$2,000,000 Minimum
$5,000,000 Maximum
10% Convertible Adjustable Secured Bonds Due 2000
ILX INCORPORATED
PLACEMENT AGENT AGREEMENT
Phoenix, Arizona
November __, 1995
BROOKSTREET SECURITIES CORPORATION
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Ladies and Gentlemen:
ILX Incorporated, an Arizona corporation (the "Company"), confirms its
agreement with you, as placement agent (the "Agent"), with respect to the sale
by the Company of a minimum $2,000,000 aggregate principal amount, and a maximum
$5,000,000 aggregate principal amount, of the Company's 10% Convertible
Adjustable Secured Bonds due 2000 (the "Bonds") to be issued pursuant to the
provisions of an Indenture, dated as of _______________ (the "Indenture"),
between the Company and U. S. Trust Company of California, N.A., as trustee (the
"Trustee"). The shares of the Company's common stock, no par value (the "Common
Stock"), issuable upon conversion of the Bonds are hereinafter referred to as
the "Underlying Stock." The Company also proposes to grant to Brookstreet
Securities Corporation warrants (described in Section 5(d) hereof) to purchase a
minimum of 40,000 and a maximum of 100,000 shares of the Company's Common Stock
(the "Warrants") (determined in increments of 1,000 shares per $50,000 in
principal amount of Bonds sold). The Bonds, the Underlying Stock and the
Warrants are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the Agent as of the date hereof, and
as of the Initial Closing (as defined in Section 2(c) hereof) and the Final
Closing (as defined in Section 2(c) hereof) if any, as follows:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form S-2 (No. 33-61477), including any related
preliminary prospectus deemed by the Company to be in compliance with and filed
pursuant to Rule 430 (the most recent of which is hereinafter referred to as the
"Preliminary Prospectus"), for the registration of the Bonds and the Underlying
Stock under the Securities Act of 1933, as amended (the "Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act and the rules and
regulations (the "Regulations") of the Commission under the Act. Subject to
Section 4(a), the Company will promptly file a further amendment to said
registration statement in the form theretofore delivered to the Agent. Except as
the context may otherwise require, said registration statement, as amended, on
file with the Commission at the time said registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations) is hereinafter
called the "Registration Statement," and the form of prospectus in the final
form filed with the Commission pursuant to Rule 424(b) of the Regulations,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-2, is hereinafter called the "Prospectus." For purposes hereof, "Rules
and Regulations" mean the rules and regulations adopted by the Commission under
the Act, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of the Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of the
Registration Statement, any of the Company's securities have been instituted or
are pending or threatened. Each of the Preliminary Prospectus, the Registration
Statement and the Prospectus conformed at the time of filing thereof with the
requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement or the Prospectus at the time
of filing thereof contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Agent or Soliciting Dealers (as
defined herein) by or on behalf of the Agent expressly for use in such
Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Initial Closing and the Final Closing, if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Agent or a Soliciting Dealer (as
defined herein), the Registration Statement and the Prospectus will contain all
statements that are required to be stated therein in accordance with the Act and
the Rules and Regulations, and will conform to the requirements of the Act and
the Rules and Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Agent expressly for use in such
Registration Statement, Prospectus, amendment or supplement.
(d) Each of the Company and its subsidiaries set forth on
Exhibit A attached hereto and incorporated herein by this reference
(collectively, the "Subsidiaries"), has been duly organized and is validly
existing as a corporation (or other entity) in good standing under the laws of
the state of its incorporation or formation. Except as set forth in the
Registration Statement or the Prospectus or listed on Exhibit A hereto, neither
the Company nor any of the Subsidiaries owns a material interest (defined for
the purposes hereof as meaning a ten percent or more interest) in any
corporation, partnership, trust, joint venture or other business entity. The
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations require such qualification or
licensing. Each Subsidiary is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing. Except as set forth on Exhibit A hereto, the Company owns 100% of
the outstanding capital stock of each of its Subsidiaries, in each case free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever; and all
outstanding shares of capital stock of each of the Subsidiaries have been
validly issued and are fully paid and non-assessable and not issued in violation
of any preemptive rights or applicable securities laws. Each of the Company and
the Subsidiaries has all requisite power and authority (corporate and other),
and has obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; each of the
Company and the Subsidiaries is and has been doing business in compliance with
all material authorizations, approvals, orders, licenses, certificates,
franchises and permits and all federal, foreign, state and local laws, rules and
regulations, or if a failure to so comply exists, such failure would not
materially and adversely affect the condition, financial or otherwise, or the
earnings, business affairs, position, prospects, value, operation, properties,
business or results of operations of the Company and the Subsidiaries taken as a
whole; and neither the Company nor any of the Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or permit which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the condition, financial or
otherwise, or the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company and the
Subsidiaries taken as a whole. The Company advises that the Arizona Department
of Real Estate has submitted to the Company a Consent Order, which includes a
fine of $2,000.00 payable by the Company, in connection with the Company's
▇▇▇▇'▇ Ranch timeshare operation. The disclosures in the Registration Statement
concerning the effects of federal, state and local laws, rules and regulations
on each of the Company's and the Subsidiaries' businesses as currently conducted
and as contemplated are correct in all material respects and do not omit to
state a material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and will have the
adjusted capitalization set forth therein on the Initial Closing and the Final
Closing, if any, as of the dates and based upon the assumptions set forth
therein. Neither the Company nor any of the Subsidiaries is a party to or bound
by any material instrument, agreement or other arrangement, including, but not
limited to, any voting trust agreement, stockholders' agreement or other
agreement or instrument, affecting the securities or options, warrants or rights
or obligations of security holders of the Company or any of the Subsidiaries or
providing for any of them to issue, sell, transfer or acquire any capital stock,
rights, warrants, options or other securities of the Company or any of the
Subsidiaries, except for this Agreement, the Indenture and as described or
referred to in the Registration Statement or the Prospectus. The Bonds, the
Underlying Stock, the Warrants and all other securities issued or issuable by
each of the Company and the Subsidiaries conform or, when issued and paid for,
will conform in all material respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of each of the Company or any of the Subsidiaries have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto and are
not subject to personal liability for the Company's acts or omissions solely by
reason of being such holders; and none of such securities was issued in
violation of the preemptive rights of any security holder of the Company or any
of the Subsidiaries or similar contractual rights granted by the Company or any
of the Subsidiaries. The Bonds will be issued pursuant to the terms and
conditions of the Indenture, and the provisions of the Indenture described in
the Prospectus will conform to the description thereof contained in the
Prospectus but such description is qualified by reference to the actual terms of
the Indenture. The Bonds have been duly authorized and, when validly
authenticated, issued, delivered and paid for in the manner contemplated by the
Indenture, will be duly authorized, validly issued and outstanding obligations
of the Company entitled to the benefits of the Indenture. The shares of Common
Stock issuable upon conversion of the Bonds will, upon such issuance, be duly
authorized, validly issued, fully paid and nonassessable, and the Company has
duly authorized and reserved for issuance upon conversion of the Bonds the
shares of Common Stock issuable upon such conversion. The Bonds and the
Underlying Stock are not and will not be subject to any preemptive or other
similar rights of any securityholder of the Company or any of the Subsidiaries;
the holders thereof will not be subject to any liability for the Company's acts
or omissions solely as such holders; all corporate action required to be taken
for the authorization, issue and sale of the Bonds and the Underlying Stock has
been duly and validly taken; and the certificates representing the Bonds and the
Underlying Stock will be in due and proper form.
(f) The consolidated financial statements of the Company and
the Subsidiaries together with the related notes thereto included in the
Registration Statement, the Preliminary Prospectus and the Prospectus fairly
present the financial position, income, change in stockholders' equity, cash
flow and the results of operations of the Company and the Subsidiaries at the
respective dates and for the respective periods to which they apply. There has
been no adverse change or development involving a material prospective change in
the condition, financial or otherwise, or in the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company or any of the Subsidiaries, whether or not arising in
the ordinary course of business, since the date of the financial statements
included in the Registration Statement and the Prospectus, except as set forth
in the Registration Statement and the Prospectus, and the outstanding debt, the
property, both tangible and intangible, and the businesses of each of the
Company and the Subsidiaries described in the Registration Statement and the
Prospectus conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "SUMMARY INFORMATION,
RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHARGES" and "SELECTED CONSOLIDATED
FINANCIAL DATA" fairly present, on the basis stated in the Prospectus, the
information set forth therein and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(g) Each of the Company and the Subsidiaries (i) has paid all
federal, state and local taxes for which it is currently liable, including, but
not limited to, withholding taxes and amounts payable under Chapters 21 through
24 of the Internal Revenue Code of 1986, as amended (the "Code"), and has
furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such taxes that are not due and
payable or are being contested in good faith by the Company and (iii) does not
have any material tax deficiency or claims outstanding, proposed or assessed
against its respective business or assets.
(h) No U.S. transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Agent in connection with (i) the issuance by the
Company of the Securities or the Underlying Stock, or (ii) the consummation by
the Company of any of its obligations under this Agreement and the Indenture.
(i) Each of the Company and the Subsidiaries maintains
insurance policies, including, but not limited to, general liability, property
and product liability insurance and surety bonds which insures the Company and
the Subsidiaries and their respective professional staffs against such losses
and risks generally insured against by comparable businesses. Neither the
Company nor any of the Subsidiaries (A) has failed to give notice or present any
insurance claim with respect to any matter, including, but not limited to, the
Company's or any of the Subsidiaries' businesses, property or professional
staff, under any insurance policy or surety bond in a due and timely manner, (B)
has any disputes or claims against any underwriter of such insurance policies or
surety bonds or has failed to pay any premiums due and payable thereunder or (C)
has failed to comply with all conditions contained in such insurance policies
and surety bonds. The Company has not received notice of facts or circumstances
under any such insurance policy or surety bond which would relieve any insurer
of its obligation to satisfy in full any valid claim of the Company or any of
the Subsidiaries.
(j) There is no material action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or, to the best of the Company's
knowledge, threatened against, or involving the properties or businesses of, the
Company or any of the Subsidiaries which (i) questions the validity of the
capital stock of the Company or any of the Subsidiaries, this Agreement and the
Indenture or of any action taken or to be taken by the Company or any of the
Subsidiaries pursuant to or in connection with this Agreement or the Indenture,
(ii) is required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration Statement
are accurately summarized in all respects) or (iii) materially and adversely
affects the condition, financial or otherwise, or the earnings, business
affairs, position, prospects, stockholders' equity, value, operation,
properties, businesses or results of operations of the Company and the
Subsidiaries taken as a whole. For the purposes hereof, a material action shall
be an action resulting in liability to the Company in excess of five percent of
its net worth, as reflected on its most recent balance sheet.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Bonds, the Underlying Stock and the
Warrants, to enter into this Agreement and the Indenture and to consummate the
transactions provided for in such agreements; and this Agreement and Indenture
have each been (or, as to the Indenture, will be prior to the Initial Closing
Date) duly and properly authorized, executed and delivered by the Company. Each
of the Agreement and the Indenture, when executed, constitutes a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, and none of the Company's issue and sale of the
Bonds, the Underlying Stock and the Warrants, the execution or delivery of this
Agreement and the Indenture, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein or the conduct
by it and the Subsidiaries of their businesses as described in the Registration
Statement, the Prospectus or any amendments or supplements thereto conflicts or
will conflict with or results or will result in any breach or violation of any
of the terms or provisions of, or constitutes or will constitute a default
under, or results or will result in the creation or imposition of any lien
(other than the lien created by the Indenture), charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever upon any property or assets (tangible or intangible) of the Company
or any of the Subsidiaries pursuant to the terms of, (i) the certificate of
incorporation or by-laws of the Company or any of the Subsidiaries, (ii) any
material license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders' agreement, note, loan or credit agreement or other
agreement or instrument to which the Company or any of the Subsidiaries is a
party or by which it is or may be bound or to which its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or (iii) to
the best of the Company's knowledge, any statute, judgment, decree, order, rule
or regulation applicable to the Company or any of the Subsidiaries of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of the Subsidiaries or any of their
respective activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any domestic court, regulatory body, government agency or other
body is required for the issuance of the Bonds pursuant to the Prospectus and
the Registration Statement, the performance of this Agreement and the Indenture
or the transactions contemplated hereby or thereby, including, without
limitation, any waiver of any preemptive, first refusal or other rights that any
entity or person may have for the issue and/or sale of any of the Securities,
except such as have been or may be required to be obtained under the Act, the
Exchange Act and the rules of the National Association of Securities Dealers,
Inc. or may be required under state securities or Blue Sky laws in connection
with the offering and sale of the Bonds.
(m) Each of the Company and the Subsidiaries shall have duly
and validly authorized, executed and delivered each agreement, contract or other
document filed as an exhibit to the Registration Statement (or the original of
such agreement, contract or document if a copy thereof is filed as an exhibit to
the Registration Statement) to which it is a party or by which it may be bound
or to which its assets, properties or businesses may be subject, and each such
agreement, contract or other document constitutes its legal, valid and binding
agreement enforceable against it in accordance with its terms. The descriptions
in the Registration Statement of agreements, contracts and other documents are
accurate but such descriptions are qualified by reference to the actual terms of
such agreements, contracts and other documents. There are no contracts or other
documents which are required by the Act or the Rules and Regulations to be
described in the Registration Statement or filed as exhibits to the Registration
Statement which are not described or filed as required; and the exhibits which
have been filed are complete and correct copies of the documents of which they
purport to be copies, except to the extent such documents are filed as unsigned
forms of documents.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the Company
nor any of the Subsidiaries has (i) entered into any material transaction other
than in the ordinary course of business or (ii) declared or paid any dividend or
made any other distribution on or in respect of its capital stock of any class
and there has not been any material change in the capital stock, debt (long or
short term) or liabilities (except for (x) financing in connection with
acquisition of assets of the Company through purchase money financing and
financing related to timeshare sales which is secured by timeshare receivables,
(y) debt incurred to finance capital improvements to existing properties not to
exceed $3,000,000 outstanding and (z) debt for working capital not to exceed
$1,500,000 outstanding) or any material change in or affecting the general
affairs, management, financial operations, stockholders' equity or results of
operations of the Company or any of the Subsidiaries.
(o) No material default exists in the due performance and
observance of any material term, covenant or condition of any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit agreement,
purchase order, agreement or instrument evidencing an obligation for borrowed
money or other material agreement or instrument to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the Subsidiaries
may be bound or to which the property or assets (tangible or intangible) of the
Company or any of the Subsidiaries is subject or affected. For the purposes
hereof, a material default shall be a default resulting in liability to the
Company in excess of five percent of its net worth, as reflected on its most
recent balance sheet.
