1,000,000 Shares
TRANSNATIONAL FINANCIAL CORPORATION
Common Stock
______________, 1998
UNDERWRITING AGREEMENT
TEJAS SECURITIES GROUP, INC.
As Representative of the Several Underwriters
1250 Capital of Texas Hwy. South
Building Two, Suite ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Transnational Financial Corporation, a California corporation (the
"Company"), proposes to sell to you and the other underwriters named in Schedule
I hereto (collectively, the "Underwriters"), for whom Tejas Securities Group,
Inc. is acting as managing underwriter and representative (the
"Representative"), in the respective amounts set forth opposite each
Underwriter's name in Schedule I hereto, an aggregate of 1,000,000 shares of
Common Stock, no par value (the "Common Stock"), of the Company (such shares are
hereinafter collectively referred to as the "Underwritten Securities"). The
Company also proposes to grant to the Underwriters the Underwriters' Warrants
(defined in Section 7 hereof) to purchase up to 100,000 shares of Common Stock
(such Underwriters' Warrants and shares of Common Stock, are collectively
referred to herein as the "Warrant Securities"). ▇▇▇▇▇▇▇ Family LLC (the
"Selling Shareholder") proposes to grant to the Underwriters the Underwriters'
Option (described in Section 2(b) hereof) to purchase up to an aggregate of
150,000 shares of Common Stock solely to cover over-allotments in the sale of
the Underwritten Securities (such shares are collectively referred to herein as
the "Option Securities"). The Underwritten Securities, the Option Securities and
the Warrant Securities are collectively referred to herein as the "Securities."
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Effective Date" shall mean each date that the
Registration Statement (as defined below) and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean the
date and time that this Agreement is executed and delivered by the parties
hereto. The term "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in Section 1(a) below with respect to the offering of the
Securities, and any preliminary prospectus included in the Registration
Statement on the Effective Date that omits Rule 430A Information (as defined
below). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the most recent Preliminary Prospectus which predates or
coincides with the Execution Time. "Prospectus" shall mean the final prospectus
with respect to the offering of the Securities that contains the Rule 430A
Information. "Registration Statement" shall mean (a) the registration statement
referred to in Section 1(a) below, including Exhibits and Financial Statements,
in the form in which it has or shall become effective, (b) in the event any
post-effective amendment thereto becomes effective prior to the Closing Date (as
defined in Section 3(a) hereof) or any settlement date pursuant to Section 3(b)
hereof, such registration statement as so amended on such date, and (c) in the
event of the filing of any abbreviated registration statement increasing the
size of the offering (a "Rule 462 Registration Statement"), pursuant to Rule
462(b) (as defined below), which registration statement became effective upon
filing the Rule 462 Registration Statement. Such term shall include Rule 430A
Information (as defined below) deemed to be included therein at the Effective
Date as provided by Rule 430A. "Rule 424," "Rule 462(b)" and "Rule 430A" refer
to such rules promulgated under the Securities Act of 1933, as amended (the
"Act"). "Rule 430A Information" means information with respect to the Securities
and the offering thereof permitted to be omitted from the Registration Statement
when it becomes effective pursuant to Rule 430A.
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1
1. Representations and Warranties of the Company and Selling Shareholder.
(I) The Company represents and warrant to, and agrees with, each
Underwriter that:
(a) The Company meets the requirements for the use of Form
SB-2 under the Act and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a
related preliminary prospectus ("Preliminary Prospectus"), on Form SB-2
(Commission File No. 333-50657) (the "Registration Statement") for the
registration under the Act of the Securities. The Company may have
filed one or more amendments thereto, including related Preliminary
Prospectuses, each of which has previously been furnished to you. The
Company will next file with the Commission either prior to
effectiveness of such Registration Statement, a further amendment
thereto (including the form of Prospectus) or, after effectiveness of
such Registration Statement, a Prospectus in accordance with Rules 430A
and 424(b)(1) or (4). As filed, such amendment and form of Prospectus,
or such Prospectus, shall include all Rule 430A Information and, except
to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you in
writing, prior to the Execution Time, will be included or made therein.
(b) The Preliminary Prospectus dated _________________, at the
time of filing thereof, conformed in all material respects with the
applicable requirements of the Act and the rules and regulations
thereunder and did not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. If
the Effective Date is prior to or simultaneous with the Execution Time,
(i) on the Effective Date, the Registration Statement conformed in all
material respects to the requirements of the Act and the rules and
regulations thereunder and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, and (ii) at the Execution Time, the Registration Statement
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b), the Registration Statement and the Prospectus will conform, in
all material respects to the requirements of the Act and the rules and
regulations thereunder, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will
omit, to state a material fact required to be stated therein or
necessary in order to make the statements therein (and, in the case of
the Prospectus, in the light of the circumstances under which they were
made) not misleading. If the Effective Date is subsequent to the
Execution Time, on the Effective Date, the Registration Statement and
the Prospectus will conform in all material respects to the
requirements of the Act and the rules and regulations thereunder, and
neither of such documents will contain any untrue statement of any
material fact or will omit to state any material fact required to be
stated therein or necessary to make the statements therein (and, in the
case of the Prospectus, in the light of the circumstances under which
they were made) not misleading. The two preceding sentences do not
apply to statements in or omissions from the Registration Statement or
the Prospectus (or any supplements thereto) based upon and in
conformity with information furnished in writing to the Company by or
on behalf of any Underwriter through the Representative specifically
for use in connection with the preparation of the Registration
Statement or the Prospectus (or any supplements thereto).
(c) The Company does not own or control, directly or
indirectly, any corporation, partnership, association or other entity.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate
power and corporate authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction in which it conducts its business or owns
property and in which the failure, individually or in the aggregate, to
be so qualified would have a material adverse effect on the properties,
assets, operations, business, condition (financial or otherwise) or
prospects of the Company ("Material Adverse Effect"). The Company has
all necessary authorizations, approvals, orders, licenses, certificates
and permits of and from all government
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2
regulatory officials and bodies, to own its properties and conduct its
business as described in the Prospectus except where the absence of any
such authorization, approval, order, license, certificate or permit
would not have a Material Adverse Effect.
(e) The Company's equity capitalization is as set forth in the
Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; all
outstanding shares of Common Stock (including, without limitation, the
shares of Common Stock to be sold by the Selling Shareholder hereunder)
have been duly and validly authorized and issued and are fully paid and
nonassessable, and the certificates therefor are in valid and
sufficient form; there are, and, on the Effective Date, the Closing
Date (and any settlement date pursuant to Section 3(b) hereof), there
will be, no other classes of stock outstanding except Common Stock; all
outstanding options to purchase shares of Common Stock have been duly
and validly authorized and issued; except as described in the
Registration Statement, there are, and, on the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), there will be, no
options, warrant or rights to acquire, or debt instruments convertible
into or exchangeable for, or other agreements or understandings to
which the Company is a party, outstanding or in existence, entitling
any person to purchase or otherwise acquire shares of capital stock of
the Company; the issuance and sale of the Securities have been duly and
validly authorized and, when issued and delivered and paid for, the
Securities will be fully paid and nonassessable and free from
preemptive rights, and will conform in all respects to the description
thereof contained in the Prospectus; the Underwriters' Warrants will,
when issued, constitute valid and binding obligations of the Company
enforceable in accordance with their terms and the Company has reserved
a sufficient number of shares of Common Stock for issuance upon
exercise thereunder; the Securities will, when issued, possess the
rights, privileges and characteristics as described in the Prospectus;
and the certificates for the Securities are in valid and sufficient
form. Each offer and sale of securities of the Company referred to in
Item 15 of Part II of the Registration Statement was effected in
compliance with the Act and the rules and regulations thereunder, and
with all applicable blue sky ("Blue Sky") laws.
(f ) The Securities (other than the Underwriters' Warrants)
have been approved for listing on the American Stock Exchange ("AMEX"),
upon notice of issuance thereof.
(g) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of the Company, threatened action,
suit or proceeding before any court or governmental agency, authority
or body, domestic or foreign, or any arbitrator involving the Company
of a character required to be disclosed in the Registration Statement
or the Prospectus. There is no contract or other document of a
character required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit that is not described or filed
as required.
(h) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as rights of indemnity and contribution
hereunder may be limited by public policy and except as the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and general principles of equity.
(i) The Company has full corporate power and corporate
authority to enter into and perform its obligations under this
Agreement and to issue, sell and deliver the Securities in the manner
provided in this Agreement. The Company has taken all necessary
corporate action to authorize the execution and delivery of, and the
performance of its obligations under, this Agreement.
