares sold by it in the manner described under the caption
"Use of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Common Stock.
(h) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Underwriters an earnings
statement (which need not be audited) covering the twelve-month period ending
[ ] that satisfies the provisions of Section 11(a) of the Securities Act.
(i) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act. Additionally, the Company shall report the use of proceeds from
the issuance of the Common Shares as may be required under Rule 463 under the
Securities Act.
(j) Agreement Not To Offer or Sell Additional Securities. During the
period of 120 days following the date of the Prospectus, the Company will not,
without the prior written
15
consent of NMS (which consent may be withheld at the sole discretion of NMS),
directly or indirectly, sell, offer, contract or grant any option to sell,
pledge, transfer or establish an open "put equivalent position" within the
meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement under
the Securities Act in respect of, any shares of Common Stock, options or
warrants to acquire shares of the Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock (other than as
contemplated by this Agreement with respect to the Common Shares); provided,
however, that the Company may issue options to purchase its Common Stock or
shares of its Common Stock issuable upon exercise of options, pursuant to any
stock option, stock bonus or other stock plan or arrangement described in the
Prospectus; provided, further that holders of options to acquire shares of
Common Stock granted on or after January 19, 1999 or shares of Common Stock
acquired upon the exercise of such options, agree in writing not to sell, offer,
dispose of or otherwise transfer any such options or shares during such 120 day
period without the prior written consent of NMS (which consent may be withheld
at the sole discretion of NMS).
(k) Future Reports to the Underwriters. During the period of five years
hereafter the Company will furnish to the Underwriters c/o NMS at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇▇▇▇, Managing Director: (i)
as soon as practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of the
close of such fiscal year and statements of income, shareholders' equity and
cash flows for the year then ended and the opinion thereon of the Company's
independent public or certified public accountants; (ii) as soon as practicable
after the filing thereof; copies of each proxy statement, Annual Report on Form
10-K, Quarterly Report on Form l0-Q, Current Report on Form 8-K or other report
filed by the Company with the Commission, the NASD or any securities exchange;
and (iii) as soon as available, copies of any report or communication of the
Company mailed generally to holders of its capital stock.
B. Covenants of the Selling Shareholder. The Selling Shareholder
further covenants and agrees with each Underwriter:
(a) Agreement Not to Offer or Sell Additional Securities. The Selling
Shareholder will not, without the prior written consent of NMS (which consent
may be withheld in its sole discretion), directly or indirectly, sell, offer,
contract or grant any option to sell (including without limitation any short
sale), pledge, transfer, establish an open "put equivalent position" within the
meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of any
shares of Common Stock, options or warrants to acquire shares of Common Stock,
or securities exchangeable or exercisable for or convertible into shares of
Common Stock currently or hereafter owned either of record or beneficially (as
defined in Rule 13d-3 under Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date 120 days after the date of the Prospectus.
(b) Delivery of Forms W-8 and W-9. To deliver to the Underwriters prior
to the First Closing Date a properly completed and executed United States
Treasury Department Form W-8 (if the Selling Shareholder is a non-United States
person) or Form W-9 (if the Selling Shareholder is a United States Person).
16
NMS, on behalf of the several Underwriters, may, in its sole
discretion, waive in writing the performance by the Company or the Selling
Shareholder of any one or more of the foregoing covenants or extend the time for
their performance.
Section 4. Payment of Expenses. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of the Company's
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Common Shares (including all printing and engraving costs),
(ii) all fees and expenses of the registrar and transfer agent of the Common
Stock, (iii) all necessary issue, transfer and other stamp taxes in connection
with the issuance and sale of the Common Shares to the Underwriters, (iv) all
fees and expenses of the Company's counsel, independent public or certified
public accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Registration Statement (including financial statements, exhibits, consents
and certificates of experts), each preliminary prospectus and the Prospectus,
and all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the state securities or blue sky laws or the provincial
securities laws of Canada, and, if requested by the Underwriters, preparing and
printing a "Blue Sky Survey" or memorandum, and any supplements thereto,
advising the Underwriters of such qualifications, registrations and exemptions,
(vii) the filing fees incident to, and the reasonable fees and expenses of
counsel for the Underwriters in connection with, the NASD's review and approval
of the Underwriters' participation in the offering and distribution of the
Common Shares, (viii) the fees and expenses associated with including the Common
Shares on the Nasdaq National Market, and (ix) all other fees, costs and
expenses referred to in Item 13 of Part II of the Registration Statement. Except
as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Underwriters shall pay their own expenses, including the fees and disbursements
of their counsel.
