Exhibit 1.1
1,000,000 Units
AARICA HOLDINGS, INC.
Each Unit Consisting of One Share of Common Stock and
One Redeemable Common Stock Purchase Warrant
_________, 2001
UNDERWRITING AGREEMENT
RUSHMORE SECURITIES CORPORATION
As Representative of the Several Underwriters
One Galleria Tower, Suite 300
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Aarica Holdings, Inc., a Texas corporation (the "Company"), proposes to
sell to you and the other underwriters named in Schedule I hereto (collectively,
the "Underwriters"), for whom Rushmore Securities Corporation 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 units (the "Units"), each consisting of one
share of the Company's Common Stock, $0.01 par value (the "Common Stock"), and
one redeemable common stock purchase warrant (the "Warrants"). The Units,
together with (a) the shares of Common Stock and Warrants comprising the Units
and (b) the shares of Common Stock issuable upon exercise of the Warrants are
collectively referred to as the "Underwritten Securities". Certain selling
shareholders propose to grant to the Underwriters the Underwriters' Option
(described in Section 3(b) hereof) to purchase up to an aggregate of 150,000
additional Units solely to cover over-allotments in the sale of the Underwritten
Securities (such additional Units, together with (a) the shares of Common Stock
and Warrants comprising such additional Units and (b) the shares of Common Stock
issuable upon exercise of the Warrants, are collectively referred to herein as
the "Option Securities"). The Company also proposes to issue to the
Representative the Representative's Warrants to purchase up to an aggregate of
100,000 additional Units (individually, the Representative's Warrants and such
additional Units, together with (a) the shares of Common Stock and Warrants
comprising such additional Units and (b) the shares of Common Stock issuable
upon exercise of such Warrants, are collectively referred to herein as the
"Representative's Securities"). The Representative's Warrants shall be issued
pursuant to the Representative's 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 one year from the date of the Prospectus, at 120% of the
initial public offering price of the Units. The Underwritten Securities, the
Option Securities and the Representatives' 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
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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 4(a) hereof) or any settlement date pursuant to Section 4(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.
1. 1. Representations and Warranties of the Company.
The Company represents and warrants 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. 333-43794) (the "Registration Statement") for the
registration of the Securities under the Act. 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 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
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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 shares of capital stock or equity interests in any
corporation, partnership, association or other entity, except as set
forth in the Prospectus.
(d) The Company and each of its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which each company is chartered
or organized, with full corporate power and corporate authority to own
their respective properties and conduct their respective businesses as
described in the Prospectus, and the Company and each of its
subsidiaries is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction in which
each company conducts its respective 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 and each of its
subsidiaries has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all government
regulatory officials and bodies, to own their respective properties and
conduct their respective businesses 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 does not own any shares of capital stock or
any other securities of any corporation or any equity interest in any
firm, partnership, association or other entity other than as described
in the Registration Statement.
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(f) 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 underlying (i) the Units to be sold by the
Company hereunder, (ii) the Warrants, and (iii) the Representative's
Warrants) 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 4(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 4(b) hereof), there will be, 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 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 Representative's 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 26 of Part II of the Registration Statement was effected in
compliance with the Act and the rules and regulations thereunder.
(g) The Securities (other than the Representative's Warrants)
have been approved for listing on the Boston Stock Exchange ("BSE"),
upon official notice of issuance.
(h) 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.
(i) 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.
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(j) 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.
(k) 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
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.
(l) 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.
(m) 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 26 of Part II of the
Registration Statement (other than transactions disclosed in the
Registration Statement or the Prospectus).
(n) 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 for 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.
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(o) 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.
(p) 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.
(q) The Company has not sustained, since January 1, 2000, 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.
(r) The Financial Statements and the related notes of the
Company, included in the Registration Statement and the Prospectus
present fairly the consolidated financial position, consolidated
results of operations, consolidated cash flow and consolidated changes
in shareholders' equity of the Company at the dates and for the periods
indicated, subject in the case of the Financial Statements for interim
periods, to normal and recurring year-end adjustments. The unaudited
pro forma combined condensed statements of the Company present fairly
the consolidated financial position and the consolidated results of
operations at the dates and for the periods indicated. Such Financial
Statements and the unaudited pro forma combined financial information
of the Company 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.