(j) Neither the offering, issuance and sale of the Securities,
nor the consummation of any other of the transactions contemplated
herein, nor the fulfillment of the terms hereof, will conflict with or
result in a breach or violation of, or constitute a default under, or
result in the imposition of a lien on any properties of the Company or
an acceleration of indebtedness pursuant to, the Articles of
Incorporation or bylaws of the Company, as currently in effect, or any
of the terms of any indenture or other agreement or instrument to which
the Company is a party or by which the Company or any of its properties
are bound, or any law, order, judgment, decree, rule or regulation
applicable to the Company of any court, regulatory body, administrative
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25908_2 - 75205/00002
3
agency, governmental body, stock exchange or arbitrator having
jurisdiction over the Company. The Company is not in violation of its
Articles of Incorporation or bylaws, as currently in effect, or, except
as described in the Prospectus, in breach of or default under any of
the terms of any indenture or other agreement or instrument to which it
is a party or by which it or its properties are bound, which breach or
default would, individually or in the aggregate, have a Material
Adverse Effect.
(k) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it
any shares of capital stock in consequence of the issue and sale of the
Securities, nor does any person have preemptive rights, or rights of
first refusal or other rights to purchase any of the Securities. Except
as referred to in the Prospectus, no person holds a right to require or
participate in a registration under the Act of Common Stock, Preferred
Stock or any other equity securities of the Company.
(l) The Company has not (i) taken and will not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result
in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities (other than those actions permitted by
applicable law) or (ii) effected any sales of shares of securities that
are required to be disclosed in response to Item 15 of Part II of the
Registration Statement (other than transactions disclosed in the
Registration Statement or the Prospectus).
(m) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is
required to be obtained or filed by or on behalf of the Company in
connection with the transactions contemplated herein, except such as
may have been obtained or made and registration of the Securities under
the Act, and such as may be required under the Blue Sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters.
(n) The accountants who have certified the Financial
Statements filed or to be filed with the Commission as part of the
Registration Statement are independent accountants as required by the
Act.
(o) No stop order preventing or suspending the use of any
Preliminary Prospectus has been issued, and no proceedings for that
purpose are pending or, to the best knowledge of the Company,
threatened or contemplated by the Commission; no stop order suspending
the sale of the Securities in any jurisdiction has been issued and no
proceedings for that purpose have been instituted or, to the best
knowledge of the Company, threatened or are contemplated; and any
request of the Commission for additional information (to be included in
the Registration Statement or the Prospectus or otherwise) has been
complied with.
(p) The Company has not sustained, since December 31, 1997,
any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there have not been any changes in the capital stock or long-term debt
of the Company, or any material adverse change, or a development known
to the Company that could reasonably be expected to cause or result in
a material adverse change, in the general affairs, management,
financial position, stockholders' equity, results of operations or
prospects of the Company, otherwise than as set forth in the
Prospectus. Except as set forth in the Prospectus, there exists no
present condition or state of facts or circumstances known to the
Company involving its customers which the Company can now reasonably
foresee would have a Material Adverse Effect or which would result in a
termination or cancellation of any agreement with any customer whose
purchases, individually or in the aggregate, are material to the
business of the Company, or which would result in any material decrease
in sales to any such customer or purchases from any supplier, or which
would prevent the Company from conducting its business as described in
the Prospectus in essentially the same manner in which it has
heretofore been conducted.
(q) The Financial Statements and the related notes of the
Company, included in the Registration Statement and the Prospectus
present fairly the financial position, results of operations, cash flow
and changes in shareholders' equity of the Company at the dates and for
the periods indicated, subject in the case of the
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25908_2 - 75205/00002
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Financial Statements for interim periods, to normal and recurring
year-end adjustments. The Financial Statement schedules included in the
Registration Statement present fairly the information required to be
stated therein. Such Financial Statements and schedules were prepared
in conformity with the Commission's rules and regulations and in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as stated
therein. The financial information of the Company set forth in the
Prospectus under the captions "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" fairly present, on the basis stated in the Prospectus, the
information included therein.
(r) The Company owns or possesses, or has the right to use
pursuant to licenses, sublicenses, agreements, permissions or
otherwise, adequate patents, copyrights, trade names, trademarks,
service marks, licenses and other intellectual property rights
necessary to carry on its business as described in the Prospectus, and,
except as set forth in the Prospectus, the Company has not received any
notice of either (i) default under any of the foregoing or (ii)
infringement of or conflict with asserted rights of others with respect
to, or challenge to the validity of, any of the foregoing which, in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a Material Adverse Effect, and the Company knows of
no fact which could reasonably be anticipated to serve as the basis for
any such notice.
(s) Subject to such exceptions as are not likely to result in
a Material Adverse Effect, (A) the Company owns all properties and
assets described in the Registration Statement and the Prospectus as
being owned by it and (B) the Company has good title to all properties
and assets owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except as otherwise disclosed in the
Prospectus and except for (i) liens for taxes not yet due, (ii)
mortgages and liens securing debt reflected on the Financial Statements
included in the Prospectus, (iii) materialmen's, workmen's, vendor's
and other similar liens incurred in the ordinary course of business
that are not delinquent, individually or in the aggregate, and do not
have a material adverse effect on the value of such properties or
assets of the Company, or on the use of such properties or assets by
the Company, in its respective business, and (iv) any other liens that,
individually or in the aggregate, are not likely to result in a
Material Adverse Effect. All leases to which the Company is a party and
which are material to the conduct of the business of the Company are
valid and binding and no material default by the Company has occurred
and is continuing thereunder; and the Company enjoys peaceful and
undisturbed possession under all such material leases to which it is a
party as lessee.
(t) The books, records and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions in and
dispositions of the assets of the Company. The system of internal
accounting controls maintained by the Company is 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 the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(u) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company has not incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, in each case, which are likely to result in a Material
Adverse Effect, and there has not been any payment of or declaration to
pay any dividends or any other distribution with respect to the shares
of the capital stock of the Company.
(v) The Company is in compliance in all material respects with
all applicable laws, rules and regulations, including, without
limitation, employment and employment practices, immigration, terms and
conditions of employment, health and safety of workers, customs and
wages and hours, and is not engaged in any unfair labor practice. No
property of the Company has been seized by any governmental agency or
authority as a result of any violation by the Company or any
independent contractor of the Company of any provisions of law. There
is no pending unfair labor practice complaint or charge filed with any
governmental agency against the Company. There is no labor strike,
material dispute, slow down or work stoppage actually
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25908_2 - 75205/00002
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pending or, to the best knowledge of the Company, threatened against or
affecting the Company; no grievance or arbitration arising out of or
under any collective bargaining agreements is pending against the
Company no collective bargaining agreement which is binding on the
Company restricts the Company from relocating or closing any of its
operations and none of the Company has experienced any work stoppage or
other labor dispute at any time.
(w) The Company has accurately, properly and timely (giving
effect to any valid extensions of time) filed all federal, state, local
and foreign tax returns (including all schedules thereto) that are
required to be filed, and has paid all taxes and assessments shown
thereon. Any and all tax deficiencies asserted or assessed against the
Company by the Internal Revenue Service ("IRS") or any other foreign or
domestic taxing authority have been paid or finally settled with no
remaining amounts owed. Neither the IRS nor any other foreign or
domestic taxing authority has examined any tax returns of the Company
nor has the IRS or any foreign or domestic taxing authority asserted a
position which conflicts with any tax position taken by the Company.
The charges, accruals and reserves shown in the Financial Statements
included in the Prospectus in respect of taxes for all fiscal periods
to date are adequate, and nothing has occurred subsequent to the date
of such Financial Statements that makes such charges, accruals or
reserves inadequate. The Company is not aware of any proposal (whether
oral or written) by any taxing authority to adjust any tax return filed
by the Company.
(x) With such exceptions as are not likely to result in a
Material Adverse Effect, the Company is in compliance with all Federal,
state, foreign and local laws and regulations relating to pollution or
protection of human health or the environment ("Environmental Laws"),
there are no circumstances that may prevent or interfere with such
compliance other than as set forth in the Prospectus, and the Company
has not received any notice or other communication alleging a currently
pending violation of any Environmental Laws. With such exceptions as
are not likely to result in a Material Adverse Effect, other than as
set forth in the Prospectus, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge or disposal of any
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products, that may result in the imposition of
liability on the Company or any claim against the Company or, to the
Company's best knowledge, against any person or entity whose liability
for any claim the Company has or may have assumed either contractually
or by operation of law, and the Company has not received any notice or
other communication concerning any such claim against the Company or
such person or entity.