The Selling Shareholder agrees with each Underwriter to pay (directly
or by reimbursement) all fees and expenses incident to the performance of its
obligations under this Agreement which are not otherwise specifically provided
for herein, including but not limited to (i) fees and expenses of counsel and
other advisors for such Selling Shareholder, (ii) fees and expenses of the
Custodian and (iii) expenses and taxes incident to the sale and delivery of the
Common Shares to be sold by such Selling Shareholder to the Underwriters
hereunder (which taxes, if any, may be deducted by the Custodian under the
provisions of Section 2 of this Agreement).
This Section 4 shall not affect or modify any separate, valid agreement
relating to the allocation of payment of expenses between the Company, on the
one hand, and the Selling Shareholder, on the other hand.
Section 5. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company and
17
the Selling Shareholder set forth in Sections 1(A) and 1(B) hereof as of the
date hereof and as of the First Closing Date as though then made and, with
respect to the Optional Common Shares, as of the Second Closing Date as though
then made, to the timely performance by the Company and the Selling Shareholder
of their respective covenants and other obligations hereunder, and to each of
the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Underwriters
shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent public or certified
public accountants for the Company, a letter dated the date hereof addressed to
the Underwriters, in form and substance satisfactory to the Underwriters,
containing statements and information of the type ordinarily included in
accountant's "comfort letters" to underwriters, delivered according to Statement
of Auditing Standards No. 72 (or any successor bulletin), with respect to the
audited and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the Underwriters
shall have received a reasonable number of conformed copies of such accountants'
letter for each of the several Underwriters).
(b) Compliance with Registration Requirements; No Stop Order; No
Objection from NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the Optional
Common Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by
Rule 424(b) under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective
amendment shall have become effective; or, if the Company elected to
rely upon Rule 434 under the Securities Act and obtained the
Underwriters' consent thereto, the Company shall have filed a Term
Sheet with the Commission in the manner and within the time period
required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment to the Registration Statement, shall be in
effect and no proceedings for such purpose shall have been instituted
or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the fairness
and reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the First Closing Date
and, with respect to the Optional Common Shares, the Second Closing Date:
(i) in the judgment of the Underwriters there shall not have
occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review
18
for a possible change that does not indicate the direction of the
possible change, in the rating accorded any securities of the Company
or any of its subsidiaries by any "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Securities Act.
(d) Opinion of Counsel for the Company. On each of the First Closing
Date and the Second Closing Date the Underwriters shall have received the
favorable opinion of Piper & Marbury L.L.P., counsel for the Company, dated as
of such Closing Date, the form of which is attached as Exhibit A (and the
Underwriters shall have received a reasonable number of conformed copies of such
counsel's legal opinion for each of the several Underwriters).
(e) Opinion of Counsel for the Underwriters. On each of the First
Closing Date and the Second Closing Date the Underwriters shall have received
the favorable opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the
Underwriters, dated as of such Closing Date, with respect to certain matters
(and the Underwriters shall have received a reasonable number of conformed
copies of such counsel's legal opinion for each of the several Underwriters).
(f) Officers' Certificate. On each of the First Closing Date and the
Second Closing Date the Underwriters shall have received a written certificate
executed by the Chairman, Chief Executive Officer and President of the Company
and the Chief Financial Officer of the Company, dated as of such Closing Date,
to the effect set forth in subsections (b)(ii) and (c)(ii) of this Section 5,
and further to the effect that:
(i) for the period from and after the date of this Agreement
and prior to such Closing Date, there has not occurred any Material
Adverse Change;
(ii) the representations, warranties and covenants of the
Company set forth in Section 1 (A) of this Agreement are true and
correct with the same force and effect as though expressly made on and
as of such Closing Date, and
(iii) the Company has complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed
or satisfied hereunder at or prior to such Closing Date.