(p) Each of the Company and the Subsidiaries is in material
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. Except as described in the Prospectus, the
Company has not received notice of any pending investigations involving the
Company or any of the Subsidiaries by the U.S. Department of Labor or any other
governmental agency responsible for the enforcement of such federal, state,
local or foreign laws and regulations. The Company has not received notice of
any unfair labor practice charge or complaint against the Company or any of the
Subsidiaries pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or any of the Subsidiaries, or any predecessor entity
of the Company or any of the Subsidiaries, and none has ever occurred. No
collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any of the Subsidiaries. No material labor dispute
with the employees of the Company or any of the Subsidiaries exists or, to the
best of the Company's knowledge, is imminent.
(q) Except as described in the Registration Statement and
except for the ILX Profit Sharing Plan, dated December 31, 1994, neither the
Company nor any of the Subsidiaries maintains, sponsors or contributes to any
program or arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan" or a "multi-employer plan" ("ERISA Plans") as such terms
are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Neither the
Company nor any of the Subsidiaries maintains or contributes to, now or at any
time previously, a defined benefit plan as defined in Section 3(35) of ERISA. To
the best of the Company's knowledge, no ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code which could subject the Company
or any of the Subsidiaries to any tax penalty on prohibited transactions and
which has not adequately been corrected. To the best of the Company's knowledge,
each ERISA Plan is in compliance with all material reporting, disclosure and
other requirements of the Code and ERISA as they relate to such ERISA Plan.
Neither the Company nor any of the Subsidiaries has ever completely or partially
withdrawn from a "multi-employer plan" as so defined.
(r) Neither the Company or any of the Subsidiaries, nor any of
the directors, principal stockholders, executive officers or, to the best of the
Company's knowledge, employees, affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing or ▇▇▇▇ ▇▇▇▇▇▇▇, a principal shareholder,
has taken, directly or indirectly, any action designed to or which has
constituted or which might be expected to cause or result in, under the Exchange
Act or otherwise, stabilization or manipulation in violation of the Exchange Act
of the price of any security of the Company to facilitate the sale or resale of
the Securities, the Underlying Stock or otherwise.
(s) Each of the Company and the Subsidiaries (i) to the best
of the Company's knowledge, owns or possesses, or has a license or other right
to use, all copyrights, trademarks, service marks and trade names, together with
all applications for any of the foregoing, presently used or held for use by it
in connection with its businesses as described in the Registration Statement,
(ii) has not received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the condition, financial or otherwise, or the
business affairs, position, prospects, properties, results of operations or net
worth of the Company and the Subsidiaries, taken as a whole, and (iii) is not
obligated or under any liability whatsoever to make any material payments by way
of royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any trademark, service mark, trade name or copyright or other intangible
asset with respect to the use thereof or in connection with the conduct of its
business or otherwise. None of the copyrights, trademarks, service marks and
trade names presently owned or used by the Company or any of the Subsidiaries
are in dispute or, to the best of the Company's knowledge, are in conflict with
the right of any other person or entity.
(t) Each of the Company and the Subsidiaries has good and
marketable title to, or valid and enforceable leasehold estates in, all material
items of real and personal property described in the Registration Statement to
be owned or leased by it, in each case free and clear of all monetary liens,
charges, claims, encumbrances, pledges, security interests, defects and other
restrictions and equities of any kind whatsoever, other than those referred to
in the Prospectus or the Registration Statement and liens for taxes not yet due
and payable.
(u) Deloitte & Touche, whose reports are filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(v) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Bonds hereunder or
any other arrangements, agreements, understandings, payments or issuance not
described in the Prospectus with respect to the Company, any of the Subsidiaries
or any of their respective officers, directors, stockholders, employees or
affiliates that may affect the Agent's compensation as determined by the
National Association of Securities Dealers, Inc. ("NASD").
(w) Neither the Company or any of the Subsidiaries nor any of
their respective executive officers, principal stockholders, or, to the best of
the Company's knowledge, employees or agents nor any other person acting on
behalf of the Company or any of the Subsidiaries nor ▇▇▇▇ ▇▇▇▇▇▇▇, a principal
shareholder, has, directly or indirectly, given or agreed to give any money,
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or any official or employee of any governmental agency
(domestic or foreign), or any instrumentality of any government (domestic or
foreign), or any political party or candidate for office (domestic or foreign),
or any other person who was, is or may be in a position to help or hinder the
businesses of the Company or any of the Subsidiaries (or assist the Company or
any of the Subsidiaries in connection with any actual or proposed transaction)
which (i) might subject the Company or any of the Subsidiaries, or any of such
others to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign), (ii) if not given in the past,
might have had a materially adverse effect on the assets, businesses or
operations of the Company or any of the Subsidiaries or (iii) if not continued
in the future, might adversely affect the assets, businesses, operations or
prospects of the Company or any of the Subsidiaries. Each of the Company's and
the Subsidiaries' internal accounting controls are sufficient to cause the
Company and the Subsidiaries to comply with the Foreign Corrupt Practices Act of
1977, as amended.
(x) Except as set forth in the Registration Statement
Prospectus, no officer, director, principal stockholder or key employee of the
Company or any of the Subsidiaries, or any "affiliate" or "associate" (as these
terms are defined in Rule 405 promulgated under the Rules and Regulations) of
any of the foregoing persons or entities, has or has had, either directly or
indirectly, (i) any interest in any person or entity which furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company or any of the Subsidiaries or (ii) a material interest in
any person or entity which purchases from or sells or furnishes to the Company
or any of the Subsidiaries any goods or services or (iii) a beneficial interest
in any material contract or agreement to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries may
be bound or affected. Except as set forth in the Registration Statement or the
Prospectus, there are no existing material agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company or any of the
Subsidiaries and any such officer, director, principal stockholder or key
employee or any "affiliate" or "associate."
(y) The minute books of each of the Company and the
Subsidiaries have been made available to the Agent, contain a complete summary
of all actions of the directors and stockholders of each of the Company and the
Subsidiaries since the time of their respective incorporation and reflect all
transactions referred to in such minutes accurately in all respects.
(z) No holders of any securities of the Company or any of the
Subsidiaries or of any options, warrants or other convertible or exchangeable
securities of the Company or any the Subsidiaries have the right to include any
securities issued by the Company or any of the Subsidiaries in the Registration
Statement and no person or entity holds any anti-dilution rights with respect to
any securities of the Company or any of the Subsidiaries that would be triggered
by the issuance of the Bonds, the Warrants or the Common Stock into which they
are convertible as described in the Registration Statement and the Prospectus.
(aa) Any certificate signed by any officer of the Company and
delivered to the Agent or ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ("Agent's Counsel")
shall be deemed a representation and warranty by the Company to the Agent as to
the matters covered thereby.
(bb) To the best of the Company's knowledge, each of the
Company and the Subsidiaries is in compliance with all federal, foreign, state
and local laws, rules and regulations relating to environmental protection, and
neither the Company nor any of the Subsidiaries has been notified or is
otherwise aware that it is potentially liable, or is considered potentially
liable, under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or any similar law ("Environmental Laws").
Neither the Company nor any of the Subsidiaries is involved in or subject to any
action, suit, regulatory investigation or other proceeding, pending or (to the
best of the Company's knowledge) threatened, relating to environmental
protection or the Environmental Laws, nor does the Company or any of the
Subsidiaries believe any such action, suit, investigation or proceeding is
probable of assertion against the Company or any of the Subsidiaries, provided
that the Company has filed voluntarily for a Determination of Applicability from
the Arizona Department of Environmental Quality to determine the applicability
of either General or Individual Acquifier Protection Permit requirements to the
Company's ▇▇▇▇'▇ Ranch property in accordance with Arizona Revised Statutes
ss.49-241, et seq. To the best of the Company's knowledge, no disposal, release
or discharge of hazardous or toxic substances, pollutants or contaminants,
including petroleum and gas products, as any of such terms may be defined under
federal, state or local law, has occurred on, in, at or about any of the
facilities or properties of the Company or any of the Subsidiaries.
(cc) Neither the Company nor any of the Subsidiaries has ever
received a notice, orally or in writing, with respect to the denial of any
license the Company or any Subsidiary has sought to obtain under, and the
Company-approved operating procedures and practices of each of the Company and
the Subsidiaries are, to the best of the Company's knowledge, in material
compliance with, federal, state and local laws, rules and regulations, provided
that the Company's application to obtain a license to sell timeshare interests
in the State of California has not yet been approved.
(dd) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(ee) The Company makes no representation regarding compliance
with the laws of any foreign jurisdiction. The Company has relied on the Agent
and Soliciting Dealers offering the Bonds for sale in any foreign jurisdiction
as to compliance with applicable laws, rules and regulations thereof.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
hereby appoints the Agent as its sales agent and grants the Agent the exclusive
right (subject to the right of Agent to retain Soliciting Dealers (defined
below)) to offer and sell the Bonds during the Offering Period (as hereinafter
defined) for the account of the Company. The Agent accepts such appointment and
agrees to use its best efforts as sales agent, following written or telegraphic
receipt of notice of the effective date of the Registration Statement, to offer
and sell such principal amount of Bonds as contemplated by this Agreement at
$1,000 per Bond.
(b) Each prospective purchaser of Bonds will be required to
complete, execute, and deliver to the Company a subscription agreement in
substantially the form attached as Exhibit E hereto and filed as an exhibit to
the Registration Statement (the "Subscription Agreement"). Prior to or
concurrently with the delivery to the Company of any Subscription Agreement by
any purchaser, funds sufficient to purchase the Bonds subscribed for shall be
deposited in an escrow account (the "Escrow Account") to be maintained pursuant
to an escrow agreement between the Escrow Agent (as hereinafter defined), the
Company, and the Agent in substantially the form attached hereto as Exhibit F
and filed as an exhibit to the Registration Statement (the "Escrow Agreement").
The Company shall be entitled in its sole discretion to reject in whole or in
part any Subscription Agreement tendered to it. The Company will forward to the
Agent copies of each Subscription Agreement accepted by it within three business
days of receipt by the Company of such Subscription Agreement.
(c) All subscriptions for Bonds will be conditioned upon the
acceptance by the Company of Subscription Agreements for at least $2,000,000
principal amount of Bonds (the "Minimum Subscriptions") by December 15, 1995,
which is the last date on which the offering of Bonds may be made, except that
such last offering date may be extended by the Company, in its sole discretion
by written notice to the Agent, to a date not later than January 14, 1996 (the
last date on which the offering of Bonds may be made is herein referred to as
the "Termination Date" and the period during which the offering of Bonds may be
made is herein referred to as the "Offering Period"). If Minimum Subscriptions
are not tendered to and accepted by the Company by the Termination Date, this
Agreement shall, subject to the provisions of Section 10 hereof, terminate. If
at least the Minimum Subscriptions are tendered to and accepted by the Company
on or before the Termination Date, a closing will be held at the offices of the
Agent at a date (which date may occur after the Termination Date) and time
determined by the Company as soon as practicable after the Company's acceptance
of the last of such Minimum Subscriptions (the "Initial Closing") and shall be
subject to each of the conditions precedent to closing provided for in this
Agreement. The Company may continue the Offering after the Initial Closing and
prior to the Termination Date until up to $5,000,000 principal amount of Bonds
are subscribed for, or until the offering is earlier terminated by agreement of
the Company and Placement Agent. Officers, directors, employees, principal
shareholders, their respective family members and affiliates, of the Company
shall have the right to purchase Bonds from time to time to achieve the Minimum
Subscriptions amount. If additional subscriptions are tendered and accepted
after the Initial Closing and prior to the Termination Date, an additional
closing with respect to such subscriptions shall be held in accordance with the
terms of the Prospectus (the "Final Closing"). The Final Closing will be held at
the offices of the Agent at a date (which date may occur after the Termination
Date) and time determined by the Company and shall be subject to each of the
conditions precedent to closing provided for in this Agreement. Each closing
date provided for under this Agreement (including the Initial Closing) shall
constitute a "Closing".
(d) Prior to the applicable Closing, all cash payments of
subscribers received (unless and until returned to the purchasers pursuant
hereto) will be placed in a segregated escrow account (the "Escrow Account")
with U.S. Trust Company of California, N.A. (the "Escrow Agent") for the
subscribers' benefit. The Agent will, and will cause each Soliciting Dealer to,
promptly deliver the funds into the Escrow Account in accordance with Rule
15(c)2-4 of the Securities Exchange Act of 1934, as amended, but in any event
not to exceed the next business day after receipt of such funds.
(e) The purchase price paid by any prospective purchaser whose
subscription is rejected, or is returned because the conditions to closing were
not satisfied, shall be returned to such prospective purchaser with interest at
the rate provided by the Escrow Agent.
(f) If prior to the Termination Date, subscriptions for more
than $5,000,000 principal amount of Bonds are received, the Agent, in its sole
discretion, may allocate the Bonds among the subscribers as to whom a closing
has not already been held in such a manner as they shall see fit.
(g) Payment of the purchase price for, and delivery of
certificates for, the Bonds shall be made at the offices of Brookstreet
Securities Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or at such other place as shall be agreed upon by the Agent and the Company.
Such delivery and payment shall be made at 10:00 a.m. (New York City time) on
the applicable Closing or at such other time and date as shall be agreed upon by
the Agent and the Company. Delivery of the certificates for the Bonds shall be
made to the Agent against release from the Escrow Account of the purchase price
for the Bonds to the order of the Company in Los Angeles Clearing House funds.
Certificates for the Bonds shall be in definitive, fully registered form and
shall be in such denominations and registered in such names as the Agent may
request in writing at least two business days prior to the applicable Closing.
The certificates for the Bonds shall be made available to the Agent at such
office or such other place as the Agent may designate for inspection, checking
and packaging no later than 9:30 a.m. on the last business day prior to the
applicable Closing.
(h) As soon as practicable after the Closing, the Agent shall
deliver or cause to be delivered by mail to each purchaser of Bonds on such
Closing (i) a copy of an executed Subscription Agreement which indicates thereon
the number of Bonds such purchaser has purchased and (ii) a certificate
representing such Bonds, registered in such purchaser's name.