(y) Except as set forth in the Prospectus, there are no
outstanding loans, advances or guaranties of indebtedness by the
Company to or for the benefit of its affiliates, or any of its officers
or directors, or any of the members of the families of any of them,
which are required to be disclosed in the Registration Statement or the
Prospectus.
(z) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(aa) Except as set forth in the Prospectus, the Company has
insurance of the types and in the amounts that it reasonably believes
is adequate for its business, including, but not limited to, casualty
and general liability insurance covering all real and personal property
owned or leased by the Company, as applicable, against theft, damage,
destruction, acts of vandalism and all other risks customarily insured
against.
(bb) The Company has not at any time (i) made any
contributions to any candidate for political office, or failed to
disclose fully any such contribution, in violation of law; (ii) made
any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public
duties, other than payments required or allowed by all applicable laws;
or (iii) violated, nor is it in violation of, any provision of the
Foreign Corrupt Practices Act of 1977.
(cc) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company, and the Registration Statement has been duly
executed pursuant to such authorization by and on behalf of the
Company.
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(dd) All documents delivered or to be delivered by the Company
or any of its directors or officers to the Underwriters, the Commission
or any state securities law administrator in connection with the
issuance and sale of the Securities were, on the dates on which they
were delivered, and will be, on the dates on which they are to be
delivered, true, complete and correct in all material respects.
(ee) Except as described in the Prospectus, the Company does
not maintain, nor does any other person maintain on behalf of the
Company, any retirement, pension (whether deferred or non-deferred,
defined contribution or defined benefit) or money purchase plan or
trust. There are no unfunded liabilities of the Company with respect to
any such plans or trusts that are not accrued or otherwise reserved for
on the Financial Statements.
(ff) Any certificates signed by an officer of the Company and
delivered to the Representative or the Underwriters or to counsel for
the Underwriters shall also be deemed a representation and warranty of
the Company to the Underwriters as to the matters covered thereby. Any
certificate delivered by the Company to its counsel for purposes of
enabling such counsel to render the opinions referred to in Section
6(b) will also be furnished to the Representative and counsel for the
Underwriters and shall be deemed to be additional representations and
warranties by the Company to the Underwriters as to the matters covered
thereby.
(gg) The Company has obtained and delivered to the
Representative the written agreements, substantially in the form
attached hereto as Exhibit B, of all of the shareholders of the
Company, except the Selling Shareholder, restricting dispositions of
equity securities of the Company.
(II) The Selling Shareholder represents and warrants to and agrees with
each Underwriter that:
(a) The Selling Shareholder now has, and on the Closing Date
(or any settlement date pursuant to Section 3(b) hereof) will have,
valid marketable title to the Option Securities to be sold by the
Selling Shareholder, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest other than pursuant
to this Agreement; and upon delivery of such Option Securities
hereunder and payment of the purchase price as herein contemplated,
each of the Underwriters will obtain valid marketable title to the
Option Securities purchased by it from the Selling Shareholder, free
and clear of any pledge, lien, security interest pertaining to the
Selling Shareholder or the Selling Shareholder's property, encumbrance,
claim or equitable interest, including any liability for estate or
inheritance taxes, or any liability to or claims of any creditor,
devisee, legatee or beneficiary of the Selling Shareholder.
(b) The Selling Shareholder has duly authorized, executed and
delivered, in the form heretofore furnished to the Representative, an
irrevocable Power of Attorney (the "Power of Attorney") appointing
______________________ and _________________________ as
attorneys-in-fact (collective, the "Attorneys" and individually, an
"Attorney") and a Letter of Transmittal and Custody Agreement (the
"Custody Agreement") with ____________________________ as custodian
(the "Custodian"); each of the Power of Attorney and the Custody
Agreement constitutes a valid and binding agreement on the part of the
Selling Shareholder, enforceable in accordance with its terms, except
as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or by general equitable
principles; and each of the Selling Shareholder's Attorneys, acting
alone, is authorized to execute and deliver this Agreement and the
certificate referred to in Section 6(k) hereof on behalf of the Selling
Shareholder, to determine the purchase price to be paid by the several
Underwriters to the Selling Shareholder as provided in Section 3
hereof, to authorize the delivery of the Option Securities to be sold
by the Selling Shareholder under this Agreement and to duly endorse (in
blank or otherwise) the certificate or certificates representing such
Shares or a stock power or powers with respect thereto, to accept
payment therefor, and otherwise to act on behalf of the Selling
Shareholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders
required for the execution and delivery by the Selling Shareholder of
the Power of Attorney and the Custody Agreement, the execution and
delivery by or
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on behalf of the Selling Shareholder of this Agreement and the sale and
delivery of the Option Securities to be sold by the Selling Shareholder
under this Agreement (other than, at the time of the execution hereof
(if the Registration Statement has not yet been declared effective by
the Commission), the issuance of the order of the Commission declaring
the Registration Statement effective and such consents, approvals,
authorizations or orders as may be necessary under the state or other
securities or Blue Sky laws) have been obtained and are in full force
and effect; the Selling Shareholder, if other than a natural person,
has been duly organized and is validly existing in good standing under
the laws of the jurisdiction of its organization as the type of entity
that it purports to be; and the Selling Shareholder has full legal
right, power and authority to enter into and perform its obligations
under this Agreement and such Power of Attorney and Custody Agreement,
and to sell, assign, transfer and deliver the Securities to be sold by
the Selling Shareholder under this Agreement.
(d) The Selling Shareholder will not, during the one (1)-year
period beginning on the date of the Prospectus (the "Lock-Up Period"),
directly or indirectly, offer, sell, contract to sell, grant any option
for the sale of, pledge or otherwise dispose of (individually, a
"Disposition") any Common Stock, or securities exercisable, convertible
or exchangeable for or into Common Stock (collectively, the "Shares"),
that the Selling Shareholder now owns or will own in the future
(beneficially or of record), except (i) as a bona fide gift or gifts,
provided the donee or donees thereof agree in writing to be bound by
this provision, (ii) the sale of Shares to the Underwriters pursuant
hereto, or (iii) with the prior written consent of the Representative.
The foregoing restriction is expressly agreed to preclude the holder of
Shares from engaging in any hedging or other transaction which is
designed to or reasonably expected to lead to or result in a
Disposition of Shares during the Lock-Up Period even if such Shares
would be disposed of by someone other than the Selling Shareholder.
Such prohibited hedging or other transactions would include, without
limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any security (other than a
broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Shares. The Selling
Shareholder also agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of
the securities held by the Selling Shareholder except in compliance
with this restriction.
(e) Certificates in negotiable form for all Securities to be
sold by the Selling Shareholder under this Agreement, together with a
stock power or powers duly endorsed in blank by the Selling
Shareholder, have been placed in custody with the Custodian for the
purpose of effecting delivery hereunder.
(f) This Agreement has been duly authorized by the Selling
Shareholder and has been duly executed and delivered by or on behalf of
the Selling Shareholder and is a valid and binding agreement of the
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 creditors' rights generally or by general equitable
principles; and the performance of this Agreement and the consummation
of the transactions herein contemplated will not result in a breach or
violation of any of the terms and provisions of or constitute a default
under any bond, debenture, note or other evidence of indebtedness, or
under any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the
Selling Shareholder is a party or by which the Selling Shareholder, or
any Option Securities to be sold by the Selling Shareholder hereunder,
may be bound or, to the best of the Selling Shareholder's knowledge,
result in any violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over the
Selling Shareholder or its properties, or result in any violation of
any provisions of the charter, bylaws or other organizational documents
of the Selling Shareholder.
(g) The Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably
be expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the
Securities.
(h) The Selling Shareholder has not distributed and will not
distribute any prospectus or other offering material in connection with
the offering and sale of the Securities.
Underwriting Agreement
25908_2 - 75205/00002
8
(i) All information furnished by or on behalf of the Selling
Shareholder relating to the Selling Shareholder and the Option
Securities that is contained in the representations and warranties of
the Selling Shareholder in the Selling Shareholder's Power of Attorney
or set forth in the Registration Statement and the Prospectus is, and
at the time the Registration Statement became or becomes, as the case
may be, effective and at all times subsequent thereto up to and on the
Closing Date (and on any settlement date pursuant to Section 3(b)
hereof) was or will be, true, correct and complete, and does not, and
at the time the Registration Statement became or becomes, as the case
may be, effective and at all times subsequent thereto up to and on the
Closing Date (and on any settlement date pursuant to Section 3(b)
hereof), 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 such information not misleading.