(g) Bring-down Comfort Letter. On each of the First Closing Date and
the Second Closing Date the Underwriters shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, independent public or certified public accountants for the Company, a
letter dated such date, in form and substance satisfactory to the Underwriters,
to the effect that they reaffirm the statements made in the letter furnished by
them pursuant to subsection (a) of this Section 5, except that the specified
date referred to therein for the carrying out of procedures shall be no more
than three business days prior to the First Closing Date or Second Closing Date,
as the case may be (and the Underwriters shall have received a reasonable number
of conformed copies of such accountants' letter for each of the several
Underwriters).
(h) Opinion of Counsel for the Selling Shareholder. On each of the
First Closing Date and the Second Closing Date the Underwriters shall have
received the favorable opinion of Piper & Marbury L.L.P., counsel for the
Selling Shareholder, dated as of such Closing Date, the
19
form of which is attached as Exhibit B (and the Underwriters shall have received
a reasonable number of conformed copies of such counsel's legal opinion for each
of the several Underwriters).
(i) Selling Shareholder's Certificate. On each of the First Closing
Date and the Second Closing Date the Underwriters shall receive a written
certificate executed by the Attorney-in-Fact of the Selling Shareholder, dated
as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of such
Selling Shareholder set forth in Section 1(B) of this Agreement are
true and correct with the same force and effect as though expressly
made by such Selling Shareholder on and as of such Closing Date; and
(ii) such Selling Shareholder has complied with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to such Closing Date.
(j) Selling Shareholder's Documents. On the date hereof, the Company
and the Selling Shareholder shall have furnished for review by the Underwriters
copies of the Powers of Attorney and Custody Agreements executed by the Selling
Shareholder and such further information, certificates and documents as the
Underwriters may reasonably request.
(k) Lock- Up Agreement from Certain Securityholders of the Company
Other Than the Selling Shareholder. On the date hereof, the Company shall have
furnished to the Underwriters an agreement in the form of Exhibit C hereto from
each director of the Company, and such agreement shall be in full force and
effect on each of the First Closing Date and the Second Closing Date.
(l) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, the Underwriters and counsel for the Underwriters
shall have received such information, documents and opinions as they may
reasonably require for the purposes of enabling them to pass upon the issuance
and sale of the Common Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Underwriters by notice to the Company and the Selling Shareholder at any time on
or prior to the First Closing Date and, with respect to the Optional Common
Shares, at any time prior to the Second Closing Date, which termination shall be
without liability on the part of any party to any other party, except that
Section 4, Section 6, Section 8 and Section 9 shall at all times be effective
and shall survive such termination.
Section 6. Reimbursement of Underwriters' Expenses. If this Agreement
is terminated by the Underwriters pursuant to Section 5, Section 7, Section 10
or Section 11 or Section 17, or if the sale to the Underwriters of the Common
Shares on the First Closing Date is not consummated because of any refusal,
inability or failure on the part of the Company or the Selling Shareholder to
perform any agreement herein or to comply with any provision hereof, the Company
agrees to reimburse the Underwriters (or such Underwriters as have terminated
this Agreement with respect to themselves), severally, upon demand for all
out-of-pocket expenses
20
that shall have been reasonably incurred by the Underwriters in connection with
the proposed purchase and the offering and sale of the Common Shares, including
but not limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, facsimile and telephone charges.
Section 7. Effectiveness of this Agreement.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Underwriters of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company or the Selling
Shareholder to any Underwriter, except that the Company and the Selling
Shareholder shall be obligated to reimburse the expenses of the Underwriters
pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the Company or the
Selling Shareholder, or (c) any party hereto to any other party except that the
provisions of Section 8 and Section 9 shall at all times be effective and shall
survive such termination.
Section 8. Indemnification.