(i) Subject to the sale of at least the Minimum Subscription
of the Bonds, the Company agrees to direct the Escrow Agent to pay to the Agent
an underwriting commission computed at the rate of 9% of the public offering
price for each of the Bonds sold by the Agent or any Soliciting Dealer at the
public offering price of $1,000.00 per Bond for which the Company has accepted
the Subscription Agreement and received payment from the Escrow Account. If a
sale for which a Subscription Agreement has been received does not occur for any
reason whatsoever, no commission or other payment shall be due in respect
thereof. Commissions shall be payable at each Closing, based on the Bonds as to
which such Closing relates, from the funds which have been deposited in the
Escrow Account.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective as the Agent deems advisable, the Agent shall make a
public offering of the Bonds (other than to residents of or in any jurisdiction
in which qualification of the Bonds is required and has not become effective) at
the price and upon the other terms set forth in the Registration Statement and
the Prospectus. The Agent may enter into one or more agreements as the Agent, in
its sole discretion (provided that such broker-dealer shall have appropriate
licenses and permits to offer and sell the Bonds in the states in which they are
offered and sold), deems advisable with one or more NASD member broker-dealers
who shall act as dealers (the "Soliciting Dealers") in connection with such
public offering under the terms and conditions of Soliciting Dealer Agreements
in a form filed as an exhibit to the Registration Statement. The Agent may agree
to direct payment of commissions to such Soliciting Dealers from the Escrow
Account in amounts not to exceed 5% (which amounts shall be part of, and not in
addition to, the Agents commissions). Payment of all such commissions shall be
the responsibility of the Agent, and ILX shall have no responsibility or
liability therefore. Agent represents, warrants and covenants to the Company to
conduct the offering of the Bonds according to the same representation, warrants
and covenants made by the Soliciting Dealers in the Soliciting Dealer Agreement.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with the Agent as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Bonds of
which the Agent and Agent's Counsel shall not previously have been advised and
furnished with a copy, or to which the Agent or Agent's Counsel shall have
objected (except if deemed necessary by counsel for the Company, in which case
the Agent shall have the right to terminate this Agreement upon prompt notice to
the Company), or which is not in compliance with the Act, the Exchange Act or
the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Agent and as soon as practicable confirm in
writing, (i) when the Registration Statement, as amended, becomes effective and,
if the provisions of Rule 430A promulgated under the Act will be relied upon,
when the Prospectus has been filed in accordance with said Rule 430A and when
any post-effective amendment to the Registration Statement becomes effective,
(ii) of the issuance by the Commission of any stop order or of the initiation,
or the threatening, of any proceeding suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of the
Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose, (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose, (iv) of the receipt of any comments from the
Commission, and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state securities commission
shall enter a stop order or suspend such qualification at any time, the Company
will make every effort to obtain promptly the lifting of such order or
suspension.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Agent or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1), or, if applicable and if consented to by the Agent, pursuant to Rule
424(b)(4)) on or before the date it is required to be filed under the Act and
the Rules and Regulations.
(d) The Company will give the Agent notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus that the Company proposes for use by the Agent
in connection with the offering of the Bonds that differs from the corresponding
prospectus on file at the Commission at the time the Registration Statement
becomes effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) of the Rules and Regulations), and will furnish
the Agent with copies of any such amendment or supplement a reasonable amount of
time prior to such proposed filing or use, as the case may be.
(e) The Company shall endeavor in good faith, in cooperation
with the Agent, at or prior to the time the Registration Statement becomes
effective, to qualify the Bonds for offering and sale under the securities laws
of such jurisdictions identified on Exhibit C to permit the continuance of sales
and dealings therein for as long as may be necessary to complete the
distribution, and shall make such applications, file such documents and furnish
such information as may be required for such purpose, provided the Company shall
not be required to qualify as a foreign corporation or file a general consent to
service of process in any such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Agent agrees that
such action is not at the time necessary or advisable, use all reasonable
efforts to file and make such statements or reports at such times as are or may
reasonably be required by the laws of such jurisdiction to continue such
qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Bonds in accordance with the provisions hereof and the Prospectus, or any
amendments or supplements thereto. If at any time when a prospectus relating to
the Bonds is required to be delivered under the Act, any event shall have
occurred as a result of which, in the opinion of counsel for the Company or
Agent's Counsel, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits 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, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Agent promptly and prepare and file with the Commission
an appropriate amendment or supplement in accordance with Section 10 of the Act,
each such amendment or supplement to be satisfactory to Agent's Counsel, and the
Company will furnish to the Agent copies of such amendment or supplement as soon
as available and in such quantities as the Agent may request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12- month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its securityholders (including Bondholders), in the
manner specified in Rule 158(b) of the Rules and Regulations, and to the Agent
an earnings statement which will be in the detail required by, and will
otherwise comply with, the provisions of Section 11(a) of the Act and Rule
158(a) of the Rules and Regulations, which statement need not be audited unless
required by the Act, covering a period of at least 12 consecutive months after
the effective date of the Registration Statement.
(h) So long as any of the Bonds remain outstanding, the
Company will furnish to its Bondholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants), and
the other reports required to be delivered pursuant to the Indenture, and will
deliver to Agent:
(i) concurrently with furnishing such quarterly
reports to its securityholders, statements of income of the Company for each
quarter in the form furnished to the Company's securityholders and certified by
the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports
to its securityholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations, stockholders'
equity and cash flows of the Company for such fiscal year, accompanied by a copy
of the report thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, any
state securities commission, the NASD or any securities exchange; (v) every
press release and every material news item or article of interest to the
financial community in respect of each of the Company and the Subsidiaries or
their respective affairs which was released or prepared by or on behalf of the
Company or any of the Subsidiaries; and
(vi) any additional information of a public nature
concerning the Company or any of the Subsidiaries (and any future subsidiaries)
or their respective businesses which the Agent may request.
During such period, if the Company has active subsidiaries, the foregoing
financial statements will be on a consolidated basis to the extent that the
accounts of the Company and its subsidiaries are consolidated, and will be
accompanied by similar financial statements for any significant subsidiary which
is not so consolidated.
(i) The Company will maintain a transfer agent and, if
necessary under the laws of the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for the Common
Stock, and also for the Bonds.
(j) The Company will furnish to the Agent or on the Agent's
order, without charge, at such place as the Agent may designate, copies of the
Preliminary Prospectus, the Registration Statement and any pre-effective or
post-effective amendments thereto (two of which copies will be signed and will
include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such reasonable quantities as the Agent may request.
(k) Neither the Company nor any of the Subsidiaries nor any of
their respective executive officers directors, principal stockholders or
affiliates (within the meaning of the Rules and Regulations) will take, directly
or indirectly, any action designed to, or which might in the future reasonably
be expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company in violation of the Exchange Act.
(l) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"USE OF PROCEEDS" in the Prospectus. No portion of the net proceeds will be
used, directly or indirectly, to acquire or redeem any securities issued by the
Company, provided that this covenant shall not restrict the Company's ability to
redeem the Securities pursuant to their terms.
(m) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time under the
Act, the Exchange Act and the Rules and Regulations, and all such reports, forms
and documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act and the Rules and Regulations.
(n) The Company shall furnish to the Agent as early as
practicable prior to each of the date hereof, the Initial Closing and Final
Closing, if any, but no later than two full business days prior thereto, a copy
of the latest available unaudited interim consolidated financial statements of
the Company and the Subsidiaries (which in no event shall be as of a date more
than 30 days prior to the date of the Registration Statement) which have been
read by the Company's independent public accountants as stated in their letters
to be furnished pursuant to Section 6(i) hereof.
(o) The Company shall, as soon as practicable, but in no
event later than five business days before the effective date of the
Registration Statement, file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities and the Underlying Stock.
(p) Until the Termination Date, neither the Company nor any
of the Subsidiaries shall, without the prior written consent of the Agent and
Agent's Counsel, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company, any of
the Subsidiaries, their respective activities or the offering contemplated
hereby, other than trade releases issued in the ordinary course of the Company's
business consistent with past practices with respect to the Company's
operations.
(q) For any period during which any of the Bonds are
outstanding, the Company will not take any action or actions which may cause the
exemption from registration provided by Section 3(a) of the Act (or any
successor provision) to be unavailable for the conversion of the Bonds into
Common Stock.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Initial
Closing and the Final Closing (to the extent not paid at the Initial Closing)
all expenses and fees (other than fees of Agent's Counsel) incident to the
performance of the obligations of the Company under this Agreement and the
Indenture including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing (including mailing and
handling charges), filing, delivery and mailing (including the payment of
postage with respect thereto) of the Registration Statement and the Prospectus
and any amendments and supplements thereto and the printing, mailing (including
the payment of postage with respect thereto) and delivery of this Agreement and
related documents, including the cost of all copies thereof and of the
Preliminary Prospectus, the Prospectus and any amendments thereof or supplements
thereto supplied to the Agent and such dealers as the Agent may request, in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of the Bonds including, but not limited to (y) the consummation by the
Company of any of its obligations under this Agreement and the Indenture and (z)
sale of the Bonds by the Agent in connection with the distribution contemplated
hereby, (iv) the qualification of the Bonds and the Underlying Stock under state
securities or "Blue Sky" laws including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum" and the "Supplemental Blue Sky Memorandum," if
any, and disbursements and fees of counsel in connection therewith, (v) costs
and expenses of travel of personnel of the Company in connection with the "road
show," information meetings and presentations, (vi) fees and expenses of the
Trustee, transfer agent and registrar, and (vii) the fees payable to the
Commission and the NASD.
(b) The Agent acknowledge receipt of $50,000 from the
Company to offset certain expenses of the Agent. If this Agreement is terminated
by the Agent in accordance with the provisions of Section 2, Section 4(a),
Section 6, Section 10(a) or Section 12, the Agent shall retain such funds as
payment for all of their actual reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of Agent's Counsel and shall have no
additional recourse to the Company for expenses incurred.
(c) The Company further agrees that, in addition to
the expenses payable pursuant to Section 5(a) hereof, it will pay to the Agent
on each Closing by certified or bank cashier's check or, at the election of the
Agent, by directing a disbursement from the Escrow Account, a non-accountable
expense allowance equal to two percent of the gross proceeds received by the
Company from the sale of the Bonds less the $50,000 paid pursuant to Section
5(b), which $50,000 shall be subtracted from the first such payment by the
Company.
(d) In addition to the sums payable to the Agent, as provided
elsewhere herein, Agent shall be entitled to receive on the Final Closing, as
partial compensation for its services, warrants (the "Warrants") for the
purchase of a minimum of 40,000 shares and a maximum of 100,000 shares of the
Company's Common Stock (determined in increments of 1,000 shares for every
$50,000 principal amount of Bonds sold). No Warrants are issuable if a Closing
does not occur for at least the Minimum Subscriptions. The Warrants shall be
issued pursuant to the Agent's Warrant in the form of Exhibit B 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 completion of the Offering, at $3.60
per share. The Warrants shall be non-exercisable for one year from the date of
issuance of the Warrants, and non-transferrable (whether by sale, transfer,
assignment or hypothecation) except for (i) transfers to officers of Brookstreet
Securities Corporation who are also shareholders of Brookstreet Securities
Corporation, and (ii) transfers occurring by operation of law.
6. Conditions of the Agent's Obligations. The obligations of the Agent
hereunder shall be subject to the continuing accuracy of the representations and
warranties of the Company herein as of the date hereof and as of the Initial
Closing and Final Closing, if any, as if they had been made on and as of the
Initial Closing or Final Closing, as the case may be; the accuracy on and as of
the Initial Closing or Final Closing, if any, of the statements of officers of
the Company made pursuant to the provisions hereof; and the performance by the
Company on and as of the Closing and Final Closing, if any, of its covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Agent, and, at the
Initial Closing and Final Closing, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Agent's Counsel. If the Company has elected to rely upon Rule
430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing the Company shall have
provided evidence satisfactory to the Agent of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
(b) The Agent shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Agent's reasonable opinion, is material, or omits to state
a fact which, in the Agent's reasonable opinion, is material and is required to
be stated therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the Agent's reasonable opinion, is material, or omits to state
a fact which, in the Agent's reasonable opinion, is material and is required to
be stated therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) On or prior to the applicable Closing, the Agent shall
have received from Agent's Counsel, such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, the Registration
Statement, the Prospectus and other related matters as the Agent may request and
Agent's Counsel shall have received such papers and information as they request
to enable them to pass upon such matters.
(d) At the Initial Closing, the Agent shall have received from
Colombo & ▇▇▇▇▇▇▇, P.C., counsel to the Company, dated the Closing, addressed to
the Agent in substantially the form attached hereto as Exhibit D. In rendering
such opinion, such counsel may rely: (A) as to matters involving the application
of laws other than the laws of the United States and jurisdictions in which they
are admitted, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and
substance satisfactory to Agent's Counsel) of other counsel acceptable to
Agent's Counsel, familiar with the applicable laws; and (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written statements
of officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company and the
Subsidiaries, provided copies of any such statements or certificates shall be
delivered to Agent's Counsel if requested. The opinion of such counsel for the
Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and that the Agent and they are justified in
relying thereon. At the Final Closing, if any, the Agent shall have received the
favorable opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., counsel to the Company, dated such
Final Closing, addressed to the Agent and in form consistent with Exhibit D
confirming as of such Final Closing the statements made by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
P.C. in their opinion delivered on the Initial Closing.
(e) On or prior to each of the Initial Closing and each Final
Closing, if any, Agent's Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6 or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company herein contained.
(f) Prior to each of Initial Closing and Final Closing, if
any: (i) there shall have been no materially adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects, stockholders' equity or the business activities of the Company and
the Subsidiaries taken as a whole, whether or not in the ordinary course of
business, from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
or any of the Subsidiaries, from the latest date as of which the financial
condition of the Company and the Subsidiaries is set forth in the Registration
Statement and Prospectus which is adverse to the Company and the Subsidiaries
taken as a whole; (iii) neither the Company nor any of the Subsidiaries shall be
in material default under any provision of any instrument relating to any
outstanding indebtedness; (iv) neither the Company nor any of the Subsidiaries
shall have issued any securities (other than the Bonds or underlying common
stock from the exercise of options or warrants) or declared or paid any dividend
or made any distribution in respect of its capital stock of any class and there
has not been any change in the capital stock, or any change in the debt (long or
short term) or liabilities or obligations (contingent or otherwise) of the
Company or any of the Subsidiaries, except (x) in connection with the
acquisition of assets of the Company through purchase money financing and
financing related to timeshare sales which is secured by timeshare receivables,
(y) for debt incurred to finance capital improvements to existing properties not
to exceed $3,000,000 outstanding and (z) for debt for working capital not to
exceed $1,500,000 outstanding; (v) no material amount of the assets of the
Company or any of the Subsidiaries shall have been pledged or mortgaged other
than in the ordinary course of the Company's business, except as set forth in
the Registration Statement and Prospectus and except (x) in connection with the
acquisition of assets of the Company through purchase money financing and
financing related to timeshare sales which is secured by timeshare receivables,
(y) for debt incurred to finance capital improvements to existing properties not
to exceed $3,000,000 outstanding and (z) for debt for working capital not to
exceed $1,500,000 outstanding; (vi) no material action, suit or proceeding, at
law or in equity, shall have been pending or, to the best of the Company's
knowledge, threatened against the Company or any of the Subsidiaries, or
affecting any of their respective properties or businesses, before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may materially
adversely affect the business, operations, prospects, financial condition or
income of the Company and the Subsidiaries taken as a whole, except as set forth
in the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission or any state regulatory authority.