(j) The Selling Shareholder will review the Prospectus and
will comply with all agreements and satisfy all conditions on its part
to be complied with or satisfied pursuant to this Agreement on or prior
to the Closing Date and will advise one of its Attorneys and the
Representative prior to the Closing Date (or any settlement date
pursuant to Section 3(b) hereof) if any statement to be made on behalf
of the Selling Shareholder in the certificate contemplated by Section
6(k) hereof would be inaccurate if made as of the Closing Date (or any
settlement date pursuant to Section 3(b) hereof).
(k) The Selling Shareholder does not have, or has waived prior
to the date hereof, any preemptive right, co-sale right or right of
first refusal or other similar right to purchase any of the Securities
that are to be sold by the Company to the Underwriters pursuant to this
Agreement; the Selling Shareholder does not have, or has waived prior
to the date hereof, any registration right or other similar right to
participate in the offering made by the Prospectus, other than such
rights of participation as have been satisfied by the participation of
the Selling Shareholder in the transactions to which this Agreement
relates in accordance with the terms of this Agreement; and the Selling
Shareholder does not own any warrants, options or similar rights to
acquire, and does not have any right or arrangement to acquire, any
capital stock, rights, warrants, options or other securities from the
Company, other than those described in the Registration Statement and
the Prospectus.
(l) The Selling Shareholder is not aware that any of the
representations and warranties of the Company set forth in Section 1(I)
above is untrue or inaccurate in any material respect.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to issue and
sell to the Underwriters an aggregate of 1,000,000 shares of Common Stock. Each
of the Underwriters agrees, severally and not jointly, to purchase from the
Company the number of Underwritten Securities set forth opposite its name in
Schedule I hereto. The purchase price per Underwritten Security to be paid by
the several Underwriters to the Company shall be $______ per share.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Selling Shareholder hereby
grants an option (the "Underwriters' Option") to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 150,000 shares of
Common Stock, at the purchase price of $____ per share for use solely in
covering any over-allotments made by the Representative for the account of the
Underwriters in the sale and distribution of the Underwritten Securities. Said
Underwriters' Option may be exercised in whole or in part at any time on or
before the 45th day after the Effective Date upon written or telegraphic notice
by the Representative to the Selling Shareholder setting forth the number of
Option Securities which the several Underwriters are electing to purchase
pursuant to the Underwriters' Option and the settlement date. Delivery of
certificates for such Option Securities by the Selling Shareholder and payment
therefor to the Company shall be made as provided in Section 3 hereof. The
number of Option Securities to be so purchased by each Underwriter pursuant to
the Underwriters' Option shall be determined by multiplying the number of Option
Securities to be sold by the Selling Shareholder pursuant to the Underwriters'
Option, as exercised, by a fraction, the numerator of which is the number of
Underwritten Securities to be purchased by such Underwriter as set forth
opposite its name in Schedule I and the denominator of which is the total number
of Underwritten Securities to be purchased by all of the Underwriters as set
forth on Schedule I (subject to such adjustments to eliminate any fractional
share purchases as the Representative in its discretion may make).
Underwriting Agreement
25908_2 - 75205/00002
9
3. Delivery and Payment.
(a) Delivery of the certificates for the Underwritten Securities
described in Section 2(a) hereof shall be made by the Company through the
facilities of the Depository Trust Company ("DTC"), and payment therefor, shall
be made at the office of the Company at 9:00 a.m. Eastern Standard Time, on
_____________, 1998 or such later date (but not later than _____________, 1998)
as the Representative shall designate, which date and time may be postponed by
agreement among the Representative and the Company or as provided in Section 9
hereof (such date, time of delivery and payment for such Securities being herein
called the "Closing Date"). Delivery of the certificates for such Securities to
be purchased on the Closing Date shall be made as provided in the preceding
sentence for the respective accounts of the several Underwriters against payment
by the several Underwriters through Tejas Securities Group, Inc. of the
aggregate purchase price of such Underwritten Securities being sold by the
Company, to or upon the order of the Company, by wire transfer in federal (same
day) funds. Certificates for such Underwritten Securities shall be registered in
such names and in such denominations as the Representative may request not less
than one full business day in advance of the Closing Date. The Company agrees to
have the certificates for the Underwritten Securities to be purchased on the
Closing Date available at the office of the DTC, not later than 9:00 a.m.
Eastern Standard Time at least one business day prior to the Closing Date.
(b) The certificates in negotiable form for the Option Securities to be
sold by the Selling Shareholder have been placed in custody (for delivery under
this Agreement) under the Custody Agreement. The Selling Shareholder agrees that
the certificates for such shares are subject to the interests of the
Underwriters hereunder, that the arrangements made by the Selling Shareholder
for such custody, including the Power of Attorney, is to that extent irrevocable
and that the obligations of the Selling Shareholder hereunder shall not be
terminated by the act of the Selling Shareholder or by operation of law, except
as specifically provided herein or in the Custody Agreement. Delivery of
definitive certificates for the Option Securities to be purchased by the several
Underwriters pursuant to the exercise of the option granted by Section 2(b)
shall be made against payment of the purchase price therefor by the several
Underwriters by wire transfer in federal (same day) funds to the Custodian. Such
delivery and payment shall take place (i) on the Closing Date, if written notice
of the exercise of such option is received by the Selling Shareholder at least
three (3) full business days prior to the Closing Date, or (ii) on a date which
shall not be later than the third (3rd) full business day following the date the
Selling Shareholder receives written notice of the exercise of such option, if
such notice is received by the Selling Shareholder less than three (3) full
business days prior to the Closing Date.
The Company agrees to have the certificates for the Option Securities
to be purchased after the Closing Date available at the office of the DTC not
later than 9:00 a.m. Eastern Standard Time at least one business day prior to
the settlement date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution Time, to
become effective as promptly as possible. If the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representative of such timely
filing. The Company will promptly advise the Representative (i) when the
Registration Statement shall have become effective, (ii) when any post-effective
amendment thereto shall have become effective, (iii) of any request by the
Commission for any amendment or supplement of the Registration Statement or the
Prospectus or for any additional information with respect thereto, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the receipt by the Company of any notification with
respect to the institution or threatening of any proceeding for that purpose and
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The Company
will use its best efforts to prevent the issuance of any such stop order or
suspension and, if issued, to obtain as soon as possible the withdrawal thereof.
The Company will not file any amendment to the Registration Statement
Underwriting Agreement
25908_2 - 75205/00002
10
or supplement to the Prospectus without the prior consent of the Representative.
The Company will prepare and file with the Commission, promptly upon your
request, any amendment to the Registration Statement or supplement to the
Prospectus that you reasonably determine to be necessary or advisable in
connection with the distribution of the Securities by you, and will use its best
efforts to cause the same to become effective as promptly as possible.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it otherwise shall be necessary to supplement the
Prospectus to comply with the Act or the rules or regulations thereunder, the
Company will promptly prepare and file with the Commission, subject to Section
5(a) hereof, a supplement that will correct such statement or omission or a
supplement that will effect such compliance.
(c) As soon as practicable (but not later than eighteen months after
the effective date of the Registration Statement), the Company will make
generally available to its security holders and to the Representative an
earnings statement or statements (which need not be audited) of the Company
covering a period of at least twelve months after the Effective Date (but in no
event commencing later than 90 days after such date), which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder.
(d) The Company will furnish to each of you and counsel for the
Underwriters, without charge, one signed copy of the Registration Statement and
any amendments thereto (including exhibits thereto) and to each other
Underwriter a conformed copy of the Registration Statement and any amendments
thereto (without exhibits thereto) and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act, as many copies of the
Prospectus and each Preliminary Prospectus and any supplements thereto as the
Representative may reasonably request.
(e) The Company will take all actions necessary for the registration or
qualification of the Securities for sale under the laws of such jurisdictions
within the United States and its territories as the Representative may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities and will pay the fee of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with its
review of the offering, provided that the Company shall not be required to
qualify as a foreign corporation or to consent to service of process under the
laws of any such jurisdiction (except service of process with respect to the
offering and sale of the Securities).
(f) The Company will apply the net proceeds from the offering received
by it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(g) The Company will (i) cause the Securities (other than the
Underwriters' Warrant) to be listed on AMEX and (ii) comply with all
registration, filing and reporting requirements of the Exchange Act, and AMEX
which may from time to time be applicable to the Company.