(a) Indemnification of the Underwriters. Each of the Company and the
Selling Shareholder, jointly and severally, agrees to indemnify and hold
harmless each Underwriter, its officers and employees, and each person, if any,
who controls any Underwriter within the meaning of the Securities Act and the
Exchange Act against any loss, claim, damage, liability or expense, as incurred,
to which such Underwriter or such controlling person may become subject, under
the Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or actions
in respect thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A or Rule 434 under the
Securities Act, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
in whole or in part upon any inaccuracy in the representations and warranties of
the Company or the Selling Shareholder contained herein; or (iv) in whole or in
part upon any failure of the Company or the Selling Shareholder to perform their
respective obligations hereunder or under law; or (v) any act or failure to act
or any alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Common Stock or the offering contemplated hereby,
and which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon any matter covered by clause
(i) or (ii) above, provided that the Company shall not be liable under this
clause (v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage,
21
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Underwriter through its bad faith or
willful misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements of counsel
chosen by NMS) as such expenses are reasonably incurred by such Underwriter or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any 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 and the Selling
Shareholder by the Underwriters expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Common Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Common Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense, and provided, further,
that the liability of the Selling Shareholder for a breach of the
representations and warranties contained in Section 1(B) or for indemnification
or contribution under this Section 8 or Section 9, respectively, or otherwise at
law or in equity (other than claims based in whole or in part on fraud), shall
be limited to an amount equal to the initial public offering price of the Common
Shares sold by the Seller Shareholder, less the underwriting discounts and
commissions as set forth on the cover page of the Prospectus, and that the
Company and the Selling Shareholder may agree, as among themselves and without
limiting the rights of the Underwriters under this Agreement, as to the
respective amounts of such liability for which they each shall be responsible.
The indemnity agreement set forth in this Section 8(a) shall be in addition to
any liabilities that the Company and the Selling Shareholder may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement, the Selling Shareholder and each person, if any, who
controls the Company or any Selling Shareholder within the meaning of the
Securities Act or the Exchange Act, against any loss, claim, damage, liability
or expense, as incurred, to which the Company, or any such director, officer,
Selling Shareholder or controlling person may become subject, under the
Securities Act, the Exchange Act, or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the
22
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission 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 and the
Selling Shareholder by the Underwriters expressly for use therein; and to
reimburse the Company, or any such director, officer, Selling Shareholder or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer, Selling Shareholder or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. Each of the
Company and the Selling Shareholder hereby acknowledges that the only
information that the Underwriters have furnished to the Company and the Selling
Shareholder expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the first paragraph and as the second
and [__] paragraphs under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct. The indemnity agreement
set forth in this Section 8(b) shall be in addition to any liabilities that each
Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing 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 for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (NMS in the case of Section 8(b) and Section 9), representing
the
23
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
Section 9. Contribution.
If the indemnification provided for in Section 8 is for any reason held
to be unavailable to or otherwise insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount paid or payable by such indemnified party, as incurred, as a
result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholder, on the one hand,
and the Underwriters, on the other hand, from the offering of the Common Shares
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Selling Shareholder, on the one
hand, and the Underwriters, on the other hand, in connection with the statements
or omissions or inaccuracies in the representations and warranties herein which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Selling Shareholder, on the one hand, and the Underwriters,
on the other hand, in connection with the offering of the Common Shares pursuant
to this Agreement shall be deemed to be in the same respective proportions as
the total net proceeds from the offering of the Common Shares pursuant to this
Agreement (before deducting expenses) received by the Company and the Selling
Shareholder, and the total underwriting discount received by the Underwriters,
in each case as set forth on the front cover page of the Prospectus (or, if Rule
434 under the Securities Act is used, the corresponding location on the Term
Sheet) bear to the aggregate initial public offering price
24
of the Common Shares as set forth on such cover. The relative fault of the
Company and the Selling Shareholder, on the one hand, and the Underwriters, on
the other hand, shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact or any such inaccurate or alleged
inaccurate representation or warranty relates to information supplied by the
Company or the Selling Shareholder, on the one hand, or the Underwriters, on the
other hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company, the Selling Shareholder and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
Schedule A. For purposes of this Section 9, each officer and employee of an
----------
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the Securities Act and the Exchange
Act shall have the same rights to contribution as the Company.