(g) At each of the Initial Closing and Final Closing, if any,
the Agent shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Initial Closing or Final Closing, as the case
may be, to the effect that each of such persons has examined the Registration
Statement, the Prospectus, this Agreement and the Indenture, and that:
(i) the representations and warranties of the Company
in this Agreement and the Indenture are true and correct, as if made on and as
of the Initial Closing or such Final Closing, as the case may be, and the
Company has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement and the Indenture on its part to be
performed or satisfied at or prior to the Initial Closing or such Final Closing,
as the case may be;
(ii) no stop order suspending the effectiveness of
the Registration Statement or any part thereof or the qualification of the
Trustee has been issued, and no proceedings for that purpose have been
instituted or are pending or, to the best of each of such person's knowledge
after due inquiry, are contemplated or threatened under the Act;
(iii) the Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of the Registration
Statement, the Prospectus or any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and none of the Preliminary Prospectus or any supplement thereto included any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and
(iv) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus: (a)
neither the Company nor any of the Subsidiaries has incurred up to and including
the Initial Closing or Final Closing, as the case may be, other than in the
ordinary course of its business, any material liabilities or obligations, direct
or contingent (except as otherwise contemplated in subclause (d) of this clause
(iv)); (b) neither the Company nor any of the Subsidiaries has paid or declared
any dividends or other distributions on its capital stock; (c) neither the
Company nor any of the Subsidiaries has entered into any material transactions
not in the ordinary course of business (except as otherwise contemplated in
subclause (d) of this clause (iv)); (d) there has not been any material change
in the capital stock or long-term debt or any increase in the short-term
borrowings (other than any increase in the short-term borrowings in the ordinary
course of business) of the Company or any of the Subsidiaries (except for (x)
financing in connection with the acquisition of assets of the Company through
purchase money financing and financing related to timeshare sales which is
secured by timeshare receivables, (y) debt incurred to finance capital
improvements to existing properties not to exceed $3,000,000 outstanding and (z)
debt for working capital not to exceed $1,500,000 outstanding); (e) neither the
Company nor any of the Subsidiaries has sustained any material loss or damage to
its property or assets, whether or not insured; (f) there is no material
litigation which is pending or, to the best of the Company's knowledge,
threatened against the Company, any of the Subsidiaries or any affiliated party
of any of the foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (g) there has occurred
no event required to be set forth in an amended or supplemented Prospectus which
has not been set forth. References to the Registration Statement and the
Prospectus in this subsection (g) are to such documents as amended and
supplemented at the date of such certificate.
(h) By the Closing, the Agent will have received clearance
from the NASD as to the amount of compensation allowable or payable to the Agent
and Soliciting Dealers, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Agent shall
have received a letter, dated such date, addressed to the Agent in form and
substance satisfactory in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) to the Agent
and Agent's Counsel, from Deloitte & Touche:
(i) confirming that they are independent certified
public accountants with respect to the Company within the meaning of the Act and
the Exchange Act and the applicable Rules and Regulations; (ii) stating that it
is their opinion that the consolidated financial statements and supporting
schedules of the Company and the Subsidiaries, as applicable, included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and the Rules
and Regulations thereunder;
(iii) and stating that, on the basis of a limited
review which included a reading of the latest available unaudited interim
consolidated financial statements of the Company and the Subsidiaries, as
applicable, (with an indication of the date of the latest available unaudited
interim consolidated financial statements of the Company and the Subsidiaries,
as applicable), a reading of the latest available minutes of the stockholders
and board of directors and the various committees of the board of directors of
each of the Company and the Subsidiaries, consultations with officers and other
employees of each of the Company and the Subsidiaries responsible for financial
and accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
consolidated financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the Rules and Regulations or
are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the audited
consolidated financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration Statement, (B) at
a specified date not more than five days prior to the later of the date of this
Agreement or the effective date of the Registration Statement, there has been
any change in the capital stock or long-term debt of the Company or any of the
Subsidiaries, or any decrease in the stockholders' equity or net current assets
or net assets of the Company, as compared with amounts shown in the
________________, 199_ balance sheet included in the Registration Statement
other than as set forth in or contemplated by the Registration Statement, or, if
there was any change or decrease, setting forth the amount of such change or
decrease, and (C) during the period from _______________, 1995 to a specified
date not more than five days prior to the later of the date of this Agreement or
the effective date of the Registration Statement, there was any decrease in net
revenues, net earnings or net earnings per common share of the Company and its
consolidated Subsidiaries or any of the Company's unconsolidated Subsidiaries,
in each case as compared with the corresponding period beginning
_______________, 1994, other than as set forth in or contemplated by the
Registration Statement, or, if there was any such decrease, setting forth the
amount of such decrease;
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements
and/or other financial information pertaining to the Company and the
Subsidiaries set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the Company and/or the
Subsidiaries and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures need not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(v) statements as to such other matters incident to
the transaction contemplated hereby as the Agent may reasonably request.
(j) At the Initial Closing and Final Closing, if any, the
Agent shall have received from Deloitte & Touche a letter, dated as of the
Initial Closing or such Final Closing, as the case may be, to the effect that
they reaffirm that statements made in the letter furnished pursuant to
subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five days prior to the Initial Closing or such
Final Closing, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial information
as specified by the Agent and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (v).
(k) On each of the Initial Closing and Final Closing, if any,
there shall have been duly tendered to the Agent for the Agent's and Soliciting
Dealer's accounts the appropriate number of Bonds.
(l) No order suspending the sale of the Bonds in any
jurisdiction designated by the Agent pursuant to Section 4(e) hereof shall have
been issued on either the Initial Closing or the Final Closing, if any, and no
proceedings for that purpose shall have been instituted or shall be
contemplated.
If any condition to the Agent's obligations hereunder to be
fulfilled prior to or at the Initial Closing or the Final Closing, as the case
may be, is not so fulfilled, the Agent may terminate this Agreement or, if the
Agent so elect, they may waive any such conditions which have not been fulfilled
or extend the time for their fulfillment. In the event the Agent so elect to
terminate, the Agent shall have no recourse against the Company for expenses
except to retain the $50,000 paid to the Agent pursuant to Section 5(b) hereof.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Agent (for purposes of this Section 7, "Agent" shall include the officers,
directors, partners, employees, agents and counsel of the Agent), and each
person, if any, who controls an Agent ("controlling person") within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, from and against
any and all losses, claims, damages, expenses or liabilities, joint or several
(and actions, proceedings, suits and litigation in respect thereof), whatsoever
(including but not limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any action, suit,
proceeding or litigation, commenced or threatened, or any claim whatsoever), as
such are incurred, to which the Agent or any such controlling person may become
subject, under the Act, the Exchange Act or any other statute or at common law
or otherwise or under the laws of foreign countries, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained (i) in the Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time amended and supplemented), (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which the Bonds are included or (iii) in any application or other
document or written communication (in this Section 7 collectively called
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Bonds or
such securities under the securities laws thereof or filed with the Commission,
any state regulatory authority, NASDAQ or any securities exchange or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of the Prospectus, in the light of the circumstances under which they were
made), unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to the
Agent by or on behalf of the Agent or the Soliciting Dealers expressly for use
in the Preliminary Prospectus, the Registration Statement or the Prospectus, or
any amendment thereof or supplement thereto, or in any application, as the case
may be. The Company acknowledges that the statements set forth under "PLAN OF
DISTRIBUTION" and the stabilization legend in the Preliminary Prospectus and the
Prospectus constitute the only written information furnished to the Company with
respect to the Agent by or on behalf of the Agent or a Soliciting Dealer
expressly for use in the Preliminary Prospectus, the Registration Statement, the
Prospectus or any application. The indemnity agreement in this subsection (a)
shall be in addition to and not duplicative of any liability which the Company
may have at common law or otherwise.
(b) The Agent agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
Registration Statement, and each other person, if any, who controls the Company
within the meaning of the Act, to the same extent as the foregoing indemnity
from the Company to the Agent but only with respect to statements or omissions,
if any, made in the Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment thereof or supplement thereto, or in any
application made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to such Agent by such Agent
expressly for use in such Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment thereof or supplement thereto, or in any such
application, provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement or the
Prospectus. The Company acknowledges that the statements set forth under "PLAN
OF DISTRIBUTION" and the stabilization legend in the Preliminary Prospectus and
the Prospectus constitute the only information furnished in writing by or on
behalf of any of the Agent expressly for use in the Preliminary Prospectus, the
Registration Statement, the Prospectus or any application. The Agent shall also
indemnify the Company to the same extent as the foregoing for matters arising
from sales activities of the Agent and Soliciting Dealers in contravention of
the Act, the Exchange Act, state securities laws or regulations, Rules and
Regulations and the NASD rules. The indemnity agreement in this subsection (b)
shall be in addition to and not duplicative of any liability which the Agent may
have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in a material respect by such failure or from any liability
which it may have otherwise). In case any such action, suit or proceeding is
brought against any indemnified party, and it notifies an indemnifying party or
parties of the commencement thereof, the indemnifying party or parties will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent, provided that such
consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, suits, proceedings or litigation in respect thereof) (A) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified on
the other hand, from the offering of the Bonds or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each of the contributing parties, on the
one hand, and the party to be indemnified, on the other hand, in connection with
the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
In any case where the Company is a contributing party and an Agent is the
indemnified party, the relative benefits received by the Company, on the one
hand, and such Agent, on the other, shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Bonds (before deducting
expenses) bear to the total underwriting commission and expense allocations
payable to Agent hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by Agent, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions, suits, proceedings or litigation in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating,
preparing or defending any such action, claim, suit, proceeding or litigation.
Agent shall not be required under this subsection (d) to contribute any amount
in excess of the underwriting commissions and expense allocations payable
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 12(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 7, each person, if any, who controls the Company within the meaning of
the Act, each officer of the Company who has 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 this subsection (d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit, proceeding or litigation against such party in respect to which a
claim for contribution may be made against another party or parties under this
subsection (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subsection (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
shall be deemed to be representations, warranties and agreements at the Initial
Closing and Final Closing, as the case may be, and such representations,
warranties and agreements of the Company and the respective indemnity agreements
contained in Section 7 hereof shall remain operative and in full force and
effect as of such dates, regardless of any investigation made by or on behalf of
the Agent, the Company, any of the Subsidiaries or any controlling person, and
shall survive termination of this Agreement.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.,
New York City time, on the date hereof, or at such earlier time after the
Registration Statement becomes effective as the Agent, in its discretion, shall
undertake to offer the Bonds for the sale to the public, provided that the
provisions of Sections 5, 7 and 10 of this Agreement shall at all times be
effective. For purposes of this Section 9, the Bonds to be offered hereunder
shall be deemed to have been so offered upon the earlier of dispatch by the
Agent of telegrams to securities dealers releasing the Bonds for offering or the
release by the Agent for publication of the first newspaper advertisement which
is subsequently published relating to the Bonds.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the Agent
shall have the right to terminate this Agreement (i) if any domestic or
international event or act or occurrence has or in the Agent's reasonable
opinion will in the immediate future have a material adverse effect on the
Company or the securities market in general or (ii) if trading on the New York
Stock Exchange, the American Stock Exchange or in the over-the-counter market
shall have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been required
on the over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; or (iii) if the United States
shall have become involved in a war or major hostilities, or there shall have
been an escalation in an existing war or major hostilities, or a national
emergency shall have been declared in the United States; or (iv) if a banking
moratorium has been declared by a state or federal authority; or (v) if a
moratorium in foreign exchange trading has been declared; or (vi) if the Company
or any of the Subsidiaries shall have sustained a loss material or substantial
to the Company or any of the Subsidiaries by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not such loss shall have been insured, will, in the Agent's reasonable opinion,
make it inadvisable to proceed with the delivery of the Bonds; or (vii) if there
shall have been such a material adverse change in the conditions or prospects of
the Company or any of the Subsidiaries, or such material adverse change in the
general market, political or economic conditions in the United States or
elsewhere, as in the Agent's judgment would make it inadvisable to proceed with
the offering, sale and/or delivery of the Bonds; or (viii) if ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
shall no longer serve the Company in his present capacity.
(b) If this Agreement is terminated by the Agent in accordance
with the provisions of Section 2, Section 4(a), Section 10(a)(i), 10(a)(ii),
Section 10(a)(iii), Section 10(a)(iv), Section 10(a)(v), Section 10(a)(vi),
Section 10(a)(vii), Section 10(a)(viii) or Section 11 or if this Agreement shall
not be carried out within the time specified herein, or any extension thereof
granted to the Agent, by reason of any failure on the part of the Company to
perform any material undertaking or satisfy any material condition of this
Agreement by it to be performed or satisfied (including without limitation,
pursuant to Section 2, Section 6, Section 10(a) or Section 11), then the Agent
shall be entitled to retain as sole recourse against the Company all amounts
paid under Section 5(b) hereof. In addition, the Company shall remain liable for
all reasonable Blue Sky counsel fees of the Company and expenses and Blue Sky
filing fees of the Company. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 2, 6, 10 and 11 hereof),
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Default by the Company. If the Company shall fail at the Initial
Closing or Final Closing, as applicable, to sell and deliver the number of Bonds
which it is obligated to sell to applicable purchasers on such date, then this
Agreement shall terminate without any liability on the part of any party other
than pursuant to Sections 5, 7 and 10 hereof.
12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be given in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Agent shall be directed to the Agent as
follows:
Brookstreet Securities Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Director of Investment Banking
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Notices to the Company shall be directed to the Company as
follows:
ILX Incorporated
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.,
Chairman and Chief Executive Officer
With a copy to:
Colombo & ▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon the Agent, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Bonds from any Agent shall be deemed to be a successor by reason
merely of such purchase.
14. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to choice of law or conflict of laws principles.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
16. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing signed by the
Agent and the Company.
If the foregoing correctly sets forth the understanding between the
Agent and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
ILX INCORPORATED
By
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Chief Financial Officer
Confirmed and accepted as of the date first above written.