(h) During the five-year period commencing on the date hereof, the
Company will furnish to its shareholders, as soon as practicable after the end
of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of earnings and will furnish to you and, upon request, to the other
Underwriters hereunder (i) concurrent with furnishing such quarterly reports to
its shareholders, statements of income and other information of the Company for
such quarter in the form furnished to the Company's shareholders; (ii)
concurrent with furnishing such annual reports to its shareholders, a balance
sheet of the Company as at the end of such fiscal year, together with statements
of income and surplus and of cash flow of the Company for such fiscal year, all
in reasonable detail and accompanied by a copy of the certificate or report
thereon of its independent certified public accountants; (iii) as soon as they
are available, copies of all reports and financial statements furnished to or
filed with the Commission, the NASD, AMEX or any other securities exchange on
which any of the Company's securities may be listed; (iv) every press release
and every material news item or article in respect of the Company or its affairs
which was released or prepared by the Company; and (v) any additional
information of a public nature concerning the Company or its business that you
may reasonably request. During such five-year period, if the Company shall have
active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the
Underwriting Agreement
25908_2 - 75205/00002
11
accounts of the Company and its subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary that
is not so consolidated.
(i) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for the Securities.
(j) The Company will not, for a period of 365 days following the
Effective Date, without the prior written consent of the Representative, offer,
sell, contract to sell (including, without limitation, any short sale),
transfer, assign, pledge, encumber, hypothecate or grant any option to purchase
or otherwise dispose of, any capital stock, or any options, rights or warrants
to purchase any capital stock of the Company, or any securities or indebtedness
convertible into or exchangeable for shares of capital stock of the Company,
except for (i) sales of Securities as contemplated by this Agreement and (ii)
sales of Common Stock upon the exercise of outstanding options described in the
Prospectus.
(k) The Company has reserved and shall continue to reserve a sufficient
number of shares of Common Stock for issuance upon exercise of the Underwriters'
Warrant.
(l) If the Company elects to rely on Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 p.m., Washington D.C. time, on the date of this Agreement,
and the Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
(m) For the five year period from the Closing Date, the Company will
nominate for election as a director a person designated by the Representative,
and during such time as the Representative shall not have exercised such right,
the Representative shall have the right to designate an observer, who shall be
entitled to attend all meetings of the Board of Directors and receive all
correspondence and communications sent by the Company to the members of the
Board of Directors.
6. Conditions to the Obligations of the Underwriters. The obligations of the
Underwriters to purchase the Securities described in Sections 2(a) and 2(b)
hereof shall be subject to (i) the accuracy of the representations and
warranties on the part of each of the Company and the Selling Shareholder
contained herein as of the Execution Time, the Closing Date and (in the case of
any Securities delivered after the Closing Date, any settlement date pursuant to
Section 3(b) hereof), (ii) the accuracy of the statements of each of the Company
and the Selling Shareholder made in any certificates delivered pursuant to the
provisions hereof, (iii) the performance by each of the Company and the Selling
Shareholder of its obligations hereunder, and (iv) the following additional
conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under the
Act, such post-effective amendment shall become effective) not later than 5:00
p.m. Eastern Standard Time, on the execution date hereof or at such later date
and time as the Representative may approve in writing and, at the Closing Date
(and any settlement date pursuant to Section 3(b) hereof), no stop order
suspending the effectiveness of the Registration Statement or any qualification
in any jurisdiction shall have been issued and no proceedings for that purpose
shall have been initiated or, to the best knowledge of the Company, threatened
by the Commission.
(b) The Company shall have furnished to the Representative the opinion
of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, counsel for the Company, addressed to the Underwriters
and dated the Closing Date (and any settlement date pursuant to Section 3(b)
hereof), or other evidence satisfactory to the Representative to the effect
that:
(i) The Registration Statement has become effective under the
Act; any required filing of the Prospectus or any supplements thereto
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); to the best knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement or any qualification in any jurisdiction has been issued and
no proceedings for that purpose have been instituted or threatened; any
request from the Commission for additional information has been
complied with; the Registration Statement and the Prospectus (and any
Underwriting Agreement
25908_2 - 75205/00002
12
supplements thereto) comply as to form in all material respects with
the applicable requirements of the Act and the rules and regulations
thereunder (except that such counsel need express no opinion with
respect to the Financial Statements and schedules included in the
Registration Statement and Prospectus).
(ii) The Company does not own or control, directly or
indirectly, any corporation, partnership, association or other entity.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate
power and corporate authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction in which it conducts its business or owns
property and in which the failure, individually or in the aggregate, to
be so qualified would have a Material Adverse Effect. The Company has
all necessary and material authorizations, approvals, orders, licenses,
certificates and permits of and from all government regulatory
officials and bodies, to own its properties and conduct its business as
described in the Prospectus, except where failure to obtain such
authorizations, approvals, orders, licenses, certificates or permits
would not have a Material Adverse Effect.
(iv) The Company does not own any shares of capital stock or
any other equity securities of any corporation or any equity interest
in any firm, partnership, association or other entity other than as
described in the Prospectus, except for ownership interests that would
not have a Material Adverse Effect.
(v) The Company has an authorized share capitalization as set
forth in the Prospectus; the capital stock of the Company conforms in
all material respects to the description thereof contained in the
Prospectus; all outstanding shares of Common Stock have been duly and
validly authorized and issued and are fully paid and nonassessable and
the certificates therefor are in valid and sufficient form in
accordance with applicable state law; there are no other classes of
stock outstanding except Common Stock; all outstanding options to
purchase shares of Common Stock have been duly and validly authorized
and issued; except as described in the Prospectus, there are no
options, warrants or rights to acquire, or debt instruments convertible
into or exchangeable for, or other agreements or understandings to
which the Company is a party, outstanding or in existence, entitling
any person to purchase or otherwise acquire any shares of capital stock
of the Company; the issuance and sale of the Securities have been duly
and validly authorized and, when issued and delivered and paid for, the
Securities will be fully paid and nonassessable and free from
preemptive rights, and will conform in all respects to the description
thereof contained in the Prospectus; the Underwriters' Warrants
constitute valid and binding obligations of the Company enforceable in
accordance with their terms and the Company has reserved a sufficient
number of shares of Common Stock for issuance upon exercise thereof;
the Underwriters' Warrants possess the rights, privileges and
characteristics as represented in the forms filed as Exhibits to the
Registration Statement and as described in the Prospectus; the
Securities (other than the Underwriters' Warrants) have been approved
for listing on AMEX upon notice of issuance thereof; the certificates
for the Securities are in valid and sufficient form. Each offer and
sale of securities of the Company described in Item 15 of Part II of
the Registration Statement was effected in compliance with the Act and
the rules and regulations thereunder and with all applicable Blue Sky
laws.
(vi) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of such counsel after reasonable
investigation, threatened action, suit or proceeding before any court
or governmental agency, authority or body, domestic or foreign, or any
arbitrator involving the Company of a character required to be
disclosed in the Registration Statement or the Prospectus that is not
adequately disclosed in the Prospectus, and, to the best knowledge of
such counsel, there is no contract or other document of a character
required to be described in the Registration Statement or the
Prospectus, or to be filed as an exhibit, which is not described or
filed as required.
(vii) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
agreement and obligation of the Company enforceable against it in
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25908_2 - 75205/00002
13
accordance with its terms (subject to standard bankruptcy and equitable
remedy exceptions, and limitations under the Act as to the
enforceability of indemnification provisions).
(viii) The Company has full corporate power and corporate
authority to enter into and perform its obligations under this
Agreement and to issue, sell and deliver the Securities in the manner
provided in this Agreement; and the Company has taken all necessary
corporate action to authorize the execution and delivery of, and the
performance of its obligations under, this Agreement.
(ix) Neither the offering, issue and sale of the Securities
nor the consummation of any other of the transactions contemplated
herein, nor the fulfillment of the terms hereof, will conflict with or
result in a breach or violation of, or constitute a default under, or
result in the imposition of a lien on any properties of the Company, or
an acceleration of indebtedness pursuant to, the Articles of
Incorporation (or other charter document) or bylaws of the Company, or
any of the terms of any indenture or other agreement or instrument to
which the Company is a party or by which its properties are bound, or
any law, order, judgment, decree, rule or regulation applicable to the
Company of any court, regulatory body, administrative agency,
governmental body, stock exchange or arbitrator having jurisdiction
over the Company. The Company is not in violation of its Articles of
Incorporation or bylaws or, to the best knowledge of such counsel after
reasonable investigation, in breach of or default under any of the
terms of any indenture or other agreement or instrument to which it is
a party or by which it or its properties are bound, which breach or
default would, individually or in the aggregate, have a Material
Adverse Effect.