Section 10. Default of One or More of the Several Underwriters. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Common
Shares that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Common Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on Schedule A
----------
bears to the aggregate number of
25
Firm Common Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the non-
defaulting Underwriters, to purchase the Common Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or the Second Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Common
Shares and the aggregate number of Common Shares with respect to which such
default occurs exceeds 10% of the aggregate number of Common Shares to be
purchased on such date, and arrangements satisfactory to the non-defaulting
Underwriters and the Company for the purchase of such Common Shares are not made
within 48 hours after such default, this Agreement shall terminate without
liability of any party to any other party except that the provisions of Section
4, Section 6, Section 8 and Section 9 shall at all times be effective and shall
survive such termination. In any such case either the non-defaulting
Underwriters or the Company shall have the right to postpone the First Closing
Date or the Second Closing Date, as the case may be, but in no event for longer
than seven days in order that the required changes, if any, to the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 11. Termination of this Agreement. Prior to the First Closing
Date this Agreement may be terminated by the Underwriters by notice given to the
Company and the Selling Shareholder if at any time (i) trading or quotation in
any of the Company's securities shall have been suspended or limited by the
Commission or by the Nasdaq National Market, or trading in securities generally
on either the Nasdaq Stock Market shall have been suspended or limited, or
minimum or maximum prices shall have been generally established on any of such
stock exchanges by the Commission or the NASD; (ii) a general banking moratorium
shall have been declared by any of federal, New York or California authorities;
(iii) there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States' or
international political, financial or economic conditions, as in the judgment of
the Underwriters is material and adverse and makes it impracticable to market
the Common Shares in the manner and on the terms described in the Prospectus or
to enforce contracts for the sale of securities; (iv) in the judgment of the
Underwriters there shall have occurred any Material Adverse Change; or (v) the
Company shall have sustained a loss by strike, fire, flood, earthquake, accident
or other calamity of such character as in the judgment of the Underwriters may
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured. Any
termination pursuant to this Section 11 shall be without liability on the part
of (a) the Company or the Selling Shareholder to any Underwriter, except that
the Company and the Selling Shareholder shall be obligated to reimburse the
expenses of the Underwriters and the Underwriters pursuant to Sections 4 and 6
hereof, (b) any Underwriter to the Company or the Selling Shareholder, or (c) of
any party hereto to any other party except that the provisions of Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
26
Section 12. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholder and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Shareholder, as
the case may be, and will survive delivery of and payment for the Common Shares
sold hereunder and any termination of this Agreement.
Section 13. Notices. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Underwriters:
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company:
Creditrust Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman, President and Chief
Executive Officer
If to the Selling Shareholder:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o Creditrust Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman, President and Chief
Executive Officer
Any party hereto may change the address for receipt of communications
by giving written notice to the others.
27
Section 14. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and personal representatives, and no
other person will have any right or obligation hereunder. The term "successors"
shall not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.
Section 15. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
Section 16. Governing Law Provisions.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
28
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
Section 17. Failure of the Selling Shareholder to Sell and Deliver
Common Shares. If the Selling Shareholder shall fail to sell and deliver to the
Underwriters the Common Shares to be sold and delivered by such Selling
Shareholder at the First Closing Date pursuant to this Agreement, then the
Underwriters may at their option, by written notice from the Underwriters to the
Company and the Selling Shareholder, either (i) terminate this Agreement without
any liability on the part of any Underwriter or, except as provided in Sections
4, 6, 8 and 9 hereof, the Company or the Selling Shareholder, or (ii) purchase
the shares which the Company has agreed to sell and deliver in accordance with
the terms hereof. If the Selling Shareholder shall fail to sell and deliver to
the Underwriters the Common Shares to be sold and delivered by such Selling
Shareholder pursuant to this Agreement at the First Closing Date or the Second
Closing Date, then the Underwriters shall have the right, by written notice from
the Underwriters to the Company and the Selling Shareholder, to postpone the
First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
Section 18. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company and the Custodian the enclosed
copies hereof, whereupon this instrument, along with all counterparts hereof,
shall become a binding agreement in accordance with its terms.
29
Very truly yours,
CREDITRUST CORPORATION
By:
--------------------------
[Title]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By:
--------------------------
(Attorney-in-fact)
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Underwriters in San Francisco, California as of the date first above
written.
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, INCORPORATED
By NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
By:
30
SCHEDULE A
Underwriters Number of Firms
Common Shares
to be Purchased
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC........ [___]
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Incorporated............ [___]
Total........................................ [2,400,000]
---------
Schedule A-1
SCHEDULE B
Selling Shareholder Number of Firm Common Maximum Number of
Shares to be Sold Optional Common
Shares to be Sold
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o Creditrust Corporation
7000 Security Boulevard [600,000] [450,000]
------- -------
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Total: [600,000] [450,000]
======= =======
Schedule B-1
EXHIBIT A
The final opinion in draft form should be attached as Exhibit A at the time this
Agreement is executed.