BROOKSTREET SECURITIES CORPORATION
By
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Director of Investment Banking
EXHIBIT A
Subsidiaries of ILX Incorporated
Percentage of
State in Capital Stock
which Owned by ILX
Name Incorporated Incorporated
Corporate Entities:
Genesis Investment Group, Inc. ..................... Arizona 100%
Harbour Southwest Development, Inc.(1) ............. Arizona 100%
Laveen Properties, Inc.(1) ......................... Arizona 100%
Pilot Service Corp.(1) ............................. Arizona 100%
Golden Eagle Realty, Inc. .......................... Colorado 100%
Golden Eagle Resort, Inc. .......................... Arizona 100%
ILX Florida, Inc. .................................. Arizona 100%
Southern Vacations, Inc.(2) ........................ Florida 100%
ILE Sedona Incorporated ............................ Arizona 100%
Red Rock Collection Incorporated ................... Arizona 100%
Red Rock Worldwide Incorporated .................... Arizona 100%
SXI Health Institute Incorporated .................. Arizona 100%
Varsity Clubs of America Incorporated .............. Arizona 100%
VCA Iowa Incorporated(3) ........................... Arizona 100%
VCA Management Incorporated(3) ..................... Arizona 100%
VCA South Bend Incorporated(3) ..................... Arizona 100%
VCA Tucson Incorporated(3) ......................... Arizona 100%
Syracuse Project Incorporated(1) ................... Arizona 100%
Partnerships/Joint Ventures:
Los Abrigados Partners Limited Partnership ......... Arizona (4)
Orangemen Club Limited Partnership ................. New York (6)
Name State in which Incorporated
Non-Profit Entities (5):
Golden Eagle Resort Condominium Colorado
Association, Inc.
▇▇▇▇'▇ Ranch Owners Association Arizona
Sedona Vacation Club Incorporated Arizona
Varsity Clubs of America -- Iowa Arizona
Varsity Clubs of America -- ▇▇▇▇▇▇ Arizona
Varsity Clubs of America -- South Bend Arizona
Chapter
(1) Subsidiaries of Genesis Investment Group, Inc.
(2) Subsidiary of ILX Florida, Inc.
(3) Subsidiaries of Varsity Clubs of America Incorporated
(4) The general partner of the partnership is ILE Sedona Incorporated,
which has a 78.5% interest in the partnership, which is pledged to a
third party to secure financing. The limited partners, which include
controlling persons of ILX Incorporated, have a 21.5% interest in the
partnership.
(5) Non-profit entities without capital stock.
(6) The general partner is Syracuse Project Incorporated, which has an 80%
interest in the partnership.
EXHIBIT B
ILX INCORPORATED
(An Arizona Corporation)
Placement Agent's Warrant ("Warrant") to Purchase
Shares of Common Stock
NEITHER THIS WARRANT NOR THE COMMON STOCK UNDERLYING THIS WARRANT HAVE BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE. CONSEQUENTLY, NEITHER THIS WARRANT NOR THE COMMON STOCK UNDERLYING THIS
WARRANT MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE APPLICABLE
SECURITY, OR AN EXEMPTION THEREFROM, ACCOMPANIED BY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
1. Grant of Warrant. For value received in connection with the offering
(the "Offering") of its 10% Convertible Adjustable Secured Bonds due 2000 (the
"Bonds"), ILX Incorporated, an Arizona corporation ("ILX" or the "Company"),
hereby grants to Brookstreet Securities Corporation, a California corporation,
or its registered assigns ("Holder"), the right to purchase from the Company
("Warrant") _________ shares of ILX Common Stock (the "Shares"), no par value,
("Common Stock") upon the Final Closing (as defined in Section 2(c) of the
Placement Agent Agreement, dated ______________, 1995, between the Company and
Brookstreet Securities Corporation) of the Offering on the terms and conditions
set forth herein. The Exercise Price for such Warrant shall be $3.60 per share.
The Exercise Price is subject to adjustment as provided in Section 5 below.
2. Right and Manner of Exercise. This Warrant shall be exercisable at
any time from and after the first anniversary of the date hereof and ending at
5:00 P.M. California time on the fifth anniversary of the date hereof (the
"Exercise Period"). The Holder may elect to exercise this Warrant anytime during
the Exercise Period as to any or all of the Shares by delivering written notice,
or successive written notices, of exercise to the Company (as provided in
Section 11) in the form attached hereto as Exhibit A accompanied by payment of
an amount equal to the product of (i) the number of Shares being purchased and
(ii) the Exercise Price, as each may have been adjusted pursuant to the terms of
this Agreement.
3. Issuance of Shares and New Warrant. If the purchase rights evidenced
by this Warrant are exercised in whole or in part, one or more certificates for
the Shares so purchased shall be issued at the Company's expense as soon as
practicable thereafter to the Holder exercising such rights. Such Holder shall
also be issued at such time at the Company's expense a new Warrant on the same
terms and conditions as this Warrant, but representing the number of Shares (if
any) for which the purchase rights under this Warrant remain unexercised.
4. Privilege of Stock Ownership. The Holder shall for all purposes be
deemed to have become the holder of record of Shares issued upon an exercise of
this Warrant on, and the certificate evidencing such Shares shall be dated, the
date upon which the Holder presents to the Company each of notice of an intent
to exercise this Warrant pursuant to Section 2 and payment of the Exercise
Price. Holder shall receive good and marketable title to all Shares that Holder
purchases and the Company delivers upon the exercise of any or all of the
Warrants. Prior to exercise of this Warrant, the Holder shall not be entitled to
any rights as a shareholder of the Company, including (without limitation) the
right to vote, receive dividends or other distributions, exercise preemptive
rights or be notified of shareholder meetings, and such Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company except as otherwise provided herein.
5. Reservation and Availability of Shares. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued shares of Stock for the purpose of
enabling it to satisfy any obligation to issue Shares upon exercise of this
Warrant, the full number of Shares deliverable upon the exercise or conversion
of the entire outstanding amount of this Warrant. Before taking any action which
would cause an adjustment pursuant to Section 6 reducing the Exercise Price, the
Company will take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue fully paid
and non-assessable Shares at the Exercise Price as so adjusted. The Company
covenants that all Shares which may be issued upon exercise of this Warrant
will, upon issue, be fully paid and non-assessable, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities and claims
whatsoever, and the Company shall have paid all taxes, if any, in respect of the
issuance thereof.
6. Adjustment of Exercise Price/Anti-Dilution. The Exercise Price and
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of the
events enumerated in this Section 6.
6.1. Stock Splits and Combinations. If the Company shall at
any time subdivide or combine its outstanding Common Stock, or fix a record date
for payment of a dividend in Common Stock or other securities of the Company
exercisable, convertible or exchangeable for Common Stock (in which latter event
the maximum number of shares of Common Stock issuable upon the exercise,
conversion or exchange of such securities shall be deemed to have been
distributed), after that subdivision, combination or dividend, the number of
Shares subject to purchase shall be adjusted to that number of Shares which is
determined by (A) multiplying the number of shares of Common Stock purchasable
immediately prior to such adjustment by the Exercise Price in effect immediately
prior to such adjustment, and then (B) dividing that product by the Exercise
Price in effect immediately after such adjustment. If the Company shall at any
time subdivide the outstanding shares of Common Stock or fix a record date for
payment of a dividend in Common Stock or other securities exercisable,
convertible or exchangeable into Common Stock, the Exercise Price then in effect
immediately before that subdivision or dividend shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding shares
of Common Stock, then the Exercise Price in effect immediately before that
combination shall be proportionately increased. Any adjustment under this
Section 6.1 shall become effective at the close of business on the date the
subdivision or combination becomes effective or the dividend is distributed.
6.2 Reclassification, Exchange and Substitution. If the Shares
issuable upon exercise of the Warrant shall be changed into the same or a
different number of shares of any other class or classes of securities, whether
by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination or payment of dividend of securities provided for
above), the Holder of this Warrant shall, on its exercise, be entitled to
purchase for the same aggregate consideration, in lieu of the Shares which the
Holder would have become entitled to purchase but for such change, a number of
shares of such other class or classes of securities which such Holder would have
been entitled to receive as the holder of that number of Shares subject to
purchase by the Holder on exercise of this Warrant immediately before that
change.
6.3 Reorganizations, Mergers, Consolidations or Sales of
Assets. If at any time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, payment of dividend,
reclassification or exchange of Common Stock provided for above), or merger or
consolidation of the Company with or into another corporation, or the sale of
the Company's properties and assets as, or substantially as, an entirety to any
other person, then, as a part of such reorganization, merger, consolidation or
sale, lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Exercise Price then in
effect, the number of Shares or other securities or property of the Company, or
of the successor corporation resulting from such merger or consolidation, to
which a Holder of the Shares issuable upon exercise of this Warrant would have
been entitled in such capital reorganization, merger, or consolidation or sale
if this Warrant had been exercised immediately before that capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
adjustment (as determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of the Holder of this Warrant after the
reorganization, merger, consolidation, or sale such that the provisions of this
Warrant (including adjustment of the Exercise Price then in effect and number
and kind of securities purchasable upon exercise of this Warrant) shall be
applicable after that event in relation to any securities purchasable after that
event upon exercise of this Warrant.
6.4 Minimum Exercise Price Adjustment. No adjustment in the
Exercise Price shall be required unless such adjustment would require in
increase or decrease of at least one-half of one percent (0.5%) or more of the
Exercise Price, provided, however, that any adjustments which by reason of this
Subsection 6.4 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section 6
shall be made to the nearest cent or to the nearest one-hundredth of a Share as
the case may be.
7. Notices to Holder. Upon any adjustment of the Exercise Price
pursuant to Section 6, the Company within 20 days thereafter shall cause to be
given to the Holder pursuant to Section 11 hereof written notice of such
adjustment, which notice shall set forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 7.
In the event of any of the following:
7.1 the Company shall authorize the issuance to its holders of
shares of Common Stock of rights or warrants to subscribe for or purchase shares
of Common Stock or of any other subscription rights or warrants; or
7.2 the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends not exceeding [$ ____] per share of Common Stock
payable during any three-month period or distributions or dividends payable in
shares of Common Stock); or
7.3 any consolidation or merger to which the Company is a
party and for which approval of any shareholder of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company as, or
substantially as, an entirety, or of any reclassification or change of
outstanding shares of Common Stock issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination); or
7.4 the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
7.5 the Company proposes to take any action (other than
actions of the character described in Subsection 6.1 except as required under
Subsection 7.3 above) which would require an adjustment of the Exercise Price
pursuant to Section 6; then the Company shall cause to be given to the Holder,
at least 20 days (or ten days in any case specified in Subsections 7.1 or 7.2
above) prior to the applicable record date hereinafter specified, a written
notice stating (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such rights, warrants, or
distribution are to be determined, or (ii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation, or
winding up is expected to become effective, and the date as of which it is that
holders of record of shares of Common Stock shall be entitled to exchange their
shares of Common Stock for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation, or winding up. The failure to give the notice required
by this Section 7 or any defect therein shall not affect the legality or
validity of any distribution, right, warrant, consolidation, merger, conveyance,
merger, dissolution, liquidation, or winding up, or the vote upon any such
action.
8. Transfers. The Holder acknowledges and agrees that this Warrant and
the Common Stock underlying this Warrant may not be sold, pledged, assigned,
transferred or otherwise hypothecated without registration under the Act except
in certain limited circumstances where an exemption from registration exists,
supported by an opinion of counsel satisfactory to the Company and its counsel
that registration is not required thereunder. The Warrants are non-transferable
(whether by sale, transfer, assignment or hypothecation) except for (i)
transfers to officers of Brookstreet Securities Corporation who are also
shareholders of Brookstreet Securities Corporation, (ii) transfers occurring by
operation of law.
9. Fractional Shares. No fractional shares of Common Stock shall be
issued in connection with any exercise of this Warrant. In lieu of the issuance
of such fractional share, the Company shall make a cash payment equal to the
then fair market value of such fractional share as determined in good faith by
the Company's Board of Directors.
10. Successors and Assign. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon the Company and the Holder
hereof and their respective successors and assigns.
11. Notices. All notices, requests, demands and other communications
(collectively, "Notices") under this Warrant shall be in writing and shall be
deemed to have been duly given on the date of service if served personally on
the party to whom Notice is to be given, or on the third business day after the
date of mailing if mailed to the party to whom Notice is to be given, by first
class mail, registered to the Holder, at his address as shown in the Company
records; and if to the Company, at its principal office. Any party may change
its address for purposes of this Section by giving the other party written
Notice of the new address in the manner set forth above.
12. Registration Rights. The Holder shall have registration rights with
respect to the Shares as set forth in Appendix I attached hereto.
13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Arizona without regard to principles of
conflicts of laws.
14. Loss or Mutilation of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company regarding the loss, theft, mutilation or destruction
of this Warrant and upon delivery of appropriate indemnification with respect
thereto or upon surrender or cancellation of the mutilated Warrant, the Company
will make and deliver to the Holder a new Warrant of like tenor.
ILX INCORPORATED
By
, President
Attest:
, Secretary
ASSIGNMENT
FOR VALUE RECEIVED, __________________________________________________ hereby
sell(s), assign(s), and transfer(s) unto ____________________________________,
of _______________________, the right to purchase Shares evidenced by the within
Warrant, and does hereby irrevocable constitute and appoint
______________________________ to transfer such right on the books of the
Company, with full power of substitution.
DATED: ____________________, 199_
---------------------------------------------
SIGNATURE
--------------------------------------------------------------------------------
NOTICE:
This Warrant, or the Common Stock underlying the Warrant, have not been
registered under the Securities Act of 1933 (the "Act") or any states'
securities laws (the "laws") and may not be sold, pledged, transferred or
otherwise disposed of in the absence of an effective registration statement
covering these securities under the Act or laws, or an available exemption
therefrom, accompanied by an opinion of counsel satisfactory to the Company and
its counsel that registration is not required thereunder.
The signature to this Assignment must correspond with the name as written upon
the face of the within Warrant, in every particular, without alteration or
enlargement, or any change whatsoever.
EXHIBIT A
EXERCISE NOTICE
ILX INCORPORATED
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
____________________________________________________(the "Undersigned")
(Type or Print Name)
hereby elects to purchase, pursuant to the provisions of the ILX Incorporated
Placement Agent's Warrant dated _________, 1995 held by the undersigned,
__________ shares of the Common Stock of ILX Incorporated.
As an inducement to your acceptance hereunder, the undersigned
certifies that the Common Stock is being purchased for the undersigned's own
account, for investment purposed, and not with a view toward a public
distribution in violation of the registration requirements of the Securities Act
of 1933, as amended.
Payment of the purchase price of $__________ per share of Common Stock
in U.S. funds required under such Warrant accompanies this subscription.