(s) 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
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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.
(t) 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.
(u) 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.
(v) 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.
(w) 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
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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 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.
(x) Except as set forth below in this paragraph, 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.
(y) 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.
(z) 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.
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(aa) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(bb) 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.
(cc) 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, as amended.
(dd) 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.
(ee) 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.
(ff) 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.
(gg) 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
7(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.
(hh) The Company has obtained and delivered to the
Representative the written agreements, substantially in the form
attached hereto as Exhibit B, of the principal shareholders of the
Company restricting dispositions of equity securities of the Company.
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(ii) The Company is in compliance with the Foreign Corrupt
Practices Act, as amended, in all material respects.
2. Representations, Warranties and Covenants of the Selling Shareholders.
Each of the Selling Shareholders jointly and severally represents and
warrants to, and agrees with, each of the Underwriters and the Company
that:
(a) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Shareholder of
this Agreement, the Power of Attorney (the "Power of Attorney") and the
Custody Agreement (the "Custody Agreement") hereinafter referred to,
and for the sale and delivery of the Shares to be sold by such Selling
Shareholder hereunder, have been obtained; and such Selling Shareholder
has full right, power and authority to enter into this Agreement, the
Power of Attorney and the Custody Agreement and to sell, assign,
transfer and deliver the Shares to be sold by such Selling Shareholder
hereunder;
(b) The sale of the Shares to be sold by such Selling
Shareholder hereunder and the compliance by such Selling Shareholder
with all of the provisions of this Agreement, the Power of Attorney and
the Custody Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which such
Selling Shareholder is a party or by which such Selling Shareholder is
bound or to which any of the property or assets of such Selling
Shareholder is subject, or any statute or order, rule or regulation of
any court or governmental agency or body having jurisdiction over such
Selling Shareholder or the property of such Selling Shareholder;
(c) Such Selling Shareholder has good and valid title to the
Shares to be sold by such Selling Shareholder hereunder, free and clear
of all liens, encumbrances, equities or adverse claims; and, upon
delivery of such Shares and payment thereof pursuant hereto, good and
valid title to such Shares, free and clear of all liens, encumbrances,
equities or adverse claims, will pass to the several Underwriters;
(d) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares; and
(e) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Shareholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement and
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform, in all material respects, to
the requirements of the Act, and the rules and regulations of the
10
Commission thereunder, and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(f) Certificates in negotiable form representing all of the
Shares to be sold by each Selling Shareholder have been placed in
custody under a Custody Agreement, in the form furnished to you, duly
executed and delivered by such Selling Shareholder to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
as custodian ( the "Custodian"), and that each Selling Shareholder has
duly executed and delivered a Power of Attorney, in the form furnished
to you, appointing ____________ and ____________, such Selling
Shareholder's attorneys-in-fact (the "Attorneys-in-Fact"), with
authority to execute and deliver this Agreement on behalf of such
Selling Shareholder, to determine the purchase price to be paid by the
Underwriters to the Selling Shareholders as provided herein, to
authorize the delivery of the Shares to be sold by such Selling
Shareholder hereunder and otherwise to act on behalf of such Selling
Shareholder in connection with the transactions contemplated by this
Agreement and the Custody Agreement.
In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, each of the Selling Shareholders agrees to deliver to
you, prior to or at the First Time of Delivery (as hereinafter
defined), a properly completed and executed United States Treasury
Department Form W-9 (or Form W-8 if applicable, or other applicable
form or statement specified by Treasury Department regulations in lieu
thereof).