Opinion of counsel for the Company to be delivered pursuant to Section
5(d) of the Underwriting Agreement.
References to the Prospectus in this Exhibit A include any supplements
thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Maryland.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under the Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for
such jurisdictions where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, result in a
Material Adverse Change.
(iv) Each significant subsidiary of the Company (as defined
in Rule 405 under the Securities Act) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and, to the best knowledge of
such counsel, is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material
Adverse Change.
(v) All of the issued and outstanding capital stock of each
such significant subsidiary of the Company has been duly authorized and
validly issued, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or, to the best
knowledge of such counsel, any pending or threatened claim.
(vi) The authorized, issued and outstanding capital stock of
the Company (including the Common Stock) conform to the descriptions
thereof set forth in the Prospectus. All of the outstanding shares of
Common Stock (including the shares
Exhibit A-1
of Common Stock owned by the Selling Shareholder) have been duly
authorized and validly issued, are fully paid and nonassessable and, to
the best of such counsel's knowledge, have been issued in compliance
with the registration and qualification requirements of federal and
state securities laws. The form of certificate used to evidence the
Common Stock is in due and proper form and complies with all applicable
requirements of the charter and by-laws of the Company and the General
Corporation Law of the State of Maryland. The description of the
Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to such plans,
arrangements, options and rights.
(vii) No shareholder of the Company or any other person has
any preemptive right, right of first refusal or other similar right to
subscribe for or purchase securities of the Company arising (i) by
operation of the charter or by-laws of the Company or the General
Corporation Law of the State of Maryland or (ii) to the best knowledge
of such counsel, otherwise.
(viii) The Underwriting Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and public
policy and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles.
(ix) The Common Shares to be purchased by the Underwriters
from the Company have been duly authorized for issuance and sale
pursuant to the Underwriting Agreement and, when issued and delivered
by the Company pursuant to the Underwriting Agreement against payment
of the consideration set forth therein, will be validly issued, fully
paid and nonassessable.
(x) [Each of] The Registration Statement [and the Rule
462(b) Registration Statement, if any,] has been declared effective by
the Commission under the Securities Act. To the best knowledge of such
counsel, no stop order suspending the effectiveness of either of the
Registration Statement [or the Rule 462(b) Registration Statement, if
any,] has been issued under the Securities Act and no proceedings for
such purpose have been instituted or are pending or are contemplated or
threatened by the Commission. Any required filing of the Prospectus and
any supplement thereto pursuant to Rule 424(b) under the Securities Act
has been made in the manner and within the time period required by such
Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus, and each amendment or
supplement to the Registration Statement and the, as of their
respective effective or issue dates (other than the financial
statements and supporting schedules included therein or in exhibits to
or
Exhibit A-2
excluded from the Registration Statement, as to which no opinion need
be rendered) comply as to form in all material respects with the
applicable requirements of the Securities Act.
(xii) The Common Shares have been approved for listing on the
Nasdaq National Market.
(xiii) The statements (i) in the Prospectus under the captions
"Risk Factors--Government Regulation and --Shares Eligible for Future
Sale", "Description of Capital Stock", "Dividend Policy", "Management's
Discussion and Analysis and Results of Operations--Liquidity and
Capital Resources", "Business--Legal Proceedings", "Business--Trade-
marks and Proprietary Information", "Business--Government Regulation",
"Management--Employment Agreements", Management--Compensation Pursuant
to Plans", "Management--Indemnification of Directors and Officers",
"Certain Transactions", and "Underwriting" and (ii) in Item 14 and
Item 15 of the Registration Statement, insofar as such statements
constitute matters of law, summaries of legal matters, the Company's
charter or by-law provisions, documents or legal proceedings, or legal
conclusions, have been reviewed by such counsel and fairly present and
summarize, in all material respects, the matters referred to therein.
(xiv) To the best knowledge of such counsel, there are no
legal or governmental actions, suits or proceedings pending or
threatened which are required to be disclosed in the Registration
Statement, other than those disclosed therein.