DATED: _________________________, 199_
Company: __________________________________
Signature: __________________________________
Address: __________________________________
----------------------------------
Appendix I
Registration Rights
This Appendix I ("Appendix") is attached to an Placement Agent's
Warrant ("Warrant") of ILX Incorporated, an Arizona Corporation (the "Company"),
issued in favor of Brookstreet Securities Corporation, a California Corporation
(the "Holder").
1. Definitions. For purposes of this Appendix:
1.1 The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933, as
amended (the "1933 Act"), and the declaration or ordering of effectiveness of
such registration statement or document by the Securities and Exchange
Commission ("SEC");
1.2 The term "Registerable Securities" means any common stock
of the Company ("Common Stock") issued upon an exercise of the Warrant;
1.3 The number of shares of "Registerable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to any unexercised portion of the Warrant which are, Registerable
Securities;
1.4 The term "Holder" means any person owning or having the
right to Registerable Securities or any assignee thereof in accordance with the
provisions of Section 11 of this Appendix; and
1.5 The term "Applicable Form" means such registration form
under the 1933 Act as in effect on the date hereof or any registration form
under the Act subsequently adopted by the Securities and Exchange Commission
("SEC") that may be used by the Company for the registration of its securities.
1.6 The term "Offering" means any offering of Common Stock of
the Company pursuant to a registration statement filed with the SEC under the
1933 Act.
1.7 The term "Indenture" means that certain Indenture dated as
_______ __, 1995 between the Company and __________________________, as Trustee.
1.8 All other capitalized terms contained herein shall have
the meaning ascribed to them in the attached Warrant.
2. Registration of Registerable Securities.
2.1 If the Company intends to conduct an Offering on or before
the seventh anniversary of the date of the Indenture (including for the purpose
of a registration effected by the Company for shareholders other than the
Holder) of any of its Common Stock or other securities under the 1933 Act in
connection with the public offering of such securities solely for cash (other
than a registration relating either to (i) the sale of securities to
participants in a Company stock option, stock purchase or similar plan, or (ii)
a registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registerable Securities), the Company shall, at such
time, promptly give the Holder written notice of such proposed registration
pursuant to Section 11 of the Warrant. Upon the written request of Brookstreet
Securities Corporation only, regardless of whether it has assigned any portion
of the Warrants, given to the Company within 20 days after deemed receipt of
such notice from the Company, the Company shall, subject to the provisions of
Section 6 of this Appendix, cause to be registered under the 1933 Act not less
than all of the Registerable Securities. The Company shall be entitled to
postpone the inclusion of the Shares in the Registration Statement for a
reasonable time if the underwriter in the Offering reasonably determines that
registration of the Shares would render the Offering impracticable or
infeasible.
2.2 If (a) the Company has not conducted an Offering on or
before the seventh anniversary of the Indenture or (b) the Company has conducted
an Offering on or before the seventh anniversary of the Indenture but,
notwithstanding the request of the Holder in accordance with Section 2.1, the
Registerable Shares were not registered, then for a period of one (1) year from
such date, the Holder may, by written notice to the Company pursuant to Section
11 of the Warrant, demand that the Company file a registration statement
covering not less than all of the Holder's Registerable Securities on such form
as shall be appropriate under the 1933 Act for the sale of such Registerable
Securities. The Company shall file the applicable registration statement within
60 days of receipt of such notice (or such longer period as may be agreed to by
Holder).
2.3 The registration rights granted pursuant to this Section 2
may not be exercised more than once (provided, however, that any request made
pursuant to this Section 2 which does not result in the declaration of
effectiveness of a registration statement covering the Registerable Securities
owned by the Holder, whether as a result of the withdrawal of the registration
statement by the Company, through other action or inaction of the Company, a
postponement by the underwriters in the Offering or otherwise, shall not
constitute the exercise of Holder's rights pursuant to this Section 2 and such
rights shall remain intact pursuant to Section 2.1 or Section 2.2, as
applicable).
3. Obligations of the Company. Whenever required under this Appendix to
effect the registration of any Registerable Securities, the Company shall, as
expeditiously as reasonably possible:
3.1 Prepare and file with the SEC a registration statement
with respect to such Registerable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for up to 120 days;
3.2 Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement;
3.3 Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as the Holder may
reasonably request in order to facilitate the disposition of Registerable
Securities owned by the Holder;
3.4 Use its best efforts to register and qualify the
securities covered by such registration statement (i) under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holder and (ii) with (or obtain the approval of) such other
governmental agencies or authorities as may be necessary by virtue of the nature
and business of the Company to enable the Holder or any underwriter to
consummate the disposition of Registerable Securities so registered; provided
that the Company shall not be required in connection with or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such state or jurisdictions;
3.5 In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering, including, but
not limited to, making such representations and warranties to such underwriter
and using best efforts to cause Company counsel to render such opinions to such
underwriter as such underwriter may reasonably request;
3.6 Notify the Holder of Registerable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
promptly prepare and file with the SEC an appropriate amendment or supplement in
form satisfactory to the Holder;
3.7 Furnish, at the request of the Holder, if such Holder has
requested registration of Registerable Securities pursuant to this Appendix, on
the date that such Registerable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Appendix if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of counsel representing the Company for the purpose of such registration,
in form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holder
requesting registration of Registerable Securities, and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holder requesting registration of Registerable
Securities;
3.8 Promptly notify the Holder (i) when the registration
statement or any amendment to the registration statement or the prospectus used
in connection therewith may be filed, and with respect to the registration
statement and any post-effective amendment thereto, when the same has become
effective, (ii) of any request by the SEC for amendments or supplements to the
registration statement or prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or the prospectus or the initiation of any proceedings
for that purpose, and (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registerable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceedings for that purpose;
3.9 Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at the
earliest possible moment;
3.10 Furnish to counsel for the Holders of Registerable
Securities without charge, at least one copy of the registration statement and
any post-effective amendment thereto, including financial statements and
schedules and all documents incorporated therein by reference; and
3.11 Make generally available to Holder as soon as
practicable, but not later than the first day of the eighteenth full calendar
month following the effective date of the registration statement, an earnings
statement (which need not be certified by independent public or independent
certified public accountants unless required by the 1933 Act or the rules and
regulations promulgated thereunder, but which shall satisfy the provisions of
Section 11(a) of the 1933 Act) covering a period of at least twelve months
beginning after the effective date of the registration statement.
4. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Appendix with
respect to the Registerable Securities of the Holder that such Holder shall
furnish to the Company such information regarding itself, and the Registerable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of Holder's Registerable
Securities.
5. Expenses of Registration. The Company shall bear and pay expenses
incurred in connection with any registration, filing or qualification of
Registerable Securities with respect to registration pursuant to Section 2 or
Section 10 of this Appendix for the Holder (which right may be assigned as
provided in Section 11 of this Appendix), including (without limitation) all
registration, filing, and qualification fees (including those fees with respect
to filings required to be made with the NASD and fees and expenses of compliance
with state securities or blue sky laws), printers and accounting fees relating
or apportionable thereto, but excluding the fees and disbursements of counsel
for the Holder and underwriting discounts and commissions relating to
Registerable Securities.
6. Underwriting Requirements. In connection with any Offering pursuant
to Section 2.1 hereof, involving an underwriting of shares being issued by the
Company, the Company shall not be required under Section 2 of this Appendix to
include any of the Holders' Registerable Securities in such underwriting unless
the Holder accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it, and then only in such quantity as
will not, in the opinion of the underwriters, jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registerable Securities, requested by Holders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registerable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling Holders according to the
total amount of securities entitled to be included therein owned by each selling
Holder or in such other proportion as shall mutually be agreed to by such
selling Holders). If all of the Holders' Registerable Securities have not been
registered for sale due to the provisions of this Section 6, the provisions of
Section 2.3 shall control.
7. Agreements by Holder. Whenever required under this Appendix to
effect the registration of any Registerable Securities, the Holder shall, as
expeditiously as reasonably possible:
7.1 Furnish the Company all material information requested by
the Company concerning Holder and ▇▇▇▇▇▇'s holdings of securities of the Company
and the proposed method of sale or other disposition of the Registerable
Securities and such other information and undertakings as shall be reasonably
required in connection with the preparation and filing of any such registration
statement covering all or part of the Registerable Securities and in order to
ensure full compliance with the 1933 Act;
7.2 Cooperate in good faith with the Company and its
underwriters, if any, in connection with such registration, including performing
its obligations under any underwriting agreement and placing the Registerable
Securities to be included in such registrations statement in escrow or custody
to facilitate the sale and distribution thereof.
8. Indemnification. In the event any Registerable Securities are
included in a registration statement under this Appendix:
8.l To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, any underwriter (as defined in the 1933 Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the 1933 Act, the 1934
Act or other federal or state laws, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"); (i) any untrue statement of a material fact by the Company or
alleged untrue statement of a material fact contained in such registration
statement, including prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission by the
Company to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the 1933 Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the 1933 Act, the
1934 Act or any state securities law. The Company will pay as incurred to such
Holder, underwriter or controlling person, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 8.1 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld) nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Holder, underwriter or controlling person.
8.2 To the extent permitted by law, the Holder will indemnify
and hold harmless the Company, each of its directors, each officer who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the 1933 Act, any underwriter, any other holder selling
securities in such registration statement and any controlling person of any such
underwriter or other holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject
under the 1933 Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation in reliance upon and in conformity with
information furnished by the Holder expressly for use in connection with such
registration; and the Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 8.2 in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 8.2 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder (which consent shall not be unreasonably
withheld); provided, that in no event shall any indemnity under this Section 8.2
exceed the gross proceeds from the offering received by such ▇▇▇▇▇▇.
8.3 Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action (including any
governmental action), such indemnified party will if a claim in respect thereof
is to be made against any indemnifying party under this Section 8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties provided that an indemnified party shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party other than under this Section 8.
8.4 If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liability or expenses referred to herein, then an indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Holder and any underwriter from
the offering at issue, or (ii) if the allocation by clause (i) above is not
permitted by law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, the Holder and any underwriter in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the Company,
the Holder and any underwriter shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, or with respect to the Holder or any underwriter,
information supplied by such person for inclusion in documents relating to the
offering and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Notwithstanding
the provisions of this Section 8.4, the Holder shall not be obligated to
contribute hereunder any amount which in the aggregate exceeds the amount for
which it would have been liable pursuant to Section 8.2 in respect of such loss,
claim, damage, liability or action had indemnification been available under
Section 8.2. The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8.4 were determined by a pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to above in this Section 8.4. The
amount paid or payable by any party as a result of the losses, claims, damages,
liabilities and expenses referred to in this Section 8.4 shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
any claim or defending any such action, suit or proceeding. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
8.5 Any losses, claims, damages liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 shall remain
operative and in full force and effect regardless of (i) any investigation made
by or on behalf of any entity, (ii) acceptance of any securities and payment
therefor, and (iii) any termination of the provisions of this Appendix.
8.6 Notwithstanding any provisions in the Warrant or this
Appendix to the contrary, the benefits and obligations of this Section 8 shall
survive the termination of the Warrant and the termination of any registration
rights set forth in this Appendix.
9. Reports Under the 1934 Act. With a view to making available to the
Holder the benefits of Rule 144 promulgated under the 1933 Act ("Rule 144") and
any other rule or regulation of the SEC that may at any time permit the Holder
to sell securities of the Company to the public without registration or pursuant
to a registration on any Applicable Form, the Company agrees to:
9.1 make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after 90 days following the
closing by the Company of an Offering;
9.2 take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holder to utilize any applicable Form for the sale of Registerable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the Company closes an Offering;
9.3 file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
9.4 furnish to the Holder, so long as the Holder owns any
Registerable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after 90 days following the closing by the Company of an Offering), the
1933 Act and the 1934 Act (at any time after it has become subject to such
reporting requirements), or that it qualifies as a registrant whose securities
may be resold pursuant to the Applicable Form (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company filed with the SEC and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
in availing the Holder of any rule or regulation of the SEC which permits the
selling of any securities without registration or pursuant to any Applicable
Form.
10. Assignment of Registration Rights. The rights to cause the Company
to register Registerable Securities pursuant to this Appendix may be assigned by
the Holder to a transferee or assignee of at least twenty-five percent (25%) of
the shares of such securities (appropriately adjusted to reflect any stock
dividend, distribution, stock split or combination, reclassification,
recapitalization or other similar event affecting the number of shares of Common
Stock after ________ __, 1995); provided the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; provided, further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and the transfer otherwise complies with all applicable provisions
under applicable federal and state securities laws.
11. Amendment of Registration Rights. Any provision of this Appendix
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registerable
Securities then outstanding.
12. Termination of Registration Rights. No person shall be entitled to
exercise any right relating to registration provided for in this Appendix after
the seventh anniversary of the date of the Warrant.
EXHIBIT E
SUBSCRIPTION AGREEMENT
ILX Incorporated
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned (the "Subscriber") hereby subscribes for and agrees to
purchase 10% Convertible Adjustable Secured Bonds (the "CAS Bonds") of ILX
Incorporated, an Arizona corporation (the "Company"), at a price of $1,000 per
CAS Bond, in the amount set forth on the Signature Page to this Subscription
Agreement (the "Subscription Price") and on the terms set forth in this
Subscription Agreement and in the Prospectus dated November __, 1995 (the
"Prospectus"), which is part of Securities and Exchange Commission Registration
Statement No. 33-61477, which is incorporated herein by this reference.
The Subscriber represents and warrants to the Company and covenants and
agrees with it as follows:
1. Payment; Escrow. The Company has entered into an Escrow and Impound
Agreement (the "Escrow and Impound Agreement") with U.S. Trust Company of
California (the "Trust Agent"), and the Trust Agent has established an escrow
and impound account (the "Escrow and Impound Account") subject to the Escrow and
Impound Agreement. The Subscriber delivers with this Subscription Agreement the
full amount of the Subscription Price paid by check, payable to the ILX CAS Bond
Escrow and Impound Account, or concurrently with the delivery of this
Subscription Agreement has wire transferred to the ILX CAS Bonds Escrow and
Impound Account as follows:
Trust Agent
ABA: _______________
FBO: _______________
--------------------
Attn: ______________
Ref: ILX Incorporated
2. Termination of Escrow and Impound; Distribution of Funds. The Escrow
and Impound Account will terminate and the funds held therein shall be disbursed
as described below on December 15, 1995 or such later date as extended by the
Company in its sole discretion, by written notice to Brookstreet Securities
Corlporation ("Placement Agent"), to a date not later than January 14, 1995 (the
"Termination Date"); provided, however, that if the Company provides a written
statement to the Trust Agent that the Company has accepted subscriptions for at
least $2,000,000 in principal amount of CAS Bonds and the Trust Agent has
received gross proceeds of $2,000,000 in "collected funds" (defined below) (the
"Minimum Subscriptions") by and before the Termination Date, then the Escrow and
Impound Account shall not terminate but shall be extended until and including
the last "Closing" (defined below) to occur.