(x) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it
any shares of capital stock in consequence of the issue and sale of the
Securities to be sold by the Company hereunder nor does any person have
preemptive rights, or rights of first refusal or other rights to
purchase any of the Securities. Except as referred to in the
Prospectus, no person holds a right to require or participate in a
registration under the Act of Common Stock or any other equity
securities of the Company.
(xi) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is
required to be obtained or filed by or on behalf of the Company in
connection with the transactions contemplated herein, except such as
may have been obtained or made and registration of the Securities under
the Act, and such as may be required under the Blue Sky laws of any
jurisdiction.
(xii) To the best knowledge of such counsel after reasonable
investigation, the Company is not in violation of or default under any
judgment, ruling, decree or order or any statute, rule or regulation of
any court or other United States governmental agency or body, including
any applicable laws respecting employment, immigration and wages and
hours, in each case, where such violation or default could have a
Material Adverse Effect. The Company is not involved in any labor
dispute, nor, to the best knowledge of such counsel, is any labor
dispute threatened.
(xiii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(xiv) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company, and the Registration Statement has been duly
executed pursuant to such authorization by and on behalf of the
Company.
(xv) The Company owns or possesses, or has the right to use
pursuant to licenses, sublicenses, agreements, permissions or
otherwise, adequate patents, copyrights, trade names, trademarks,
service marks, licenses and other intellectual property rights
necessary to carry on its business as described in the Prospectus, and,
except as set forth in the Prospectus, neither such counsel nor, to the
knowledge of such counsel, the Company has received any notice of
either (i) default under any of the foregoing or (ii) infringement of
or conflict with asserted rights of others with respect to, or
challenge to the validity of, any of the foregoing which, in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a Material
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25908_2 - 75205/00002
14
Adverse Effect, and counsel knows of no facts which could reasonably be
anticipated to serve as the basis for any such notice.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants of the Company
and representatives of the Underwriters at which the contents of the
Registration Statement and Prospectus were discussed and, although such counsel
is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated in subparagraphs (i)
and (v) above), on the basis of the foregoing and on such counsel's
participation in the preparation of the Registration Statement and the
Prospectus, nothing has come to the attention of such counsel that causes such
counsel to believe that the Registration Statement, at the Effective Date and at
the Closing Date (and any settlement date pursuant to Section 3(b) hereof),
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus, at the date
of such Prospectus or at the Closing Date (or any settlement date pursuant to
Section 3(b) hereof), contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no comment with respect to the Financial Statements and
schedules and other financial or statistical data derived therefrom included in
the Registration Statement or Prospectus).
References to the Prospectus in this Section 6(b) shall include any
supplements thereto.
(c) The Representative shall have received on the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), the opinion of ______________,
counsel for the Selling Shareholders, addressed to the Underwriters and dated
the Closing Date (or any settlement date pursuant to Section 3(b) hereof), or
other evidence satisfactory to the Representative to the effect that of the
Underwriters, to the effect that:
(i) The Selling Shareholder has full right, power and
authority to enter into and to perform its obligations under the Power of
Attorney and Custody Agreement to be executed and delivered by it in connection
with the transactions contemplated herein; the Power of Attorney and Custody
Agreement of the Selling Shareholder has been duly authorized by the Selling
Shareholder; the Power of Attorney and Custody Agreement of the Selling
Shareholder has been duly executed and delivered by or on behalf of the Selling
Shareholder; and the Power of Attorney and Custody Agreement of the Selling
Shareholder constitutes the valid and binding agreement of the 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;
(ii) Selling Shareholder has full right, power and authority
to enter into and to perform its obligations under this Agreement and to sell,
transfer, assign and deliver the Option Securities to be sold by it hereunder;
(iii) This Agreement has been duly authorized by the Selling
Shareholder and has been duly executed and delivered by or on behalf of the
Selling Shareholder; and
(iv) Upon the delivery of and payment for the Option
Securities as contemplated in this Agreement, each of the Underwriters will
receive valid marketable title to the Option Securities purchased by it from the
Selling Shareholder, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest. In rendering such opinion, such
counsel may assume that the Underwriters are without notice of any defect in the
title of the Option Securities being purchased from the Selling Shareholder;
(d) The Representative shall have received from ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP, counsel for the Underwriters, an opinion dated the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), with respect to the issuance
and sale of the Securities, and with respect to the Registration Statement, the
Prospectus and other related matters as the Representative may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
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15
(e) The Company shall have furnished to the Representative a
certificate of the Company, signed by its Chief Executive Officer and Chief
Financial Officer, dated the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), to the effect that each has carefully examined the
Registration Statement, the Prospectus (and any supplements thereto) and this
Agreement, and, after due inquiry, that:
(i) As of the Closing Date (and any settlement date pursuant
to Section 3(b) hereof), the statements made in the Registration
Statement and the Prospectus are true and correct and the Registration
Statement and the Prospectus do not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under
the securities or Blue Sky laws of any jurisdiction is in effect and no
proceeding for such purpose is pending before or, to the knowledge of
such officers, threatened or contemplated by the Commission or the
authorities of any such jurisdiction; and any request for additional
information with respect to the Registration Statement or the
Prospectus on the part of the staff of the Commission or any such
authorities brought to the attention of such officers has been complied
with to the satisfaction of the staff of the Commission or such
authorities.
(iii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock or long-term debt of the Company,
except as set forth in or contemplated by the Registration Statement
and the Prospectus, (y) there has not been any material adverse change
in the general affairs, business, prospects, properties, management,
results of operations or condition (financial or otherwise) of the
Company, whether or not arising from transactions in the ordinary
course of business, in each case, other than as set forth in or
contemplated by the Registration Statement and the Prospectus, and (z)
the Company has not sustained any material interference with its
business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement and the
Prospectus.
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has been
no litigation instituted against the Company, any of its respective
officers or directors, or, to the best knowledge of such officers, any
affiliate or promoter of the Company, and since such dates there has
been no proceeding instituted or, to the best knowledge of such
officers, threatened against the Company, any of its officers or
directors, or, to the best knowledge of such officers, any affiliate or
promoter of the Company, before any federal, state or county court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding could have a
Material Adverse Effect.
(v) Each of the representations and warranties of the Company
in this Agreement is true and correct in all material respects on and
as of the Execution Time and the Closing Date (and any settlement date
pursuant to Section 3(b) hereof) with the same effect as if made on and
as of the Closing Date (and any settlement date pursuant to Section
3(b) hereof).
(vi) Each of the covenants required in this Agreement to be
performed by the Company on or prior to the Closing Date (and any
settlement date pursuant to Section 3(b) hereof) has been duly, timely
and fully performed, and each condition required herein to be complied
with by the Company on or prior to the Closing Date (and any settlement
date pursuant to Section 3(b) hereof) has been duly, timely and fully
complied with.
(f) At the Execution Time and on the Closing Date (and any settlement
date pursuant to Section 3(b) hereof), ▇▇▇▇ ▇▇▇▇▇ LLP, shall have furnished to
the Representative letters, dated as of such dates, in form and substance
satisfactory to the Representative, confirming that they are independent
accountants within the meaning of the Act and the applicable rules and
regulations thereunder and stating in effect that:
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25908_2 - 75205/00002
16
(i) In their opinion, the audited Financial Statements of the
Company for the fiscal years ended December 31, 1996 and 1997, and the
notes to the Financial Statements and Financial Statement schedules for
those periods included in the Registration Statement and the
Prospectus, comply in all material respects with generally accepted
accounting principles and the applicable accounting requirements of the
Act and the applicable rules and regulations thereunder.
(ii) On the basis of a reading of the latest unaudited
Financial Statements made available by the Company, carrying out
certain specified procedures (but not an examination in accordance with
generally accepted auditing standards), a reading of the minutes of the
meetings of the shareholders, directors and committees of the Company,
and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company,
nothing came to their attention that caused them to believe that: (i)
the unaudited Financial Statements of the Company for the quarter ended
March 31, 1998, and the notes to the Financial Statements and the
Financial Statement Schedules for the period then ended included in the
Registration Statement and Prospectus do not comply in all material
respects with generally accepted accounting principles or the
applicable accounting requirements of the Act and the applicable rules
and regulations thereunder; and (ii) with respect to the period
subsequent to March 31, 1998, at a specified date not more than five
business days prior to the date of the letter, (y) there were any
changes in the long-term debt or capital stock of the Company, or
decreases in net current assets, net assets or stockholders' equity of
the Company as compared with the amounts shown on the March 31, 1998
balance sheets included in the Registration Statement and the
Prospectus or (z) there were any decreases in reserves, sales, net
income or income from operations, of the Company, as compared with the
corresponding period in the preceding year, except for changes or
decreases which the Registration Statement discloses have occurred or
may occur and except for changes or decreases, set forth in such
letter, in which case (A) the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless said
explanation is not deemed necessary by the Representative and (B) such
changes or decreases and the explanation thereof shall be acceptable to
the Representative, in its sole discretion.
(iii) They have performed certain other specified procedures
as a result of which they determined that all information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth in the
Registration Statement and the Prospectus and specified by you prior to
the Execution Time, agrees with the accounting records of the Company.
The Representative shall also have also received from ▇▇▇▇
▇▇▇▇▇ LLP, a letter stating that the Company's system of internal accounting
controls taken as a whole are sufficient to meet the broad objectives of
internal accounting control insofar as those objectives pertain to the
prevention or detection of errors or irregularities in amounts that would be
material to the Financial Statements of the Company.
References to the Prospectus in this Section 6(f) shall
include any supplements thereto.
(g) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall not have been (i)
any changes or decreases from that specified in the letters referred to in
Section 6(f) hereof or (ii) any change, or any development involving a
prospective change, in or affecting the properties, assets, results of
operations, business, capitalization, net worth, prospects, general affairs or
condition (financial or otherwise) of the Company, the effect of which is, in
the sole judgment of the Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Securities as contemplated by the Registration Statement and the Prospectus.
(h) On or prior to the Effective Date, the Securities (other than the
Underwriters' Warrant) shall have been approved for listing on AMEX.
(i) The Company shall not have sustained any uninsured substantial loss
as a result of fire, flood, accident or other calamity.
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25908_2 - 75205/00002
17
(j) The Company shall have furnished to the Representative a
certificate of the Secretary of the Company certifying as to certain information
and other matters as the Representative may reasonably request.
(k) The Representative shall be satisfied that, and the Representative
shall have received a certificate, dated the Closing Date (or any settlement
date pursuant to Section 3(b) hereof), from the Attorneys for the Selling
Shareholder to the effect that, as of the Closing Date (or any settlement date
pursuant to Section 3(b) hereof):
(i) The representations and warranties made by the Selling
Shareholder herein are true or correct in all material respects on the
Closing Date (or any settlement date pursuant to Section 3(b) hereof);
or
(ii) The Selling Shareholder has complied with all obligations
or satisfied all conditions which are required to be performed or
satisfied on the part of the Selling Shareholder at or prior to the
Closing Date (or any settlment date pursuant to Section 3(b) hereof).
(l) The Company and the Selling Shareholder shall have furnished to the
Representative such further information, certificates and documents as the
Representative may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in any respect when and as provided in this Agreement, or if any
of the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all respects reasonably satisfactory in form and substance to
the Representative and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date (or any settlement date, pursuant to Section 3(b) hereof), by the
Representative. Notice of such cancellation shall be given to the Company in
writing or by telephone, facsimile or telegraph confirmed in writing.
7. Fees and Expenses and Underwriters' Warrant. The Company agrees to pay
or cause to be paid the following:
(a) the fees, disbursements and expenses of its own counsel and counsel
for the Selling Shareholders and accountants in connection with the registration
of the Securities under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus, any Prospectus, and any drafts thereof, and amendments and
supplements thereto, and the mailing and delivery of copies thereof to the
Underwriters and dealers;
(b) all expenses in connection with the qualification of the Securities
for offering under state securities laws, including the fees and disbursements
of counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky Memorandum;
(c) all filing and other fees in connection with filing with the NASD,
and complying with applicable review requirements thereof;
(d) the cost of preparing and printing certificates for the Securities;
(e) all expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties sellers' and buyers' stamp taxes
or duties on the purchase and sale of the Securities and stock exchange
brokerage and transaction levies with respect to the purchase and, if
applicable, the sale of the Securities (the latter to the extent paid and not
reimbursed) (i) incident to the sale and delivery by the Company of the
Securities to the Underwriters and (ii) incident to the sale and delivery of the
Securities by the Underwriters to the initial purchasers thereof;
(f) the costs and charges of any transfer agent and registrar;
(g) the fees and expenses in connection with qualification of the
Securities (other than the Underwriters' Warrant) for listing on the AMEX;
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25908_2 - 75205/00002
18
(h) a nonaccountable expense allowance of 2.0% of the proceeds derived
from the offering (including the Option Securities described in Section 2(b)
hereof) payable to the Representative (reduced by the amount of any payments or
reimbursements made prior to the date of this Agreement); and
(i) all other costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically provided
for in this Section 7.
Except as set forth above, the Selling Shareholders agree to pay all
costs and expenses incident to the performance of its obligations hereunder.
In addition to the sums payable to the Representative as provided
elsewhere herein and in addition to the Underwriters' Option, the Underwriters
shall be entitled to receive, as partial compensation for their services,
warrants (the "Underwriters' Warrants") for the purchase of an aggregate of
100,000 shares of Common Stock of the Company. The Underwriters' Warrants shall
be issued pursuant to a Warrant Agreement in the form of Exhibit A attached
hereto and shall be exercisable, in whole or in part, for a period of four years
commencing from the one year anniversary of the date hereof, at 120% of the
initial public offering price for the Common Stock offered pursuant to the
Prospectus. The Underwriters' Warrant, shall be non-transferable for one year
from the date of issuance of the Underwriters' Warrant, except for (i) transfers
to officers or partners of the Underwriters, (ii) in connection with a merger,
consolidation or reorganization of the Company or (iii) transfers occurring by
operation of law. The terms of the Warrant Securities subject to the
Underwriters' Warrant shall be the same as the Underwritten Securities sold to
the public.
Without limiting in any respect the foregoing obligations of the
Company, which obligations shall survive any termination of this Agreement, if
the sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 6 hereof
is not satisfied, because of any termination pursuant to Section 10 hereof, or
because of any refusal, inability or failure on the part of the Company or the
Selling Shareholder to perform any agreement herein or comply with any provision
hereof to be performed or complied with by the Company or the Selling
Shareholder other than by reason of a default by any of the Underwriters, the
Company agrees to reimburse the Underwriters, upon demand, for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Securities to the extent the amounts paid pursuant to Section 7(h) hereof
are insufficient therefor.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person who controls any Underwriter within the meaning of the Act or
the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in (i)
Section 1(I) of this Agreement, the Registration Statement, any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement thereto,
or (ii) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Securities under the securities or Blue Sky laws thereof or filed with the
Commission or any securities association or securities exchange, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Representative specifically for use in the
Registration Statement or Prospectus; provided further, that with respect to any
untrue statement or omission, or any alleged untrue statement or omission, made
in any Preliminary Prospectus, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling any such Underwriter)
Underwriting Agreement
25908_2 - 75205/00002
19
from whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Securities concerned to the extent that such untrue
statement or omission, or alleged untrue statement or omission, has been
corrected in the Prospectus and the failure to deliver the Prospectus was not a
result of the Company's failure to comply with its obligations under Section
5(d) hereof. The indemnity agreement will be in addition to any liability which
the Company may otherwise have. The Company will not, without the prior written
consent of each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless the settlement or compromise or
consent includes an unconditional release of such Underwriter and each such
controlling person from all liability arising out of such claim, action, suit or
proceeding, satisfactory in form and substance to the Representative.
(b) The Selling Shareholder agrees to indemnify and hold harmless each
Underwriter and each person who controls any Underwriter within the meaning of
the Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
(i) Section 1(II) of this Agreement, the Registration Statement, any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement thereto,
or (ii) any application or other document, or any amendment or supplement
thereto, executed by the Selling Shareholder or based upon written information
furnished by or on behalf of the Selling Shareholder filed in any jurisdiction
in order to qualify the Securities under the securities or Blue Sky laws thereof
or filed with the Commission or any securities association or securities
exchange, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in the case of subparagraphs (ii) and
(iii) of this Section 8(b) to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company or such Underwriter by the Selling Shareholder, directly or through
the Selling Shareholder's representatives, specifically for use in the
preparation thereof, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that with respect to any untrue
statement or omission, or any alleged untrue statement or omission, made in any
Preliminary Prospectus, the indemnity agreement contained in this subsection (b)
shall not inure to the benefit of any Underwriter (or to the benefit of any
person controlling any such Underwriter) from whom the person asserting any such
losses, claims, damages, liabilities or expenses purchased the Securities
concerned to the extent that such untrue statement or omission, or alleged
untrue statement or omission, has been corrected in the Prospectus and the
failure to deliver the Prospectus was not a result of the Company's failure to
comply with its obligations under Section 5(d) hereof. This indemnity agreement
shall be in addition to any liabilities which such Selling Shareholder may
otherwise have.
(c) Each Underwriter severally agrees to indemnify and hold harmless
the Company and the Selling Shareholder, each of their directors, each of the
Company's officers who signs the Registration Statement, and each person who
controls the Company or the Selling Shareholder, as the case may be, within the
meaning of the Act or the Exchange Act to the same extent as the foregoing
indemnity from the Company or the Selling Shareholder to each Underwriter, but
only with reference to written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter through the
Representative specifically for use in the Registration Statement or Prospectus.
The Company acknowledges that the corporate names of the Underwriters, the
stabilization legend on page 2 and the information under the heading
"Underwriting" in the Prospectus and in any Preliminary Prospectus constitute
the only information furnished in writing by or on behalf of the several
Underwriters. The obligations of each Underwriter under this subsection (c)
shall be in addition to any liability which the Underwriters may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, suit or proceeding, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all expenses; but the omission so to
notify the indemnifying party will not
Underwriting Agreement
25908_2 - 75205/00002
20
relieve it from any liability which it may have to any indemnified party, unless
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. All such expenses shall be paid by the indemnifying party as
incurred by an indemnified party. Any such indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party has agreed
to pay such fees and expenses or (ii) the indemnifying party shall have failed
promptly after notice by such indemnified party to assume the defense of such
action or proceeding and employ counsel reasonably satisfactory to the
indemnified party in any such action, suit or proceeding or (iii) the named
parties in any such action or proceeding (including any impleaded parties)
include both such indemnified party and the indemnifying party, and such
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to such indemnified party which are different from
or additional to those available to the indemnifying party (in which case, if
such indemnified party notifies the indemnifying party in writing that it elects
to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
or proceeding on behalf of the indemnified party or parties, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for all such indemnified parties, which firm shall be
designated in writing to the indemnifying party). Any such fees and expenses
payable by the indemnifying party shall be paid to or on behalf of the
indemnified party entitled thereto as incurred. An indemnifying party shall not
be liable for any settlement of any action or claim effected without its
consent, which consent shall not be unreasonably withheld.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 8(a), 8(b) or
8(c) is applicable in accordance with its terms but is for any reason held by a
court to be unavailable from the indemnifying party on grounds of policy or
otherwise, the Company, the Selling Shareholder and the Underwriters shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) to which the Company, the Selling Shareholder and one or more of
the Underwriters may be subject in such proportion so that the Underwriters are
responsible in the aggregate for that portion represented by the total
underwriting compensation in respect of the Securities bears to the public
offering price appearing thereon and the Company and the Selling Shareholder are
responsible for the balance; provided, however, that (i) in no case shall any
Underwriter (except as may be provided in the Agreement Among Underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the total underwriting compensation applicable to the Securities to be
purchased by such Underwriter hereunder and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls an
Underwriter within the meaning of the Act shall have the same rights to
contribution as such Underwriter, and each person who controls the Company or
the Selling Shareholder within the meaning of the Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company and the
Selling Shareholder, subject in each case to clause (ii) of this Section 8(e).
Any party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 8(e), notify such party or parties from whom contribution may
be sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any other
obligation it or they may have hereunder or otherwise.
(f) The Company and the Selling Shareholder may agree, as between
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.
9. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the number of Underwritten
Securities set forth opposite their names in Schedule I hereto bears to the
aggregate number of Underwritten Securities set forth opposite the names of all
the remaining Underwriters) the Underwritten Securities which the defaulting
Underwriter
Underwriting Agreement
25908_2 - 75205/00002
21
or Underwriters agreed but failed to purchase; provided, however, that if the
aggregate number of Underwritten Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
number of Underwritten Securities set forth in Schedule I hereto, the remaining
Underwriters shall have the right to purchase all, but shall not be under any
obligation to purchase any, of such Underwritten Securities, and if such
nondefaulting Underwriters do not purchase all of such Underwritten Securities,
this Agreement will terminate without liability to any non-defaulting
Underwriter or the Company except as otherwise provided in Section 7. In the
event of a default by any Underwriter as set forth in this Section 9, the
Closing Date shall be postponed for such period, not exceeding seven days, as
the Representative shall determine in order that the required changes in the
Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to the Company or any
nondefaulting Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company prior to
delivery of and payment for the Securities, if prior to such time (a) a
suspension or material limitation in trading in securities generally on the New
York or American Stock Exchange, the Nasdaq National Market or any relevant
over-the-counter market, the Chicago Board Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade shall have occurred, (b) a
banking moratorium shall have been declared by federal, New York or California
state authorities, (c) the United States shall have engaged in hostilities which
shall have resulted in the declaration, on or after the date hereof, of a
national emergency or war, or (d) a change in national or international
political, financial or economic conditions or national or international equity
markets or currency exchange rates shall have occurred, if the effect of any
such event specified above is, in the sole judgment of the Representative, so
material and adverse as to make it impractical or inadvisable to proceed with
the public offering or delivery of the Securities as contemplated by the
Registration Statement and the Prospectus.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers and the Underwriters set forth in, referred to 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
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and effective
only on receipt, and will be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed:
to the Representative at:
Tejas Securities Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇. South
Building Two, Suite 500
Austin, Texas 78746
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
to the Company at:
Transnational Financial Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ No. (▇▇▇) ▇▇▇-▇▇▇▇
13. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers,
directors and controlling persons referred to in Section 8 hereof, and no other
person will have any right or obligation hereunder.
14. Counterparts. This Agreement may be signed in two or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereon and hereon were on the same instrument.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas.
Underwriting Agreement
25908_2 - 75205/00002
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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Underwriters.
Very truly yours,
TRANSNATIONAL FINANCIAL CORPORATION
By:___________________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer and Chief Financial Officer
▇▇▇▇▇▇▇ FAMILY LLC
By:___________________________________________________
Attorney-in-Fact for the Selling Shareholder
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
Tejas Securities Group, Inc.
By: _______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
For itself and the other several Underwriters in Schedule I to the foregoing
Agreement.
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23
SCHEDULE I
Number of
Underwritten Securities
Underwriters To Be Purchased
------------ ---------------
Tejas Securities Group, Inc.
---------
Total 1,000,000
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EXHIBIT A
FORM OF WARRANT AGREEMENT
Underwriting Agreement
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EXHIBIT B
FORM OF LOCK-UP AGREEMENT
Tejas Securities Group, Inc.,
As Representative of the Several Underwriters
c/o Tejas Securities Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇. South
Building Two, Suite ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the several
underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with Transnational Financial
Corporation, a California corporation (the "Company"), providing for the initial
public offering (the "Offering") by the Underwriters, including yourself, of
Common Stock of the Company (the "Common Stock") pursuant to the Company's
Registration Statement on Form SB-2 (the "Registration Statement") to be filed
with the Securities and Exchange Commission on or about _________, 1998.
In consideration of the Underwriters' agreement to purchase and make
the Offering of the Common Stock, and for other good and valuable consideration,
receipt of which is hereby acknowledged, the undersigned hereby agrees that
during the period beginning on the date of this letter and ending one (1) year
(the "Lock-Up Period") after the date of the final prospectus included in the
Registration Statement (the "Offering Date"), the undersigned will not, directly
or indirectly, offer, sell, contract to sell, grant any option for the sale of,
pledge, or otherwise dispose of (individually, a "Disposition") any Common
Stock, or securities exercisable, convertible, or exchangeable for or into
Common Stock (collectively, the "Securities"), that the undersigned now owns or
will own in the future (beneficially or of record), except (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this Lock-Up Agreement, (ii) up to 150,000 shares of Common Stock in
connection with the exercise of the Underwriters' over-allotment option pursuant
to the Underwriting Agreement, or (iii) with the prior written consent of Tejas
Securities Group, Inc. The foregoing restriction is expressly agreed to preclude
the holder of Securities from engaging in any hedging or other transaction which
is designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-Up Period even if such Securities would be disposed
of by someone other than the undersigned. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities.
If for any reason the Offering Date does not occur on or before
September 30, 1998, then this Lock-Up Agreement will terminate on that date. I
understand that no assurance can be given that the Offering will be consummated.
Sincerely,
Date: _________ ___, 1998 __________________________________________
By: ______________________________________
Signature
______________________________________
Print Name
Underwriting Agreement
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