(xv) To the best knowledge of such counsel, there are no
Existing Instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than
those described or referred to therein or filed or incorporated by
reference as exhibits thereto; and the descriptions thereof and
references thereto are correct in all material respects.
(xvi) No consent, approval, authorization or other order of;
or registration or filing with, any court or other governmental
authority or agency, is required for the Company's execution, delivery
and performance of the Underwriting Agreement and consummation of the
transactions contemplated thereby and by the Prospectus, except as
required under the Securities Act, applicable state securities or blue
sky laws and from the NASD.
(xvii) The execution and delivery of the Underwriting
Agreement by the Company and the performance by the Company of its
obligations thereunder (other than performance by the Company of its
obligations under the indemnification section of the Underwriting
Agreement, as to which no opinion need be rendered) (i) have been duly
authorized by all necessary corporate action on the part of the
Company, (ii) will not result in any violation of the provisions of the
charter or by-laws of the Company or any subsidiary, (iii) will not
constitute a breach of, or Default under, or result in the creation or
imposition of
Exhibit A-3
any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, (A) the Company's
[warehouse facilities and securitizations] or (B) to the best knowledge
of such counsel, any other material Existing Instrument, or (iv) to the
best knowledge of such counsel, will not result in any violation of any
law, administrative regulation or administrative or court decree
applicable to the Company or any subsidiary.
(xviii) The Company is not, and after receipt of payment for
the Common Shares will not be, an "investment company" within the
meaning of Investment Company Act.
(xix) Except as disclosed in the Prospectus under the caption
"Shares Eligible for Future Sale", to the best knowledge of such
counsel, there are no persons with registration or other similar rights
to have any equity or debt securities registered for sale under the
Registration Statement or included in the offering contemplated by the
Underwriting Agreement, other than the Selling Shareholder, except for
such rights as have been duly waived.
(xx) To the best knowledge of such counsel, neither the
Company nor any subsidiary is in violation of its charter or by-laws or
any law, administrative regulation or administrative or court decree
applicable to the Company or any subsidiary or is in Default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any material Existing Instrument, except in each
such case for such violations or Defaults as would not, individually or
in the aggregate, result in a Material Adverse Change.
In addition, such counsel shall state that they have
participated in conferences with officers and other representatives of
the Company, representatives of the independent public or certified
public accountants for the Company and with representatives of the
Underwriters at which the contents of the Registration Statement and
the Prospectus, and any supplements or amendments thereto, and related
matters were discussed and, although such counsel is not passing upon
and does not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement
or the Prospectus (other than as specified above), and any supplements
or amendments thereto, on the basis of the foregoing, nothing has come
to their attention which would lead them to believe that either the
Registration Statement or any amendments thereto, at the time the
Registration Statement or such amendments became effective, contained
an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus, as of its date or at the
First Closing Date or the Second Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading
(it being understood that such counsel need express no belief as to the
financial statements or other financial or statistical data
Exhibit A-4
derived therefrom, included in the Registration Statement or the
Prospectus or any amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Maryland or the federal law of the United
States, to the extent they deem proper and specified in such opinion, upon the
opinion (which shall be dated the First Closing Date or the Second Closing Date,
as the case may be, shall be satisfactory in form and substance to the
Underwriters, shall expressly state that the Underwriters may rely on such
opinion as if it were addressed to them and shall be furnished to the
Underwriters) of other counsel of good standing whom they believe to be reliable
and who are satisfactory to counsel for the Underwriters; provided, however,
that such counsel shall further state that they believe that they and the
Underwriters are justified in relying upon such opinion of other counsel, and
(B) as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials.
With respect to the statements in the Prospectus under the captions
"Risk Factors - Government Regulation" and "Business - Government Regulation",
J. ▇▇▇▇▇ ▇▇▇▇▇▇, Vice President, General Counsel of the Company, may render the
opinions described in paragraph (xiii) above.
Exhibit A-5
EXHIBIT B
The final opinion in draft form should be attached as Exhibit B at the time this
Agreement is executed.
The opinion of such counsel pursuant to Section 5(h) shall be rendered
to the Underwriters at the request of the Company and shall so state therein.
References to the Prospectus in this Exhibit B include any supplements thereto
---------
at the Closing Date.