For purposes of this Agreement, the term "collected funds" shall mean
all funds received by the Trust Agent that have cleared normal banking channels
and are in the form of cash or cash equivalents.
a. If the Trust Agent receives the Minimum Subscriptions prior to the
Termination Date in collected funds and the other conditions are met as set
forth in the Escrow and Impound Agreement, a copy of which is attached as an
Exhibit to the Registration Statement and incorporated herein by this reference,
a closing (the "Initial Closing") shall be held on a date selected by the
Company, which date may be after the Termination Date but as soon as practicable
after the Company's acceptance of the last of the Minimum Subscriptions. At the
Initial Closing, the Trust Agent shall release the collected funds then on
deposit in the Escrow and Impound Account based on the subscriptions as to which
the Iniitial Closing relates, along with all accrued interest thereon, at the
direction of the Company.
b. The Company may agree to continue the offering of the CAS Bonds
after the Initial Closing and prior to the Termination Date until up to
$5,000,000 in principal amount of the CAS Bonds are subscribed for, or until
earlier terminated by agreement between the Company and Placement Agent. If such
additional subscriptions are tendered and accepted after the Initial Closing and
prior to the Termination Date, an additional closing (the "Final Closing") with
respect to such subscriptions shall be held in accordance with the terms of the
Prospectus which shall be and occur on a date selected by the Company, which
date may be after the Termination Date, but as soon as practicable after the
Company's acceptance of such subscriptions. Each of the Initial Closing and the
Final Closing shall be referred to herein as a "Closing." If, prior to the
Termination Date, subscriptions for more than $5,000,000 in principal amount of
CAS Bonds are received (an "Oversubscription"), the Placement Agent in its sole
and absolute discretion, may allocate (in such manner as the Placement Agent
determines) the CAS Bonds among the subscribers as to whom a Closing has not
already been held.
c. Upon the occurrence of a Closing with respect to which the
Subscriber's subscription has been accepted, in whole or in part, and as soon as
practicable thereafter but in any event in compliance with all applicable laws,
the Placement Agent shall cause certificates representing the CAS Bonds for
which the Subscriber's subscription has been accepted to be transmitted to the
Subscriber or such other person or entity as the Subscriber has indicated below.
If the Trust Agent does not receive the Minimum Subscriptions prior to the
Termination Date, the Trust Agent promptly shall notify each of the applicable
state securities administrators if and as required, by telephone or telegraph
confirmed in writing, of such fact, and shall promptly, thereafter, refund to
the Subscriber the amount received from the Subscriber, without deduction,
penalty, or expense to the Subscriber, and the Trust Agent shall notify the
Company of its distribution of the funds. Such distribution shall include the
Subscriber's pro rata share of any interest earned while the Subscriber's funds
were on deposit in the Escrow and Impound Account and such funds were invested,
as described in the Escrow and Impound Agreement. The purchase money returned to
the Subscriber shall be free and clear of any and all claims of the Company or
any of its creditors. Except as otherwise agreed between the Subscriber and the
Company, certificates representing the CAS Bonds shall not bear any legends
restricting transfer.
2. Irrevocable; Rejection of Acceptance of the Subscription by the
Company. This Subscription Agreement is irrevocable by the Subscriber. The
Company may, in its sole discretion, accept or reject this Subscription
Agreement in whole or in part at any time. If the Company rejects the Agreement
in whole or the Placement Agent does not allocate CAS Bonds to the subscriber
due to Oversubscription, the Company or the Placement Agent, as applicable, will
promptly cause the Trust Agent to return the entire amount paid by the
Subscriber in connection with this Subscription Agreement, with accrued
interest, by mailing a check to the Subscriber. If the Company rejects the
Subscription Agreement in part or the Placement Agent does not allocate the full
amount of CAS Bonds subscribed for hereunder due to an Oversubscription, the
Company or the Placement Agent, as applicable, promptly will cause the Escrow
and Impound Agent to return the amount paid by the Subscriber in connection with
the portion of this Subscription Agreement that is rejected or for which CAS
Bonds are not allocated, with accrued interest, by mailing a check in such
amount to the subscriber. Unless and until the Company accepts this Subscription
Agreement and the Company receives payment in full for the CAS Bonds upon
release of the funds therefor from the Trust Agent, the Subscriber will not
become a holder of the CAS Bonds subscribed for hereunder and such CAS Bonds
will not be considered issued or outstanding.
3. Acknowledgements. By entering this Subscription Agreement, the
Subscriber acknowledges that the Subscriber has received and thoroughly reviewed
the Prospectus relating to the offering of CAS Bonds. The Subscriber further
acknowledges that the Subscriber has investigated all issues to the Subscriber's
satisfaction, and has consulted with such of the Subscriber's own legal counsel
or other advisors as the undersigned deems necessary. The Subscriber understands
that the Company is obligated to obtain the Minimum Subscriptions prior to the
Termination Date before the Company will receive any offering proceeds and
before the Subscriber will receive certificates representing the CAS Bonds for
which and to the extent that this Subscription Agreement may have been accepted,
if any.
4. Capacity; Enforceability. The Subscriber represents and warrants
that: (a) if the Subscriber is executing this Subscription Agreement in a
representative or fiduciary capacity, the Subscriber has full power and
authority to execute and deliver this Subscription Agreement in such capacity
and on behalf of the Subscriber's principal; and (b) this Subscription Agreement
constitutes a legal, valid and binding obligation of the Subscriber (or the
person for whom the Subscriber is executing this Subscription Agreement)
enforceable against the Subscriber (or such person) in accordance with its
terms.
5. Miscellaneous. This Subscription Agreement sets forth the entire
agreement of the parties with respect to the subject matter hereof and it
supersedes and discharges all prior agreements (written and oral) and
negotiations and all contemporaneous oral agreements concerning such subject
matter. This Subscription Agreement may not be amended or terminated except by a
writing signed by the party against whom any such amendment or terminations is
sought. If the Subscriber is more than one person, the obligation of the
Subscriber shall be joint and several. This Subscription Agreement is governed
by Arizona law.
6. Subscription.
Number of CAS Bonds subscribed for: ___________________
Total Amount of payment: $______________________________
ADDRESS OF SUBSCRIBER: SIGN AND DATE HERE:
(Street) (Print Name of Subscriber)
By:
(Signature)
(City) (Print Name of Signatory)
(State) (Zip Code) (Print Title of Signatory)
(Telephone Number)
(Taxpayer Identification Number) (Date)
REGISTRATION AND ADDRESS:
Registration Mr.
Mrs. Please Print Name(s) in which your CAS Bonds
Ms. are to be registered _____________________
Other ___________________________________________
Social Security or Taxpayer ID number(s): _____________________________________
---------------------------------------
Ownership
Check One: Individual Ownership or Separate Property
Joint Tenants with Right of Survivorship (all parties sign)
Community Property (both sign if to be registered in both names)
Tenants in Common (all parties sign)
Corporation
Partnership (General or Limited)
IRA/▇▇▇▇▇ Plan (circle one)
As Trustee or Other Fiduciary for:____________________________
Other:
Broker-Dealer (Firm):__________________________________________________________
Registered Representative (please print):______________________________________
Office Address:__________________________________ Phone:____________________
Dated:_____________________ Signature:____________________________________
EXHIBIT F
ESCROW AND IMPOUND AGREEMENT
This Escrow and Impound Agreement is made and entered into as of _______, 1995,
by and among U.S. Trust Company of California, N.A. (the "Escrow and Impound
Agent"), Brookstreet Securities Corporation (the "Placement Agent") and ILX
Incorporated, an Arizona corporation (the "Company").
RECITALS
The Company proposes to offer for sale to investors through one or more
registered broker-dealers up to 5,000 Convertible Adjustable Secured Bonds (the
"CAS Bonds") at a price of $1,000 per CAS Bond (the "Proceeds").
The Placement Agent intends to sell the CAS Bonds as the Company's
agent on a best efforts part-or- none basis for 2,000 CAS Bonds and on a best
efforts basis for the remaining CAS Bonds in a public offering (the "Offering")
according to the terms and conditions of a Placement Agent Agreement dated
November __, 1995 (the "Placement Agent Agreement").
The Company and the Placement Agent desire to establish an escrow
account in which funds received from subscribers will be deposited pending
completion of the escrow and impound period. U.S. Trust Company of California is
a bank, as defined in Section 3(a)(6) of the Securities Exchange Act of 1934 and
agrees to serve as Escrow and Impound Agent in accordance with the terms and
conditions set forth herein and subject to the approval of any state
administrator exercising proper jurisdiction and authority with respect to this
Agreement (collectively, "State Administrators").
The purpose of this Escrow and Impound Agreement is to comply with the
provisions of Rules 10(b)-9 and 15c2-4 under the Exchange Act of 1934, state
laws that may be applicable and regulations adopted thereunder and the terms and
conditions of the Placement Agent Agreement. The term Selected Dealer as used
herein shall include the Placement Agent and other agent and/or other selected
dealers as part of the selling group, all of whom shall be registered with the
Securities and Exchange Commission and under the securities laws of the states
in which such Selected Dealer sells the CAS Bonds, and all of whom shall be
members of the National Association of Securities Dealers. All Selected Dealers
shall be bound by this Agreement. However, for purposes of communications and
directives of the Selected Dealers, the Escrow and Impound Agent need only
accept those communications and directives signed by the Placement Agent.
AGREEMENT
Now therefore, in consideration of the foregoing, it is hereby agreed
as follows:
1. Establishment of Escrow and Impound Account. The parties hereby
establish an interest-bearing escrow and impound account with the Escrow and
Impound Agent, which escrow account shall be entitled ILX CAS Bond Escrow and
Impound Account (the "Escrow and Impound Account"). Each Selected Dealer will
instruct subscribers to make checks for subscriptions payable to the order of
the Escrow and Impound Agent. Any checks received that are made payable to a
party other than the Escrow and Impound Agent shall be returned to the Selected
Dealer who submitted the check.
2. Escrow and Impound Period. The Escrow and Impound Period shall begin
with the commencement of the Offering and shall terminate on December 15, 1995,
or such later date selected by the Company, in its sole discretion, but not
later than January 14, 1995 (the "Termination Date"); provided that, if the
Company provides a written statement to the Escrow and Impound Agent that the
Company has accepted subscriptions for at least $2,000,000 in principal amount
of CAS Bonds and the Escrow and Impound Agent has received gross proceeds of
$2,000,000 in "collected funds" (defined below) (the "Minimum Subscriptions") by
and before the Termination Date, then the Escrow and Impound Period shall be
extended until and including the date of the "Final Closing" (as defined below).
For purposes of this Agreement, the term "collected funds" shall mean all funds
received by the Escrow and Impound Agent that have cleared normal banking
channels and are in the form of cash or cash equivalents able to be converted
into cash on a same day basis.
During the Escrow and Impound Period, the Company is aware and understands that
it is not entitled to any funds received into escrow and no amounts deposited in
the Escrow and Impound Account shall become the property of the Company or any
other entity, or be subject to the debts of the Company or any other entity,
except to the extent that such funds are directed to be paid in connection with
the Initial Closing, as defined in the Placement Agent Agreement.
3. Deposits into the Escrow and Impound Account. Each Selected Dealer
agrees that it shall promptly deliver all monies received from subscribers for
the payment of the CAS Bonds to the Escrow and Impound Agent for deposit in the
Escrow and Impound Account together with a written account of each sale, which
account shall set forth, among other things, the subscriber's name and address,
the number of CAS Bonds purchased, the amount paid therefor, whether the
consideration received was in the form of a check or wire transfer, the date of
said check or wire transfer, and the date received by such Selected Dealer. All
monies so deposited in the Escrow and Impound Account are hereinafter referred
to as the "Escrow and Impound Amount."
4. Disbursements from the Escrow and Impound Account.
A. If the Escrow and Impound Agent does not receive the
Minimum Subscriptions prior to the Termination Date, the Escrow and Impound
Agent promptly shall notify each of the applicable State Administrators if and
as required, by telephone or telecopy confirmed in writing, of such fact (or, if
permitted, shall notify the Company, which shall notify the applicable State
Administrators as required), and shall promptly, thereafter, refund to each
subscriber the amount received from the subscriber, without deduction, penalty,
or expense to the subscriber, and the Escrow and Impound Agent shall notify the
Company and each Selected Dealer of its distribution of the funds. Such
distribution shall include each subscriber's pro rata share of any interest
earned while the subscriber's funds were on deposit in the Escrow and Impound
Account as set forth in paragraph 6 hereof. The purchase money returned to each
subscriber shall be free and clear of any and all claims of the Company or any
of its creditors.
B. If the Escrow and Impound Agent receives the Minimum
Subscriptions prior to the Termination Date in collected funds and the other
conditions (as set forth below) are met, the Escrow and Impound Agent shall
release the collected funds then on deposit in the Escrow and Impound Account
based on Subscriptions as to which the Initial Closing relates, along with all
accrued interest thereon, as directed by the Company on the date of the Initial
Closing.
The Minimum Subscriptions may be met by all collected funds that are
deposited during the Escrow and Impound Period. However, escrow cannot be broken
and the Offering may not proceed to any Closing (as defined below) until
collected funds have been collected through the normal banking channels in an
aggregate amount sufficient to meet the Minimum Subscriptions. In no event may a
Selected Dealer substitute its own good check for the check of a purchaser that
has insufficient funds, nor otherwise purchase to satisfy the offering
contingency, unless purchasing for investment prior to the termination of the
Escrow and Impound Period, and the offering document discloses the maximum
amount of such potential purchase, and such arrangement has been approved, to
the extent required by applicable law, by the State Administrators.
The Escrow and Impound Agent will not release the Escrow and Impound
Amount to the Company until the Company has provided written notice that it has
accepted subscriptions for the Minimum Subscriptions and, if and to the extent
required by law (it being understood that the Escrow and Impound Agent has no
duty to investigate the law), each of the State Administrators identified by the
Company in writing to the Escrow and Impound Agent has entered an order
authorizing the release of funds in the Escrow and Impound Account. If required,
such order will be entered only five business days after receipt by the
State Administrator of an application that includes the following:
(i) A verified statement duly executed by the Escrow and
Impound Agent setting forth the total amount in collected funds on deposit with
the Escrow and Impound Agent on the most recent practicable date,
(including purchases for which check or other payment had been received by the
purchaser and were subsequently collected as provided in paragraph 5 hereof),
and states therein that all of the conditions of this Escrow and Impound
Agreement have been met; and
(ii) A verified statement duly executed by the Company that
states:
a. That there have been no material omissions or
changes in the financial condition of the Company, or other changes of
circumstances, that would render the amount of the Proceeds inadequate to
finance, to the extent described in the registration statement, the Company's
purposes set forth in the registration statement; and
b. That there have been no material omissions or
changes that would render the representations contained in the registration
statement to be fraudulent, false, or misleading.