Each of the Selling Shareholders specifically agrees, jointly
and severally, that the Shares represented by the certificate held in
custody for such Selling Shareholder under the Custody Agreement are
subject to the interests of the Underwriters hereunder and that the
arrangements made by such Selling Shareholder for such custody, and the
appointment by such Selling Shareholder of the Attorneys-in-Fact by the
Power of Attorney, are to that extent irrevocable. Each of the Selling
Shareholders specifically agrees, severally and not jointly, that the
obligations of the Selling Shareholders hereunder shall not be
terminated by operation of law, whether by the death or incapacity of
any individual Selling Shareholder or, in the case of an estate or
trust, by the death or incapacity of any executor or trustee or the
termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or
by the occurrence of any other event. If any individual Selling
Shareholder or any such executor or trustee should die or become
incapacitated, or if any such estate or trust should be terminated, or
if any such partnership or corporation should be dissolved, or if any
other such event should occur before the delivery of the Shares
hereunder, certificates representing the Shares shall be delivered by
or on behalf of the Selling Shareholders in accordance with the terms
and conditions of this Agreement and of the Custody Agreement, and
actions taken by the Attorneys-in-Fact pursuant to the Power of
Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or
not the Custodian, the Attorneys-in-Fact, or any of them shall have
received notice of such death, incapacity, termination, dissolution or
other event.
11
3. 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 Units.
Each of the Underwriters agrees, severally and not jointly, to purchase
from the Company the number of Units set forth opposite its name in
Schedule I hereto. The purchase price to be paid by the several
Underwriters to the Company shall be $_______ per Unit. No value shall
be attributable to the Warrants.
(b) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, ▇▇▇▇▇ ▇▇▇▇▇▇ and
Continental Capital and Equity Corporation (the "Selling Shareholders")
hereby grant an option (the "Underwriters' Option") to the several
Underwriters to purchase, severally and not jointly, up to an aggregate
of 150,000 Units (____ Units and ____ Units, respectively), at the same
purchase price per Unit 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. The 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 Shareholders setting forth
the number of Units which the several Underwriters elect to purchase
pursuant to the Underwriters' Option. Delivery of certificates for such
Option Securities by the Selling Shareholders and payment therefor to
the Selling Shareholders shall be made as provided in Section 4 hereof.
The number of Units purchased by each Underwriter pursuant to the
Underwriters' Option shall be determined by multiplying the number of
Units to be sold by the Selling Shareholders pursuant to the
Underwriters' Option, as exercised, by a fraction, the numerator of
which is the number of Units 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 Units to be purchased by all of the Underwriters as
set forth on Schedule I (subject to such adjustments to eliminate any
fractional Unit purchases as the Representative in its discretion may
make).
12
4. Delivery and Payment.
(a) If the Underwriters' Option described in Section 3(b)
hereof is exercised on or before the third business day prior to the
Closing Date (as defined below), delivery of the certificates for the
Shares described in Sections 3(a) and 32(b) 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 Representative
at 9:00 a.m. Dallas, Texas, time, on ____________, ____ or such later
date (but not later than ____________, ____) 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 10
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 the Representative of the aggregate purchase price of such
Securities being sold by the Company, to or upon the order of the
Company, by wire transfer. Certificates for such 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 Securities to be purchased on the Closing Date
available at the office of the DTC, not later than 9:00 a.m. Dallas,
Texas, time, at least one business day prior to the Closing Date.
(b) If the Underwriters' Option is exercised after the third
business day prior to the Closing Date, (i) delivery of the
certificates for the Shares described in Section 3(a) hereof and
payment therefor will be governed by the provisions of Section 4(a)
hereof and (ii) the Selling Shareholders will deliver (at the expense
of the Selling Shareholders) on the date specified by the
Representative (which shall not be less than one nor more than five
business days after exercise of the Underwriters' Option), certificates
for the Shares described in Section 3(b) hereof in such names and
denominations as the Representative shall have requested against
payment at the office of the Representative of the purchase price
therefor, to or upon the order of the Selling Shareholders, by wire
transfer. If settlement for such Securities occurs after the Closing
Date, the Company will deliver to the Representative on the settlement
date for such Securities, and the obligation of the Underwriters to
purchase such Securities shall be conditioned upon receipt of,
supplemental opinions, certificates and letters confirming as of such
date the opinions, certificates and letters delivered on the Closing
Date pursuant to Section 7 hereof. The Company agrees to have the
certificates for the Securities to be purchased after the Closing Date
available at the office of the DTC not later than 9:00 a.m. Dallas,
Texas, time at least one business day prior to the settlement date.
5. 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.
6. Agreements.
13
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 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 6(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 120
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
14
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). Without limiting the foregoing,
the Company will use its best efforts to register or qualify the shares
of Common Stock underlying the Warrants in any jurisdiction where the
registered holders of 5% or more of such Warrants reside, and will use
its best efforts to keep such registrations or qualifications in effect
during the term of the Warrants.
(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
Representative's Warrants) to be listed or quoted on the BSE and (ii)
comply with all registration, filing and reporting requirements of the
Exchange Act and the BSE 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, the BSE 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 accounts of the Company and
its subsidiaries are consolidated,
15
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 one (1) year
following the Effective Date, without the prior written consent of the
Representative, offer, sell, contract to sell, or otherwise dispose of,
any shares of Common Stock, or any options, rights or warrants to
purchase shares of Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock, except for (i) sales of
Securities as contemplated by this Agreement, and (ii) sales of Common
Stock upon the exercise of Warrants or options issued pursuant to the
Company's employee stock option plan 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 Representative's Warrants.
(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 date of the Prospectus,
the Company will nominate for election as a director a person
designated by the Representative or, at the Representative's option, to
designate a person to attend meetings of the board of directors, 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. If ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, a
principal of Rushmore Securities Corporation, is designated as a member
of the board of directors, he will receive an annual retainer of $5,000
and $1,000 per meeting attended, $1,000 for chairing a committee of the
board of directors, and $500 for each committee meeting attended.
(n) The Company shall solicit the exercise of the Warrants
solely through the Representatives, at the Representative's election,
and the Company shall pay to the Representatives the compensation set
forth in Section 8 hereof for such services.
7. Conditions to the Obligations of the Underwriters.
The obligations of the Underwriters to purchase the Securities
described in Sections 3(a) and 3(b) hereof shall be subject to (i) the
accuracy of the representations and warranties on the part of the
Company 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 4(b) hereof, (ii) the accuracy of
the statements of the Company made
16
in any certificates delivered pursuant to the provisions hereof,
(iii) the performance by the Company 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 4(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 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, L.L.C., counsel for the Company, addressed
to the Underwriters and dated the Closing Date (and any settlement date
pursuant to Section 4(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 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 shares of capital stock or equity interests
in any corporation, partnership, association or other entity,
except as set forth in the Prospectus.
(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.
17
(iv) 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 Warrants and the
Representative's 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 Warrants and the Representative's 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
Representative's Warrants) have been approved for listing or
quotation on the BSE, 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 26 of Part II of the Registration Statement
was effected in compliance with the Act and the rules and
regulations thereunder.
(v) 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.
(vi) 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 accordance with its terms
(subject to standard bankruptcy and equitable remedy
exceptions, and limitations under the Act as to the
enforceability of indemnification provisions).
(vii) 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
18
has taken all necessary corporate action to authorize
the execution and delivery of, and the performance of its
obligations under, this Agreement.
(viii) 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.
(ix) 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.
(x) 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.
(xi) 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.
(xii) The Company is not an investment company
subject to registration under the Investment Company Act of
1940, as amended.
19
(xiii) 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.
(xiv) Except as disclosed in the Prospectus, 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 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 4(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 4(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
7(b) shall include any supplements thereto.
(c) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, counsel to the Selling Shareholders, as
indicated in Schedule II hereto, shall have furnished to you their
written opinion with respect to each of such selling Shareholders,
dated such Time of Delivery, in form and substance satisfactory to you,
to the effect that:
(i) A Power of Attorney and a Custody Agreement have
been duly authorized, executed and delivered by each such
Selling Shareholder and
20
constitute valid and binding agreement of such Selling
Shareholder in accordance with their terms;
(ii) This Agreement has been duly executed and
delivered by or on behalf of such Selling Shareholder
hereunder and the compliance by such Selling Shareholder with
all of the provisions of this Agreement, the Power of Attorney
and the Custody Agreement and the consummation of the
transactions herein and therein contemplated with not (a)
conflict with the laws of the State of Tennessee or
Mississippi of the federal laws of the United States by which
such Selling Shareholder is bound, or (b) result in a breach
or violation of any order, rule or regulation known to such
counsel of any court or governmental agency or body which, to
such counsel's knowledge has jurisdiction over such Selling
Shareholder or the Stock of such Selling Shareholder;
(iii) To the best of such counsel's knowledge, no
consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation
of the transactions contemplated by this Agreement in
connection with the Shares to be sold by such Selling
Shareholder hereunder, except such as have been obtained under
the Act and such as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution
of such Shares by the Underwriters; and
(iv)Title to such Shares, free of all adverse claims,
has been transferred to each of the several Underwriters who
have purchased such Shares in good faith and without notice of
any such adverse claim within the meaning of the Uniform
Commercial Code.
(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 4(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.
(e) The Company shall have furnished to the Representative a
certificate of the Company, signed by its Chief Executive Officer and
its Chief Financial Officer, dated the Closing Date (and any settlement
date pursuant to Section 4(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 4(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.
21
(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 material 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, which 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 4(b) hereof) with the same
effect as if made on and as of the Closing Date (and any
settlement date pursuant to Section 4(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 4(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 4(b) hereof) has been duly, timely and fully complied
with.
22
(f) At the Execution Time and on the Closing Date (and any
settlement date pursuant to Section 4(b) hereof), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 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:
(i) In their opinion, the audited Financial
Statements of the Company for the fiscal years ended December
31, 1998 and 1999, 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 three (3) months ended March 31, 2000], 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, 2000,
at a specified date not more than five business days prior to
the date of the letter, there were any changes in the
long-term debt or capital stock of the Company or its
subsidiaries, or decreases in net current assets, net assets
or stockholders' equity of the Company as compared with the
amounts shown on the March 31, 2000 balance sheets included in
the Registration Statement and the Prospectus, 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.
References to the Prospectus in this Section 7(e) shall
include any supplements thereto.
23
(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 7(e) 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 Representative's Warrants) shall have been approved for
listing on the BSE, subject to official notice of issuance.
(i) The Company shall not have sustained any uninsured
substantial loss as a result of fire, flood, accident or other
calamity.
(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 Company shall have furnished to the Representative
such further information, certificates and documents as the
Representative may reasonably request.
(l) The Company shall have entered into lock-up agreements
with ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. providing that for a period of one (1) year
after the Effective Date, without the prior written consent of the
Representative, they will not sell, contract to sell, or otherwise
dispose of any shares of Common Stock, any options or warrants to
purchase Common Stock, or any securities convertible into, exercisable
for or exchangeable for shares of Common Stock with the exception of
200,000 shares of Common Stock issued in connection with a bridge
financing in the amount of $500,000, which are subject only to a six
(6) month lock-up period.
If any of the conditions specified in this Section 7 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 4(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.
8. Fees and Expenses and Representative's Warrants. The Company and the
Selling Shareholders agree to pay or cause to be paid and issue the
following:
24
(a) the fees, disbursements and expenses of its own counsel
and counsel for the Company and 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 any 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 Representative's
Warrants) for listing on the BSE;
(h) a nonaccountable expense allowance of 2.0% of the proceeds
of the offering (including the Option Securities described in Section
3(b) hereof) payable to the Representative; and
(i) a solicitation fee to the Representatives equal to 5.0% of
the aggregate proceeds received by the Company as a result of the
solicitation of the exercise of the Warrants, provided that no
solicitation fee shall be payable (i) within one year after the date of
the Prospectus, (ii) if the market price of the Common Stock is lower
than the exercise price of the Warrants, (iii) if the Warrants are held
in a discretionary account at the time of the exercise, unless prior
written approval of the exercise of such Warrants is received from the
beneficial owner of the Warrants, or (iv) unless the beneficial owner
of the Warrants states in writing that the exercise was solicited by
the Representatives and designates, in writing, the Representative to
receive the solicitation fee with respect to the exercise of such
Warrants;
(j) 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 8.
25
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 7 hereof is not satisfied, because of
any termination pursuant to Section 11 hereof, or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof to be performed or
complied with by the Company 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 8(h) hereof are
insufficient therefor.
9. 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 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) 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 6(d) hereof. The
indemnity agreement will be in addition to any liability which the
Company may otherwise have. The Company will not, without the
26
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) Each of the Selling Shareholders, jointly and severally,
will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, 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 will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses
are incurred; provided, however, that (i) the Selling Shareholders
shall 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 an untrue
statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through you expressly for use therein and (ii) in no event
shall the liability of any Selling Shareholder under this subsection
(b) exceed the total gross proceeds from the sale of Shares by such
Selling Shareholder hereunder.
(c) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its directors, each of the Company's
officers who signs the Registration Statement, and each person who
controls the Company, within the meaning of the Act or the Exchange Act
to the same extent as the foregoing indemnity from the Company and the
Selling Shareholders to each Underwriter, but only with reference to
written information relating to such Underwriter furnished to the
Company and the Selling Shareholders by or on behalf of such
Underwriter through the Representative specifically for use in the
Registration Statement or Prospectus. The Company and the Selling
Shareholders acknowledge 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 (b) shall be in addition to any
liability which the Underwriters may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 9 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 9,
27
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 to so notify
the indemnifying party will not 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 Sections
9(a) or 9b) 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 and the Selling
Shareholders 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 and the Selling Shareholders 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 Shareholders is 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
28
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 9 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 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, subject in each case to
clause (ii) of this Section9(d). 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 9(d), notify such party or parties from whom contribution may
be sought, but the omission to so 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.
10. 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 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 non-defaulting
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 8. In
the event of a default by any Underwriter as set forth in this Section 10,
the Closing Date shall be postponed for such period, not exceeding seven
(7) 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 non-defaulting Underwriter for damages
occasioned by its default hereunder.
11. 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 or the Nasdaq National Market System
shall have occurred, (b) a banking moratorium shall have been declared by
federal or New York 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
29
above is 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.
12. 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 9 hereof, and will survive
delivery of and payment for the Securities until all applicable
statutes of limitation have expired. The provisions of Sections 8 and 9
hereof shall survive the termination or cancellation of this Agreement.
13. 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:
Rushmore Securities Corporation
One Galleria Tower, Suite 300
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
to the Company at:
Aarica Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, President
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, L.L.C.
One Galleria Tower, Suite 300
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
14. 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 9 hereof, and no
other person will have any right or obligation hereunder.
30
15. 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.
16. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas. Venue will lie in the
federal or state courts of Dallas County, Texas.
[Remainder of page intentionally left blank.]
31
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,
AARICA HOLDINGS, INC.
By:
------
▇▇▇▇▇ ▇▇▇▇▇▇, President
63845_2/43190.00003
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
RUSHMORE SECURITIES CORPORATION
By:
--------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
For itself and the other several Underwriters in Schedule I to the foregoing
Agreement.
32
63845_2/43190.00003
SCHEDULE I
Underwriters Number of Units
to be Purchased
Rushmore Securities Corporation
Capital West Securities
---------
Total 1,000,000
FORM OF LOCK-UP AGREEMENT
RUSHMORE SECURITIES CORPORATION
As Representative of the Several Underwriters
One Galleria Tower, Suite 300
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned understands that you, as the Representative of the
several underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with Aarica Holdings, Inc., a Texas
corporation (the "Company"), providing for the initial public offering (the
"Offering") by the Underwriters, of 1,000,000 Units, each consisting of one
share of Common Stock of the Company, $0.01 par value (the "Common Stock"), and
one redeemable common stock purchase warrant (the "Warrants"), pursuant to the
Company's Registration Statement on Form SB-2 (the "Registration Statement")
filed with the Securities and Exchange Commission.
In consideration of the Underwriters' Agreement to purchase the Units,
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 relating to the offer and sale of the Units, 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, or (ii) with the prior
written consent of the Representative. 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 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 the Securities.
Sincerely,
Date: _________________, 2001
By: ________________________