(i) The Underwriting Agreement has been duly authorized,
executed and delivered by or on behalf of, and is a valid and binding
agreement of, such Selling Shareholder, enforceable in accordance with
its terms, except as rights to indemnification thereunder may be
limited by applicable law or public policy and except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles.
(ii) The execution and delivery by such Selling Shareholder
of, and the performance by such Selling Shareholder of its obligations
under, the Underwriting Agreement and its Custody Agreement and its
Power of Attorney will not, to the best of such counsel's knowledge,
violate or contravene any provision of applicable law or regulation, or
violate, result in a breach of or constitute a default under the terms
of any other agreement or instrument to which such Selling Shareholder
is a party or by which it is bound, or any judgment, order or decree
applicable to such Selling Shareholder of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over such Selling Shareholder.
(iii) Such Selling Shareholder has good and valid title to all
of the Common Shares which may be sold by such Selling Shareholder
under the Underwriting Agreement and has the legal right and power, and
all authorizations and approvals required to enter into the
Underwriting Agreement and its Custody Agreement and its Power of
Attorney, to sell, transfer and deliver all of the Common Shares which
may sold by such Selling Shareholder under the Underwriting Agreement
and to comply with its other obligations under the Underwriting
Agreement, its Custody Agreement and its Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of
such Selling Shareholder has been duly authorized, executed and
delivered by such Selling Shareholder and is a valid and binding
agreement of such Selling Shareholder, enforceable in accordance with
its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles.
(v) Assuming that the Underwriters purchase the Common
Shares which are sold by such Selling Shareholder pursuant to the
Underwriting
Exhibit B-1
Agreement for value, in good faith and without notice of any adverse
claim, the delivery of such Common Shares pursuant to the Underwriting
Agreement will pass good and valid title to such Common Shares, free
and clear of any adverse claim within the meaning of the Uniform
Commercial Code.
(vi) To the best of such counsel's knowledge, no consent,
approval, authorization or other order of, or registration or filing
with, any court or governmental authority or agency, is required for
the consummation by such Selling Shareholder of the transactions
contemplated in the Underwriting Agreement, except as required under
the Securities Act, applicable state securities or blue sky laws, and
from the NASD.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Maryland or the federal law of the United
States, to the extent they deem proper and specified in such opinion, upon the
opinion (which shall be dated the First Closing Date or the Second Closing Date,
as the case may be, shall be satisfactory in form and substance to the
Underwriters, shall expressly state that the Underwriters may rely on such
opinion as if it were addressed to them and shall be furnished to the
Underwriters) of other counsel of good standing whom they believe to be reliable
and who are satisfactory to counsel for the Underwriters; provided, however,
that such counsel shall further state that they believe that they and the
Underwriters are justified in relying upon such opinion of other counsel, and
(B) as to matters of fact, to the extent they deem proper, on certificates of
the Selling Shareholder and public officials.
Exhibit B-2
EXHIBIT C
[Date]
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Incorporated
c/o NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: Creditrust Corporation (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of Common Stock (the "Offering") for which you will act as the
representatives of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company by,
among other things, raising additional capital for its operations. The
undersigned acknowledges that you and the other underwriters are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into underwriting arrangements with
the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of NationsBanc
▇▇▇▇▇▇▇▇▇▇ Securities LLC (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-1(h)
under the Securities Exchange Act of 1934, or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or
securities exchangeable or exercisable for or convertible into shares of Common
Stock currently or hereafter owned either of record or beneficially (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date 120 days after the date of the Prospectus;
provided, however, that the foregoing restrictions do not apply to options to
acquire shares of Common Stock granted to the undersigned before January 19,
1999, or shares of Common Stock acquired pursuant to the exercise of options
granted to the undersigned before January 19, 1999. The undersigned also agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent and registrar against the transfer of shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock held
by the undersigned except in compliance with the foregoing restrictions.
Exhibit C-1
With respect to the Offering only, the undersigned waives any registration
rights relating to registration under the Securities Act of any Common Stock
owned either of record or beneficially by the undersigned, including any rights
to receive notice of the Offering.
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
-----------------------------
Printed Name of Holder
By:
-----------------------------
Signature
-----------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
Exhibit C-2