C. If the Escrow and Impound Agent previously has released
funds to the Company pursuant to paragraph B of this Section, the Escrow and
Impound Agent shall release to the Company all additional funds deposited with
respect to the Offering, together with all interest earned thereon, for all
subscriptions regarding which the Company has given written notice of its
acceptance to the Escrow and Impound Agent on the Final Closing Date, which date
shall be selected by the Company and may be after the Termination Date.
5. Collection Procedure.
A. The Escrow and Impound Agent hereby is authorized to
forward each check for collection and, upon collection of the proceeds of each
check, deposit the collected proceeds in the Escrow and Impound Account. As an
alternative, the Escrow and Impound Agent may telephone the bank on which the
check is drawn to confirm that the check has been paid. Any check returned
unpaid to the Escrow and Impound Agent shall be returned to the Selected Dealer
that submitted the check. In such cases, the Escrow and Impound Agent promptly
will notify the Company of such return.
B. If the Company rejects in whole any subscription for which
the Escrow and Impound Agent already has collected funds, the Escrow and Impound
Agent shall promptly return the entire amount paid by the rejected subscriber,
with accrued interest, by mailing a check to the rejected subscriber. If the
Company rejects in part any subscription for which the Escrow and Impound Agent
has collected funds, the Escrow and Impound Agent shall promptly return the
amount paid by the subscriber in connection with the rejected portion, with
accrued interest, by mailing a check to the rejected subscriber. If the Company
rejects, in whole or in part, any subscription for which the Escrow and Impound
Agent has not yet collected funds but has submitted the subscriber's check for
collection, the Escrow and Impound Agent shall promptly mail a check in the
applicable rejected amount to the rejected subscriber after the Escrow and
Impound Agent has cleared such funds. If the Escrow and Impound Agent has not
yet submitted a rejected subscriber's check for collection, the Escrow and
Impound Agent shall promptly remit the subscriber's check directly to the
subscriber.
6. Investment of Escrow Amount. The Escrow and Impound Agent shall
invest, at reasonable and convenient times after receipt, the Escrow and Impound
Amount only in short-term securities issued or guaranteed by the U.S. Government
or in money market funds of the Trustee, it's affiliates or other entities that
invest in such securities. If the funds of the Escrow and Impound Account have
been so invested, refunds to subscribers pursuant to paragraph 4A or paragraph 5
hereof shall include each subscriber's pro rata share of any interest earned
while the subscriber's funds were on deposit. The Escrow and Impound Agent shall
have no liability for funds invested in accordance with this paragraph 6.
7. Compensation of Escrow and Impound Agent. The Company shall pay the
Escrow and Impound Agent a fee for its escrow services in an amount of $_____.
If it is necessary for the Escrow and Impound Agent to return funds to the
purchasers of the CAS Bonds, the Company shall pay to the Escrow and Impound
Agent an additional amount sufficient to reimburse it for its actual cost in
disbursing such funds. However, no such fee, reimbursement for costs and
expenses, indemnification for any damages incurred by the Escrow and Impound
Agent, or any monies whatsoever shall be paid out of or chargeable to the funds
on deposit in the Escrow and Impound Account upon reasonable prior notice.
8. Books and Records. During the term of this Agreement, the Escrow and
Impound Agent shall keep accurate books and records of all transactions
hereunder. The Company and the Placement Agent shall have access to such books
and records at all reasonable times upon reasonable prior notice.
9. Liability of the Escrow and Impound Agent; Indemnity. The Escrow and
Impound Agent may conclusively rely on, and shall be protected when it acts in
good faith upon, any statement, certificate, notice, request, consent, order or
other document that it believes to be genuine and that has been signed by the
proper party. The Escrow and Impound Agent shall have no duty or liability to
verify any such statement, certificate, notice, request, consent, order, or
other document that it in good faith believes to be genuine and its sole
obligation shall be to act only as expressly set forth in this Agreement. The
Escrow and Impound Agent shall be under no obligation to institute or defend any
action, suit, or proceeding or otherwise incur any expense in connection with
this Agreement unless it is indemnified by the Company or Placement Agent to its
satisfaction. The Escrow and Impound Agent may consult counsel in respect of any
question arising under this Agreement, and the Escrow and Impound Agent shall
not be liable for any action taken, or omitted, in good faith upon advice of
such counsel. The Company and the Placement Agent hereby indemnify and hold
harmless the Escrow and Impound Agent from and against any and all loses,
claims, damages, liabilities and reasonable expenses, including reasonable
attorney fees, that ▇▇▇▇▇▇ and Impound Agent may incur in connection with the
performance of its duties hereunder, except that such indemnity shall not extend
to losses, claims, damages, liabilities, or expenses that result, directly or
indirectly from the gross negligence of the Escrow and Impound Agent of its
obligations under this agreement.
10. This Agreement shall be binding upon, and inure to, the benefit of
the parties hereto, their heirs, successors, and assigns.
11. This Agreement shall terminate in its entirety when all the Escrow
and Impound Amount has been distributed as provided in paragraph 4, above.
12. The parties hereby incorporate by reference the terms and
conditions of Section 603(a)-(d), 603(f), 608(b) and 610 of the Indenture
between Escrow and Impound Agent, as "Trustee" thereunder, and the Company, and
agree that all reference to "Trustee" therein shall be deemed to refer to Escrow
and Impound Agent for purposes of incorporating such provisions in this
Agreement.
The Company, the Placement Agent, and the Escrow and Impound Agent have entered
into this Agreement on this ___ day of ________________ in multiple
counterparts, each of which shall be considered an original.
BROOKSTREET SECURITIES CORPORATION, for
itself and as agent for the other
Selected Dealers
By:
Its:
ILX INCORPORATED, an Arizona corporation
By:
Its:
ESCROW AND IMPOUND AGENT
By:
Its:
ILX INCORPORATED
(an Arizona corporation)
10% Convertible Adjustable Secured Bonds Due 2000
SOLICITING DEALER AGREEMENT
________________, 1995
Ladies/Gentlemen:
We have agreed to use our best efforts to sell a minimum of $2,000,000 and
a maximum of up to $5,000,000 aggregate principal amount of 10% Convertible
Adjustable Secured Bonds Due 2000 (the "Bonds") of ILX Incorporated (the
"Company"). The Bonds are hereinafter sometimes referred to collectively as the
"Securities." The Securities are being offered by us as agent for the Company.
The Securities and the terms of the offering are more fully described in the
enclosed Prospectus, receipt of which you hereby acknowledge.
We are hereby inviting certain Soliciting Dealers, subject to the other
terms and conditions set forth below and in such Prospectus, to solicit
subscriptions for the Securities. You hereby confirm that you are a dealer
actually engaged in the investment banking or securities business and that you
are either (i) a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") or (ii) a dealer with its principal place
of business located outside the United States, its territories or possessions
and not required to be registered under the Securities Exchange Act of 1934 (the
"1934 Act") who hereby agrees not to make any sales within the United States,
its territories or its possessions or to persons who are nationals thereof or
residents therein. You hereby agree to comply with the provisions of Sections 24
and 34 of Article Ill of the Rules of Fair Practice of the NASD, and if you are
a foreign dealer and not a member of the NASD, you also agree to comply with:
(i) the NASD's interpretation with respect to free-riding and withholding, (ii)
the provisions of Sections 8 and 36 of Article III of such Rules of Fair
Practice, as though you were a member of the NASD, and (iii) Section 25 of
Article III thereof as that Section applies to non-member foreign dealers.
The public offering price of the Units is $1,000 per Bond. By directing
payment from the Escrow Account (as defined below) we will pay to you a
commission of 5 percent of the gross proceeds from the sale of each Bond
sold by the Company pursuant to a subscription therefor (a "Subscription")
solicited by you. Payment will be made promptly on the Initial Closing or the
Final Closing (both as defined in the Placement Agent Agreement); provided,
however, that in the event that a sale of a Bond for which you have solicited a
Subscription shall not occur, whether by reason of the failure of any condition
specified herein or the Sales Agency Agreement, no commission or payment in
respect thereof shall be due. Commissions and payments will be payable only with
respect to transactions lawful in the jurisdiction where they occur. You agree
that the Company shall have no responsibility or liability for the payment of
commissions to you.
You agree to submit on behalf of each person desiring to purchase
Securities, a Subscription in form and substance satisfactory to the Company and
all documents, if any, required under state securities laws. You shall ascertain
that each Subscription has been properly completed. All payments for the
Securities shall be made by check payable to the order of "U.S. Trust Company of
California, N.A. as Escrow Agent for ILX Incorporated"
You agree to promptly submit on behalf of each person desiring to purchase
Securities a completed Subscription, as well as all checks received by you from
subscribers to U.S. Trust Company of California, N.A., at
____________________________________, California (the "Escrow Agent").
Subscriptions for Securities shall be made only during the offering period
described in the Prospectus. You shall have no reasonable grounds to believe, on
the basis of having received and examined the Prospectus, including, without
limitation, the "Use of Proceeds" sections thereof, that all material facts are
not adequately and accurately disclosed and provide a basis for evaluating an
investment in the Company. For purposes of evaluating the Company, you recognize
that under NASD rules you may rely on the information from an inquiry conducted
by another NASD member only if you have reasonable grounds to believe that such
inquiry was conducted with due care, the results of the inquiry were given to
you with the permission of the NASD member that made the inquiry and that no
NASD member that participated in the inquiry is a sponsor or affiliate of the
sponsor of the Company.
All subscriptions solicited by you will be strictly subject to confirmation
by us and acceptance thereof by the Company. Neither you nor any other person is
authorized to give any information, written or oral, or make any
representations, written or oral, in connection with the offer and sale of
Securities other than those contained (i) in the Prospectus in connection with
the sale of any of the Securities or (ii) any supplemental sales material
supplied or prepared by the Company and delivered to you by the Company for use
in making offers of Securities. No dealer is authorized to act as agent for us
when offering any of the Securities to the public or otherwise, it being
understood that you and each other Soliciting Dealer are independent contractors
with us. Nothing herein contained shall constitute you or any other Soliciting
Dealer an association or partner with us.
Upon release by us, you may offer the Securities at the public offering
price, subject to the terms and conditions hereof.
We will provide you with such number of copies of the enclosed Prospectus
and such number of copies of amendments and supplements thereto as you may
reasonably request. If the Company provides us with supplemental sales material
to be used in connection with the solicitation of Securities of the Company, we
will provide such materials to you. In the event you elect to use such
supplemental sales material, you agree that such material shall not be used in
connection with the solicitations of Securities unless accompanied or preceded
by the Prospectus as then currently in effect and as it may be amended or
supplemented in the future. You agree that you will deliver a copy of the
Prospectus, and any amendments or supplements thereto, to each person to whom
you make an offer of Securities and that you will not disseminate or publish any
advertisement relating to your solicitation of subscribers for the Securities
(including, without limitation, any so-called tombstone advertisement or any
advertisement relating to seminars) (i) the form of which has not been submitted
to the NASD by the Company and (ii) that has not been approved in writing by the
Company.
This Agreement shall terminate at the close of business on the 45th day
after the completion of the sale of all the Securities by the Company, unless
earlier terminated.
We shall have full authority to take such action as we may deem advisable
in respect to all matters pertaining to the offering. We shall be under no
liability to you except for lack of good faith and for obligations expressly
assumed by us in this Agreement. Nothing contained in this paragraph is intended
to operate as, and the provisions of this paragraph shall not constitute, a
waiver by you of compliance with any provision of the Securities Act of 1933, as
amended (the "1933 Act"), or of the rules and regulations thereunder.
Upon application to us, we will inform you as to the jurisdictions in which
we believe the Securities have been qualified for sale under, or are exempt from
the requirements of, the respective securities laws of such jurisdictions, but
we assume no responsibility or obligation as to your right to sell the
Securities in any jurisdiction. You agree that we may limit the number of offers
and sales which may be made, or the number of the Securities which may be sold,
by you in any jurisdiction. You agree not to sell the Securities in any
jurisdiction where such sale by you is prohibited.
You warrant and represent that you and your agents and employees are duly
licensed to sell the Securities in those jurisdictions in which you do so. You
further agree that you will promptly notify us of any changes in your, or your
agent's or employee's, status as a licensed broker-dealer in any jurisdiction in
which you or your agent or your employee has been offering or selling the
Securities. If necessary, we will cause to be filed with the Department of State
of New York a Further State Notice with respect to the Securities and will cause
to be sent to the Pennsylvania Securities Commission a list of the Soliciting
Dealers to whom this Agreement is initially being sent.
You confirm that you are familiar with Securities Act Release No. 4698 and
Rule 15c2-8 under the 1934 Act, relating to the distribution of preliminary and
final prospectuses, and confirm that you have complied and will comply
therewith. We will make available to you, to the extent they are made available
to us by the Company, such number of copies of the Prospectus as you may
reasonably request for the purposes contemplated by the 1933 Act, the 1934 Act,
and the applicable rules and regulations thereunder.
In making any offer or sale of the Securities, you shall comply with the
provisions of the 1933 Act and the 1934 Act, you shall comply with all of the
provisions of this Soliciting Dealer Agreement, and you shall take all necessary
actions pursuant to instructions given by counsel to the Company or us or
otherwise required to permit the offer and sale of the Securities to comply with
the securities or "blue sky" laws of the jurisdictions in which you make offers
or sales of the Securities.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns, this Agreement
and its conditions and provisions being for the sole and exclusive benefit of
the parties hereto and their respective successors and permitted assigns, and
for the benefit of no other person, firm, partnership or corporation.
The terms used herein, unless defined otherwise, shall have the same
meaning as in the Sales Agency Agreement.
This Agreement may be amended only by means of a written document, signed
by the party to be bound, and may not be assigned by you without our prior
written consent.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California. Any notice from us to you shall be deemed to
have been duly given if mailed or telegraphed to you at the address to which
this Agreement is mailed.
Please confirm your agreement hereto by signing and returning at once to us
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Upon receipt thereof,
this letter and such signed duplicate copy will evidence the agreement between
us.
Very truly yours,
BROOKSTREET SECURITIES CORPORATION
By:
(Authorized Representative)
Accepted:
(Signature of Selected Dealer)
(Address to which all communications
are to be sent)
Fax No.: