PLACEMENT AGENT AGREEMENT
April 13, 1998
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. Introductory. Capital Title Group, Inc., a Delaware corporation (the
"Company"), proposes to sell 3,703,703 shares (the "Shares") of its Common
Stock, $.001 par value (the "Common Stock") at a purchase price of $1.35 per
share.
2. Representations and Warranties of the Company. The Company
represents, warrants, and agrees that:
(i) A Private Placement Memorandum dated April 13, 1998 (the
"Memorandum"), with respect to the Common Stock, copies of which have
heretofore been delivered to you, has been prepared by the Company.
(ii) At the date of the Memorandum, the Memorandum did not
include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were
made not misleading; at all times subsequent thereto up to and
including the Closing Date (as hereinafter defined) neither the
Memorandum, nor any amendment or supplement thereto, will include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in light of the circumstances
under which they were made not misleading; and neither the Memorandum
nor any supplemental written sales material supplied or approved in
writing by the Company (when read in conjunction with the Memorandum,
whether designated only for broker-dealer use or otherwise) will
include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading; provided,
however, that the foregoing representations, warranties, and
agreements shall not apply to information contained in or omitted from
the Memorandum, any such amendment or supplement or supplemental sales
material in reliance upon, and in conformity with, information
furnished to the Company by you specifically for use in the
preparation thereof.
(iii) Subsequent to the respective dates as of which information
is given in the Memorandum, and except as set forth or contemplated in
the Memorandum, including the financial statements and the notes
thereto,(a) neither the Company nor any subsidiary of
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the Company (individually, a "Subsidiary") and, collectively, the
"Subsidiaries") has incurred any material liabilities or obligations,
direct or contingent, which are required to be reflected or reserved
in a balance sheet or the notes thereto under generally accepted
accounting principles, but which are not reflected in the Exchange Act
Documents, nor entered into any material transactions, except in
either case in the ordinary course of business, (b) there has not been
any material adverse change, or to the knowledge of the Company, any
development involving a prospective material adverse change (so far as
the Company may now foresee), in the condition (financial or
otherwise), business, prospects, or results of operations of the
Company and the Subsidiaries or any change in the capital or increase
in the long-term debt of the Company, (c) neither the Company nor any
Subsidiary has sustained any material loss, including, but not limited
to any loss on account of theft, fire, flood, explosion, accident or
other calamity, whether or not insured, which has materially and
adversely interfered, or may materially and adversely interfere, with
the operation of the Company's or any Subsidiary's business, (d) to
the best knowledge of the Company, no event, condition or state of
facts, including, without limitation, the enactment, adoption or
promulgation of any law, rule or regulation, has occurred, which
materially and adversely does or would affect the results of
operations or the business or financial condition of the Company or
any Subsidiary, (e) the Company has not declared, paid, or made any
dividend or distribution of any kind on its capital stock, and (f) to
the Company's knowledge there has not been any material change in the
ownership of the capital stock of the Company. As of the date hereof,
the Company has no dividends declared but not paid or in arrears.
(iv) The financial statements, together with the related notes,
set forth in the Memorandum and the Exchange Act Documents (as defined
below) fairly present, on the basis stated therein and on the date of
the Memorandum or the date of the respective Exchange Document, the
financial position of the Company and its consolidated Subsidiaries at
the respective dates therein specified and their consolidated results
of operations and cash flows for the periods then ended, subject to,
in the case of financial statements respecting interim periods, normal
year-end adjustments. To the best knowledge of the Company, such
statements and related notes have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
except as may be set forth in the Memorandum.
(v) Ernst & Young LLP, which has expressed its opinion on the
audited financial statements of the Company included in the
Memorandum, are, with respect to the Company, independent public
accountants within the meaning of the Securities Act of 1933, as
amended (the "1933 Act") and the rules and regulations promulgated
thereunder (the "Rules and Regulations").
(vi) All action required to be taken by the Company as a
condition to the due and proper authorization, issuance, sale, and
delivery of the Common Stock of the Company to subscribers therefor in
accordance with the terms of this Agreement, and the
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Memorandum has been, or prior to the Closing Date (as herein defined),
will have been, taken; and upon the payment of the consideration for
the Common Stock specified in the Memorandum, the Common Stock will be
duly and validly issued, fully paid and non- assessable.
(vii) The Company has been duly organized and is validly existing
and in good standing as a corporation under the laws of the State of
Delaware, with power and author ity (corporate and other) to own or
lease its properties and to conduct its business as described in the
Exchange Act Documents; each of the Subsidiaries has been duly
organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own or lease its properties and to
conduct its business as described in the Exchange Act Documents; the
Company and each of the Subsidiaries are duly qualified to do business
and in good standing as foreign corporations in all other
jurisdictions in which their ownership or leasing of properties, or
the conduct of their business requires or may require such
qualification where the failure to be so qualified would have a
material adverse effect on the Company; the Company and the
Subsidiaries are in possession of and operating in compliance in all
material respects with all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, and orders
required for the conduct of their business as described in the
Exchange Act Documents, where the failure to possess or comply
therewith would have a material adverse effect upon the Company's
consolidated condition (financial or otherwise), business, or results
of operations of the Company and the Subsidiaries taken as a whole
(viii) At April 1, 1998, the authorized, issued, and outstanding
shares of capital stock of the Company are as follows:
Par Shares Shares
Title Value Authorized Outstanding
----- ----- ---------- -----------
Common Stock $0.001 50,000,000 12,168,029
The outstanding shares of Common Stock of the Company are duly
authorized, validly issued, fully paid, and non-assessable, with no
personal liability attaching to the ownership thereof, except for
personal liability that may attach to shareholders pursuant to Section
164 of the Delaware General Corporation Law (the "DGCL"). Except as
set forth on Schedule 2(viii) attached hereto or in the Memorandum,
the Company has not granted or issued, or agreed to grant or issue,
any options, warrants or similar rights to acquire or receive any of
the authorized but unissued shares of its capital stock or any
securities convertible into shares of its capital stock. No person
holds of record or, to the best of the Company's knowledge,
beneficially, 5% or more of the outstanding shares of the capital
stock of the Company except as set forth in the Memorandum. Except as
set forth above or in the Memorandum, there are no outstanding
agreements or understandings
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to which the Company is a party with respect to the sale of any shares
of the Common Stock of the Company. The capital stock of the Company
conforms in all material respects to the description thereof contained
in the Memorandum.
(ix) Except as disclosed in the Memorandum, there are no legal or
governmental proceedings pending to which the Company or a Subsidiary
is a party or of which any of its properties are the subject, which,
if determined adversely to the Company or a Subsidiary, would
individually or in the aggregate result in a material adverse change
in the condition (financial or otherwise), business or results of
operations of the Company and its Subsidiaries taken as a whole; and,
to the best knowledge of the Company after due inquiry, no such
proceedings are threatened, except as set forth in the Memorandum.
(x) Neither the Company nor any Subsidiary is in violation of its
certificate of incorporation or bylaws, and is not in default, or with
the giving of notice or lapse of time or both, would not be in
default, in the performance of any material obligation, agreement, or
condition contained in any lease, license, material contract,
indenture, or loan agreement or in any bond, debenture, note, or any
other evidence of indebtedness, except for such defaults as would not
have a material adverse effect on the Company and the Subsidiaries
taken as a whole. The execution, delivery and performance of this
Agreement, the incurrence of the obligations herein and the
consummation of the transactions contemplated herein will not conflict
with or result in a breach of, or default under, the certificate of
incorporation or bylaws of the Company, or any material loan
agreement, mortgage, deed of trust, indenture, or other agreement or
instrument to which the Company or any Subsidiary is a party or by
which it is bound, except to the extent that the same have been, or
prior to the Closing Date will be, waived or cured, or, to the best
knowledge of the Company, any material law, statute, order, rule,
administrative regulation, or decree of any court, or governmental
agency or body having jurisdiction over the Company or any Subsidiary
or their properties or result in the creation or imposition of any
material lien, charge, claim, or encumbrance upon any property or
asset of the Company or any Subsidiary.
(xi) There are no pre-emptive rights or other rights to subscribe
for or to purchase, or any restriction upon the voting or transfer of,
any such shares of Common Stock pursuant to the Company's certificate
of incorporation, by-laws, or any agreement or other instrument to
which the Company is a party, except as set forth in the Memorandum.
The offering or sale of the Common Stock as contemplated in this
Agreement will not give rise to any rights for or relating to the
registration of any such shares of Common Stock other than the
registration rights of the holders of Common Stock and the Warrant (as
hereinafter defined) to be issued to you as provided in Section 4(h)
hereof.
(xii) This Agreement has been duly and validly authorized,
executed and delivered by or on behalf of the Company and constitutes
a legal, valid, and binding
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obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, rearrangement, liquidation,
conservatorship, receivership, or similar laws relating to or
affecting creditors' rights generally and except as enforceability of
the indemnity and contribution provisions contained in Section 6 may
be limited by applicable law or principles of public policy.
(xiii) Except as otherwise stated in the Memorandum (including
the financial statements and notes thereto included therein), the
Company and each of its Subsidiaries has good title, free and clear of
all liens and encumbrances, to all of the personal property referred
to in the Memorandum as being owned by it except liens and
encumbrances that are not material in the aggregate and do not
materially interfere with the conduct of the business of the Company
and the Subsidiaries, and, except as otherwise stated in the
Memorandum, has valid and binding leases to the real and/or personal
property described in the Memorandum as under lease to it with such
exceptions as do not materially interfere with the conduct of the
business of, or the use of such property by, the Company or any
Subsidiary.
(xiv) Neither the Company nor any Subsidiary is in violation of
any law, ordinance, governmental rule, regulation, or permit, or court
decree to which it may be subject and has not failed to obtain any
license, permit, franchise, or other governmental authorization
necessary to the ownership of its property or to the conduct of its
business, which violation or failure to obtain would have any material
adverse effect on the condition (financial or other), properties or
results of operations of the Company and its Subsidiaries taken as a
whole.
(xv) No consent, approval, authorization or order of any court or
governmental authority or agency is required for the consummation by
the Company of the transactions contemplated by this Agreement, except
such as may be required by the National Association of Securities
Dealers, Inc., the 1933 Act or the Rules and Regulations or state
securities or Blue Sky laws.
(xvi) Except as described in Schedule 2(xvi) hereto or in the
Memorandum, the Company has not made during the past six months, and
will not make throughout the Offering Period (as herein defined) or
during the six-month period commencing on the Closing Date, any offer
to sell any security to be issued by it or any security issued or to
be issued by any other corporation, partnership, or similar entity
formed or to be formed by it, which security is of the same or a
similar class as the Common Stock or the Common Stock of the Company,
other than offers of securities under an employee benefit plan as
defined in Rule 405 under the 1933 Act, securities issued in
connection with the Warrant, securities issued in connection with
acquisitions, or other securities that will not invalidate the
exemption from registration relied on to offer and sell the Common
Stock.
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(xvii) All reports and statements required to be filed by the
Company under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder, due at or
prior to the date of this Agreement have been made. Such filings,
together with all documents incorporated by reference therein, are
referred to as "Exchange Act Documents." Each Exchange Act Document
conformed in all material respects at the time of its filing to the
requirements of the Exchange Act and the rules and regulations
thereunder, and no Exchange Act Document 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, in light
of the circumstances under which they were made, not misleading.
(xviii) Except as indicated in Schedule 2(xviii) attached hereto,
each of the Company and the Subsidiaries has filed all United States
federal, state, county, local and foreign national, provincial and
local returns and reports which were required to be filed on or prior
to the date herein in respect of all income, withholding, franchise,
payroll, excise, property, sales, use, value-added or other taxes or
levies, imposts, duties, license and registration fees, charges,
assessments or withholdings of any nature whatsoever (together,
"Taxes"), and has paid all Taxes (and any related penalties, fines and
interest) which have become due pursuant to such returns or reports or
pursuant to any assessment which has become payable, or, to the extent
its liability for any Taxes (and any related penalties, fines and
interest) has not been fully discharged, adequate reserves therefor
have been established. All such returns and reports filed on or prior
to the date hereof have been properly prepared and are true, correct
(and to the extent such returns reflect judgments made by the Company
or a Subsidiary, as the case may be, such judgments were reasonable
under the circumstances) and complete in all material respects.
(xix) Except as set forth in Schedule 2(xix) attached hereto,
since December 31, 1997, each of the Company and the Subsidiaries has
conducted its business, maintained its real property and equipment and
kept its books of account, records and files, substantially in the
same manner as previously conducted, maintained or kept and solely in
the ordinary course.
3. Representations and Warranties of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇. You
represent and warrant to, and agree with, the Company that:
(i) You have been duly organized and are validly existing and in
good standing as a corporation under the laws of the State of Texas,
with power and authority (corporate and other) to perform your
obligations under this Agreement; you are a broker-dealer registered
and in good standing under the Securities Exchange Act of 1934, as
amended, and under the securities or Blue Sky laws of each state in
which the Shares are being offered or sold by you, and you are a
member in good standing of the National Association of Securities
Dealers, Inc.; you are in possession of and operating in compliance
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with all authorizations, licenses, permits, consents, certificates and
orders required for the performance of your duties under this
Agreement.
(ii) There are no legal or governmental proceedings pending to
which you are a party or of which any of your properties is the
subject, which, if determined adversely to you, would individually or
in the aggregate materially and adversely affect your ability to
perform your obligations under this Agreement.
(iii) There are no facts or circumstances relating to your
directors or officers which would give rise to a prohibition or
restriction under the terms of Rule 502(b)(2)(iii) adopted under the
1933 Act.
(iv) This Agreement has been duly and validly authorized,
executed and delivered by you or on your behalf and constitutes your
legal, valid, and binding obligation enforceable against you
accordance with its terms, except as such enforceability may be
limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, rearrangement, liquidation,
conservatorship, receivership, or similar laws relating to or
affecting creditors' rights generally and except as enforceability of
the indemnity and contribution provisions contained in Section 6 may
be limited by applicable law or principles of public policy.
(v) No consent, approval, authorization or order of any court or
governmental authority or agency is required for the performance by
you of your obligations under this Agreement, except such as may be
required by the National Association of Securities Dealers, Inc. or
under Regulation D or state securities or Blue Sky laws.
4. Offering and Sale of Common Stock. (a) On the basis of the
representations, warranties, and covenants herein contained, but subject to the
terms and upon the conditions herein set forth, you are hereby appointed the
exclusive selling agent of the Company during the term herein specified (the
"Offering Period") for the purpose of finding subscribers for the Shares, on a
best-efforts all-or-none basis for the account of the Company through a private
offering (the "Offering") to an unlimited number of "accredited investors" (as
such term is defined in the Rules and Regulations) and up to 35 investors who
are not accredited investors. Subject to the perfor ▇▇▇▇▇ by the Company of all
its obligations to be performed hereunder, and to the completeness and accuracy
of all the representations and warranties contained herein, you hereby accept
such agency and agree on the terms and conditions herein set forth to use your
best efforts during the Offering Period to find subscribers for the Common Stock
at a price of $1.35 per share. Your agency hereunder, which is terminable as
provided in Section 10 hereof, shall continue until not later than May 4, 1998;
provided that such termination date (the "Termination Date") may be extended up
to and including until May 19, 1998, by mutual agreement of the parties.
(b) In connection with the performance of your obligations under this
Agreement, you may engage, for the account of the Company, the services of one
or more broker-dealers ("Addi tional Agents") who are members of the National
Association of Securities Dealers, Inc. and who are acceptable to the Company,
and, as compensation for their services, shall pay to such Addi tional Agents an
amount to be negotiated between you and such Additional Agents. Such amount will
be paid to the Additional Agents by you only out of the commissions received by
you in respect of sales of Common Stock as described in paragraph (f) of this
Section 4, and the Company shall have no obligation to any Additional Agent
respecting any such payment. The arrangements, if any, between the Company, you,
and any Additional Agent shall be set forth in an Additional Agent Agreement
("Additional Agent Agreement"), which shall provide, among other things, that
such Additional Agent shall be deemed to have agreed to the matters set forth
herein as if the Additional Agent were a signatory hereof. Nothing contained in
this Agreement or in the Additional Agent Agreement shall be deemed to
constitute the Additional Agents, if any, as your agents, and you shall not be
liable to the Company in respect of the performance by the Additional Agents, if
any, of any representations, warranties or covenants of such Additional Agents
contained herein or in the Additional Agent Agreement.
(c) Each subscriber must complete and execute a copy of the
Subscription Agreement. Upon receipt, you shall hold the Subscription Agreements
for safekeeping and deposit all funds delivered to you into a segregated
subscription escrow account as described in the Memorandum.
(d) In the event that subscriptions for a minimum of 3,703,703 shares
of Common Stock shall not have been received and accepted by the Company by the
Termination Date, all funds received from subscribers (if any) shall be returned
in full, and your agency and this Agreement shall terminate without obligation
on your part or on the part of the Company, except as provided in Sections 6 and
7 hereof.
(e) If, by the Termination Date or such earlier time as may be agreed
upon by you and the Company, you have received subscriptions for all of the
Shares, you shall notify the Company of the aggregate amount of Common Stock for
which you have received subscriptions. Payment of the purchase price for the
Common Stock for which you have found subscribers, and delivery, with respect to
each subscriber for Common Stock, of a copy of a Subscription Agreement signed
by such subscriber, shall then be made at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or such other place as shall be agreed
upon between you and the Company, at 10:00 A.M., Houston Time, on the fifth full
business day after the day on which you so notify the Company of the amount of
Common Stock subscribed for, or such other day and time (not later than ten
business days thereafter) as shall be agreed upon between you and the Company
(the "Closing Date"), in accordance with the terms and provisions of the Escrow
Agreement dated as of April 13, 1998, among you, the Company, and Sterling Bank.
(f) As compensation for your services, a cash commission will be paid
to you with respect to subscriptions received by you as to which the payments
and deliveries provided for in this Section 4 are made at the Closing Date equal
to 6.0% of the purchase price of each share of Common Stock. In addition, the
Company agrees to pay you $50,000 as a non-accountable expense allowance and, in
addition, to reimburse you for your reasonable expenses in accordance with
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Section 6 hereof. Such commissions and non-accountable expense allowance shall
be paid to you on the Closing Date by bank wire transfer payable in Federal
Funds (same day funds).
(g) Neither you, the Company, nor any Additional Agent shall, directly
or indirectly, pay or award any finder's fees, commissions or other compensation
to any person engaged by a potential investor for investment advice as an
inducement to such advisor to advise the purchase of Common Stock; provided,
however, that, subject to Section 4(b), normal sales commissions payable to a
registered broker-dealer or other properly licensed person for selling Common
Stock shall not be prohibited hereby.
(h) If the Offering closes, as further consideration for your services
hereunder, the Company will issue to you on the Closing Date a stock purchase
warrant (the "Warrant") in the form attached hereto as Exhibit II granting you
the right to purchase from the Company for a period of three years 308,642
shares of Common Stock for a cash consideration per share equal to $1.62 subject
to standard antidilution adjustments. The Warrant shall be deemed fully earned
upon its issuance.
(i) You will prepare and file such statements and reports as are or may
be required to enable the Common Stock to be qualified for sale under the
securities laws of such jurisdictions as you may designate.
(j) You will advise the Company if you become aware of any material
change in the facts and circumstances subsequent to the date of the Memorandum
relating to the offer and sale of the Common Stock, as described in the
Memorandum.
(k) You will not make a general solicitation with respect to the
Offering.
5. Covenants and Agreements of the Company. The Company covenants and
agrees with you that:
(a) Neither the Company nor any of its Subsidiaries will, prior to the
Closing Date incur any material liability or obligation, direct or contingent,
or enter into any material transaction, other than in the ordinary course of
business, except as contemplated by the Memorandum. The Company will not declare
or pay any dividend or make any distribution on the Common Stock payable to
shareholders of record on a date prior to the Closing Date.
(b) The Company will use the net proceeds received by it from the sale
of the Common Stock in the manner specified in the Memorandum under the caption
"Use of Proceeds."
(c) If at any time after the date of the Memorandum and prior to the
Termination Date, any event relating to or affecting the Company occurs as a
result of which the Memorandum would include an untrue statement of a material
fact, or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading,
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the Company will promptly notify you thereof and will prepare an amended or
supplemented offering memorandum which will correct such statement or omission.
For purposes of this para graph (a), the Company will furnish such information
with respect to itself as you may from time to time reasonably request.
(d) It will deliver to you, at or before the date hereof, an original
of the Memorandum suitable for duplication by you, including such financial
statements. It will deliver to you, from time to time until the Termination
Date, an original of such amendments or supplements to the Memorandum that may
be prepared by the Company suitable for duplication by you.
(e) It will cooperate with you to enable the Common Stock to be
qualified for sale under the securities laws of such jurisdictions as you may
designate, subject to approval by the Company, and at your request will make
such applications and furnish such information as may be required of it for that
purpose; provided, however, that it shall not be required to qualify to do
business or to file a general consent to service of process in any such
jurisdiction. It will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualifications in effect for
so long a period as you may reasonably request for the distribution of the
Common Stock.
(f) It will file all reports required by Regulation D with regard to
sales of the Common Stock and use of the proceeds therefrom; provided that you
provide all information as to purchasers of the Common Stock required for such
filings.
(g) For a period of three years from the Closing Date, the Company will
deliver to you (i) copies of the financial statements furnished by the Company
to stockholders and each other report furnished by the Company to stockholders,
(ii) as soon as they are available, copies of any other reports (financial or
other) which the Company shall publish or otherwise make generally available to
the Company's security holders as such and (iii) as soon as they are available,
copies of any reports and financial statements furnished to or filed with the
Commission.
(h) The Company agrees to nominate for election as a director of the
Company one individual designated by you for so long as purchasers of the Common
Stock offered and sold pursuant to Section 4(a) of this Agreement retain, in the
aggregate, at least 50% of the aggregate number of shares of Common Stock
offered and sold pursuant to Section 4(a).
(i) The Company will not offer or sell any securities of the Company
that are of the same or a similar class as the Common Stock offered and sold
pursuant to this Agreement for a period of six months after the Closing Date,
other than those offers or sales of securities under an employee benefit plan as
defined in Rule 405 under the 1933 Act, unless the Company provides you with an
opinion of counsel acceptable to you that any such offer or sale will not be
integrated with the offering of the Common Stock pursuant to this Agreement for
purposes of the exemptions under Regulation D and the condition contained in
Rule 502(a) of Regulation D.
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(j) The Company will cause each of ▇▇▇▇▇▇ ▇. Head, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇▇ to deliver to you on or before the Closing Date
an agreement satisfactory in form and substance to you, whereby each agrees, for
a period of one year after the Closing Date, not to sell, offer or otherwise
dispose of any shares of Common Stock without your prior written consent
("Lock-Up Letters"); provided, however, that Messrs Head, ▇▇▇▇▇, and Lamb may
sell up to five percent of the shares of Common Stock that they currently own
and ▇▇. ▇▇▇▇▇▇ may sell up to 25% of the shares that he currently owns without
your consent. In addition, during the lock-up period, Messrs. Head, Johns, Lamb,
and ▇▇▇▇▇▇ may sell their shares on a pro rata basis with other selling
shareholders, if any, in any underwritten public offering, subject to the
discretion of the underwriters in any such offering to limit the shares of
selling shareholders that may be sold in such offering.
(k) The Company agrees that, until the Company has successfully
completed an underwritten public offering of Common Stock pursuant to which the
Company realizes proceeds of at least $12,000,000 and the price to the public is
at least $5.00 per share (a "Qualified Offering"), the number of shares of the
Common Stock collectively issued or issuable by the Company as incentive
compensation, directly or pursuant to the grant and exercise of options or
warrants, to its employees (both full and part-time), directors, consultants,
agents (excluding you), or any others persons under any plan, agreement, or
otherwise will not, in the aggregate, exceed 2,770,000 without your written
consent. In addition, the issuance of such shares, options, or warrants will be
subject to the following limitations: (i) no more than 30,000 shares shall be
issued to employees of each new branch office opened in Arizona subsequent to
the Closing Date, (ii) no more than 150,000 shares shall be issued to employees
located in each new county in California in which the Company opens an office
subsequent to the Closing Date (provided that the relocation of an existing
office shall not be considered the opening of a new office), and (iii) no more
than 50,000 shares shall be issued for any other purpose. The Company agrees
that no shares issued pursuant to this paragraph (k) will be issued or issuable
at a per share price less than the greater of $2.50 or Current Market Value
except for up to 150,000 shares to be issued in connection with the Company's
proposed expansion into San Diego County, California which may be issued at a
price of not less than $2.00.
(l) The Company hereby grants you a right of first refusal to act as,
at least, co-manager on the next succeeding offering by the Company of its
securities commenced within the 24 months following the Closing Date. The
foregoing right of first refusal shall not apply if, in the reasonable judgment
of counsel for the lead underwriter selected by the Company, your inclusion as
an underwriter would cause the offering to violate applicable rules and
regulations of federal or state governmental agencies, including the Corporate
Financing Rules of the National Association of Securities Dealers, Inc.
Notwithstanding the foregoing, the Company shall not be required to employ any
specific underwriter that you suggest that is not acceptable to the Company nor
shall you be required to co-manage any offering with an underwriter suggested by
the Company that is not acceptable to you.
- 10 -
(m) The Company hereby also grants to the purchasers of the Common
Stock offered pursuant to Section 4(a) hereof (individually a "Purchaser" and ,
collectively, the "Purchasers") a pre-emptive right to purchase any and all
additional shares of Common Stock, or securities convertible into or containing
an option or warrant to purchase Common Stock ("Derivative Securities"), as may
hereafter be issued from time to time by the Company (including shares of Common
Stock or Derivative Securities offered, sold, or granted to officers and
employees of the Company) if such shares are offered and/or sold for a purchase
price or such Derivative Securities have a conversion or exercise price that is
less than the lesser of (i) $1.35 per share or (ii) the Current Market Price of
the Common Stock. Such pre-emptive rights shall exist with respect to shares of
Common Stock originally authorized, shares hereafter authorized, or treasury
shares, but shall not exist with respect to: (a) shares of Common Stock issued
by the Company in a firm commitment underwritten offering, (b) shares of Common
Stock issued by the Company upon the exercise or conversion of currently
outstanding Derivative Securities, or (c) shares of Common Stock issued by the
Company upon the exercise of stock options permitted under paragraph (k) above.
Each Purchaser shall be entitled to purchase the number of shares of
Common Stock equal to the number of shares of Common Stock offered by the
Company multiplied by a fraction the numerator of which is the number of shares
of Common Stock owned by the Purchaser and the denominator of which is
3,703,703. The Board of Directors of the Company shall establish the price,
terms, and conditions on which such pre-emptive rights may be exercised on an
equitable basis. Adjustments may be made in the number of shares offered to each
holder in order to eliminate fractional shares. The time of expiration of
pre-emptive rights may be established by the Board of Directors but each holder
shall have a minimum of 45 days in which to consider exercising his or her
pre-emptive right.
The foregoing pre-emptive right shall terminate on the date that the
Company successfully completes a Qualified Offering.
(n) The "Current Market Price" as used in this Agreement shall mean, as
of any date, 5% of the sum of the average, for each of the 20 consecutive
Trading Days immediately prior to such date, of either: (i) the high and low
sales prices of the Common Stock on such Trading Day as reported on the
composite tape for the principal national securities exchange on which the
Common Stock may then be listed, or (ii) if the Common Stock shall not be so
listed on any such Trading Day, the high and low sales prices of Common Stock in
the over-the-counter market as reported by the Nasdaq National Market, or (iii)
if the Common Shares shall not be included in the Nasdaq National Market on any
such Trading Day, the representative bid and asked prices at the end of such
Trading Day in such market as reported by the Nasdaq Stock Market or (iv) if
there be no such representative prices reported by the Nasdaq Stock Market, the
lowest bid and highest asked prices at the end of such Trading Day in the
over-the-counter market as reported on the OTC Electronic Bulletin Board or by
the National Quotation Bureau, Inc., or any successor organization. For purposes
of determining Current Market Price, the term "Trading Day" shall mean a day on
which an amount greater than zero can be calculated with respect to the Common
- 11 -
Stock under any one or more of the foregoing categories (i), (ii), (iii) and
(iv), and the "end" thereof, for the purposes of categories (iii) and (iv),
shall mean the exact time at which trading shall end on the New York Stock
Exchange. If the Current Market Price cannot be determined under any of the
foregoing methods, Current Market Price shall mean the fair value per share of
Common Stock on such date determined by the Board of Directors in good faith,
irrespective of any accounting treatment.
6. Payment of Expenses. If this Agreement becomes effective and the
transactions contemplated by this Agreement are consummated or this Agreement
terminates or is terminated, the Company will pay all reasonable expenses
incident to the performance of the obligations of the Company under this
Agreement, including (but not limited to) all expenses and taxes incident to the
sale and delivery of the Common Stock, all expenses incident to the printing of
copies of the Memorandum, any supplemental sales material supplied or approved
in writing by the Company, any amendments or supplements thereto, any "Blue Sky"
memorandum, and this Agreement and furnishing the same to you, all filing and
printing fees and expenses (including legal fees and disbursements of your
counsel) incurred in connection with qualification of the Common Stock for sale
under the laws of such jurisdictions as you may designate, the fees and
disbursements of counsel and accountants for the Company, and all your
out-of-pocket expenses (including fees and disbursements of your counsel
incurred in connection with this Agreement and the Offering) incurred in
connection with this Agreement, preparing to market, and marketing the Common
Stock, up to a maximum of $75,000 (the non-accountable expense allowance
provided in Section 4(f) shall not count against such expense limitation).
7. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless you, each Additional Agent and each person, if any,
who controls you or such Additional Agent within the meaning of the 1933 Act,
against any losses, claims, damages, liabilities, or expenses (including, unless
the Company elects to assume the defense as hereinafter provided, the reasonable
cost of investigating and defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which (i) are based on the
ground or alleged ground that the Memorandum (as from time to time amended or
supplemented) or any written supplemental sales material supplied or approved in
writing by the Company provided that such supplemental sales material is
accompanied with or preceded by the Memorandum, includes or allegedly includes
an untrue statement of material fact or omits to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, unless such statement or omission (i) was
made in reliance upon, and in conformity with, information furnished to the
Company by you or any Additional Agent specifically for use in the preparation
thereof, (ii) arise out of the acts or omissions of broker-dealers retained by
the Company in connection with the Offering other than you or Additional Agents
retained by you, or (iii) arise out of the Company's breach of a representation
or warranty or covenant or agreement contained in this Agreement; provided that
in no case is the Company to be liable with respect to any claims made against
you, such Additional Agent or any such controlling person unless you, such
Additional Agent or such controlling person shall have notified the Company in
writing within a reasonable time after the summons or other first legal process
- 12 -
giving information of the nature of the claim shall have been served upon you,
such Additional Agent, or such controlling person, but failure to notify the
Company of any such claim shall not relieve it from any liability that it may
have to you, such Additional Agent, or such controlling person otherwise than on
account of the indemnity agreement contained in this paragraph. The Company will
be entitled to participate at its own expense in the defense, or if it so
elects, to assume the defense of any suit brought to enforce any such liability,
but, if the Company elects to assume the defense, such defense shall be
conducted by counsel chosen by it. In the event the Company elects to assume the
defense of any such suit and retain such counsel, you, such Additional Agent, or
such controlling person or persons, defendant or defendants in the suit, may
retain additional counsel but shall bear the fees and expenses of such counsel
unless (i) the Company shall have specifically authorized the retaining of such
counsel or (ii) the parties to such suit include you, such Additional Agent, or
such controlling person or persons, and the Company and you, such Additional
Agent, or such controlling person or persons have been advised by counsel that
one or more material legal defenses may be available to you or them that may not
be available to the Company in which case the Company shall not be entitled to
assume the defense of such suit notwithstanding its obligation to bear the
reasonable fees and expenses of such counsel. In no event shall the Company be
liable for the fees and expenses of more than one 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. The Company shall not be liable to indemnify any person for any
settlement of any such claim effected without its consent which shall not be
unreasonably withheld. This indemnity agreement will be in addition to any
liability which the Company might otherwise have.
(b) You and each Additional Agent agree to indemnify and hold harmless
the Company, each of the Company's officers, directors, and each other person,
if any, who controls the Company within the meaning of the 1933 Act, against any
losses, claims, damages, liabilities, or expenses (including, unless you or such
Additional Agent elects to assume the defense, the reasonable cost of
investigating and defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which (1) may be based on
the ground or alleged ground that the Memorandum (as from time to time amended
and supplemented) or any supplemental sales material used by you or such
Additional Agent, includes or allegedly includes an untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which it was made, not
misleading, but only insofar as such statement or omission (i) was made in
reliance upon, and in conformity with, written information furnished to the
Company by you or an Additional Agent specifically for use in the preparation
thereof or (ii) relates to any such supplemental sales material not supplied by
the Company or approved by it in writing, (2) arise out of any acts or omissions
by you that cause the Offering to involve a public offering under Section 4(2)
of the 1933 Act or your failure to be properly licensed to sell the Shares, or
(3) arise out of your breach of a representation or warranty or covenant or
agreement contained in this Agreement; provided, however, that in no case are
you or any Additional Agent to be liable with respect to any claims made against
the Company or any such person against whom the action is brought unless the
Company or such person shall have notified you or such Additional Agent, as the
- 13 -
case may be, in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Company or such person, but failure to notify you or such
Additional Agent of such claim shall not relieve you or such Additional Agent
from any liability that you or such Additional Agent may have to the Company or
such person otherwise than on account of the indemnity agreement contained in
this paragraph. You or such Additional Agent shall be entitled to participate at
your or its expense in the defense, or if you or such Additional Agent so
elects, to assume the defense of any suit brought to enforce any such liability,
but, if you or such Additional Agent elects to assume the defense, such defense
shall be conducted by counsel chosen by you or such Additional Agent, as the
case may be. In the event that you or such Additional Agent elects to assume the
defense of any such suit and retain such counsel, the Company, said officers and
directors and any person or persons, defendant or defendants in the suit, may
retain additional counsel but shall bear the fees and expenses of such counsel
unless (i) you shall have specifically authorized the retaining of such counsel
or (ii) the parties to such suit include you, such Additional Agent or such
controlling person or persons, and the Company and you, such Additional Agent,
or such controlling person or persons have been advised by counsel that one or
more material legal defenses may be available to the Company that may not be
available to you or them in which case you shall not be entitled to assume the
defense of such suit notwithstanding your obligation to bear the reasonable fees
and expenses of such counsel. You or such Additional Agent shall not be liable
to indemnify any person for any settlement of any such claim effected without
your or its consent which consent shall not be unreasonably withheld. This
indemnity agreement will be in addition to any liability which you or any
Additional Agent might otherwise have.
(c) If the indemnification provided for in this Section 7 is
unavailable, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect not only the relative benefits received by the Company on
one hand and you and the Additional Agents, if any, on the other from the
Offering, but also the relative fault of the Company on the one hand and you and
the Additional Agents, if any, on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities, or
expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and you and the Additional Agents, if any, on the other, shall be
deemed to be in the same proportion as the total maximum net proceeds from the
Offering (before deducting expenses) received by the Company, bear to the total
selling commissions and the value of the Warrant received by you and the
Additional Agents, if any. The 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, you or an Additional Agent, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and whether a party breached a
representation or warranty or covenant or agreement contained in this Agreement.
The Company and you agree that it would not be just and equitable if
contribution were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
- 14 -
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such claim. Notwithstanding the provisions of this paragraph
(c), you shall not be required to contribute any amount in excess $350,000 less
the amount of any damages which you have otherwise been required to pay by
reason of an untrue or alleged untrue statement or omission or alleged omission
by the Company. Notwithstanding the provisions of this paragraph (c), the
Company shall not be required to contribute any amount in excess of $5,000,000
less the amount of any damages which the Company has otherwise been required to
pay by reason of an untrue or alleged untrue statement or omission or alleged
omission by you. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Survival of Indemnities, Representations, Warranties, etc. The
respective indemnities, covenants, agreements, representations, warranties, and
other statements of you and the Company as set forth in this Agreement or made
by them respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation made by or on behalf of you, the Company
or any of the officers or directors of the Company or any controlling person,
and shall survive delivery of and payment for the Common Stock.
9. Conditions of Your Obligations. Your obligations hereunder are
subject to the accuracy in all material respects at and (except as otherwise
stated herein) as of the date hereof and at and as of the Closing Date, of the
representations and warranties made herein by the Company, to the compliance in
all material respects at and as of the Closing Date by the Company with its
covenants and agreements herein contained and other provisions hereof to be
satisfied at or prior to the Closing Date and to the following additional
conditions:
(a) You shall not have stated in writing prior to the Closing Date to
the Company that the Memorandum, or any amendment or supplement thereto contains
an untrue statement of fact which, in your opinion, is material, or omits to
state a fact which, in your opinion, is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) You shall have received from Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.,
counsel for the Company, an opinion, dated the Closing Date, substantially to
the effect set forth in Exhibit II hereto.
(c) You shall have received from ▇▇▇▇▇ & ▇▇▇▇▇, ▇.▇., your counsel, an
opinion or opinions dated the Closing Date with respect to such matters as you
may reasonably request, and the Company shall have furnished to such counsel
such documents as they may reasonably request for the purpose of enabling them
to pass upon such matters.
- 15 -
(d) You shall have received a certificate, dated the Closing Date, of
the Chief Executive Officer or the President and the chief financial or
accounting officer of the Company to the effect that:
(i) No injunction preventing or suspending the use of the
Memorandum has been issued, and, to the best of the knowledge of the
signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the 1933 Act or any
State securities laws;
(ii) The representations and warranties of the Company in this
Agreement are true and correct in all material respects at and as of
the Closing Date, and the Company has complied in all material respects
with all the agreements and satisfied in all material respects all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(iii) No litigation has been instituted or threatened against
the Company of a character required to be disclosed in the Memorandum
that is not so disclosed; and
(iv) Between the date of this Agreement and the Closing Date,
there has not been any material adverse change, or to the knowledge of
the Company, any development involving a prospective material adverse
change (so far as the Company may now foresee), in the condition
(financial or otherwise), business, prospects, or results of operations
of the Company.
(e) The Company shall have furnished to you such additional
certificates as you may have reasonably requested as to the accuracy, at and as
of the Closing Date, of the representations and warranties made herein by it, as
to compliance at and as of the Closing Date by it with its covenants and
agreements herein contained and other provisions hereof to be satisfied at or
prior to the Closing Date and as to other conditions to your obligations
hereunder.
(f) There shall not have been any material adverse change in any legal
proceedings or regulatory actions pending or the commencement of similar actions
which, if determined adversely to the Company, would have a material adverse
effect on the condition (financial or otherwise), business, property, or results
of operations of the Company.
(g) You shall have received a Lock-Up Letter from each executive
officer and director of the Company.
If any of the conditions provided for in this Section 8 shall not have
been satisfied when and as required by this Agreement, this Agreement may be
terminated by you by notifying the Company of such termination in writing at or
prior to the Closing Date, but you shall be entitled to waive any of such
conditions.
- 16 -
10. Effective Date. This Agreement shall become effective at 11:00
A.M., Houston Time, on the date hereof.
11. Termination. In the event of any termination of this Agreement
under this or any other provision of this Agreement, there shall be no liability
of any party to this Agreement to any other party, other than as provided in
Sections 6, 7, and 8.
This Agreement may be terminated after it becomes effective by (A) the
Company for any reason by notice to you and (B) you by notice to the Company (i)
if at or prior to the Closing Date trading in securities on the New York,
American Stock Exchange, or Nasdaq Stock Market shall have been suspended or
minimum or maximum prices shall have been established on either such exchange or
stock market, or a banking moratorium shall have been declared by Texas or
United States authorities (unless such suspension is made pending completion of
the sale of the Shares, at which time, such suspension will be lifted); (ii) if
at or prior to the Closing Date there shall have been an outbreak of hostilities
between the United States and any foreign power, or of any other insurrection or
armed conflict involving the United States which, in your reasonable judgment,
makes it impracticable or inadvisable to offer or sell the Common Stock; (iii)
if there shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or the
transactions contemplated by this Agreement, which, in your reasonable judgment,
makes it impracticable or inadvisable to offer or deliver the Common Stock on
the terms contemplated by the Memorandum, or (iv) if there shall be any
litigation or regulatory action, pending or threatened against or involving the
Company, which, in your reasonable judgment, makes it impracticable or
inadvisable to offer or deliver the Common Stock on the terms contemplated by
the Memorandum.
If, and only if, the Company terminates this Agreement after it becomes
effective for any reason or the Offering fails to close because of the Company's
breach of any representations or warranties contained in this Agreement or the
Company's failure to fulfill its covenants and agreements contained in this
Agreement, the Company shall pay you a fee of $100,000, plus actual expenses
incurred as provided in Section 6 hereof, less the amounts previously paid to
you by the Company pursuant to Section 6, which shall be in addition to all
amounts previously paid to you and any amounts payable to you pursuant to
Section 7 or 8 hereof.
12. Notices. All communications hereunder shall be in writing and, if
sent to you or any Additional Agent shall be mailed, delivered or telegraphed
and confirmed to you, at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or if sent to
the Company shall be mailed, delivered or telegraphed and confirmed to the
Company, to ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
13. Successors. This Agreement shall inure to the benefit of and be
binding upon you, any Additional Agents, the Company and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right,
- 17 -
remedy or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control you
or any Additional Agent within the meaning of Section 15 of the 1933 Act, and
your and any Additional Agent's indemnities shall also be for the benefit of
each officer and director of the Company and the person or persons, if any, who
control the Company within the meaning of Section 15 of the 1933 Act.
14. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
If the foregoing correctly sets forth our understanding please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
CAPITAL TITLE GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. Head
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. Head
Title: President
Accepted and delivered in Houston,
Texas as of the date first
above written
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President
- 18 -
EXHIBIT I
OPINION OF COUNSEL TO THE COMPANY
(i) The Company has been duly organized and is validly existing and in
good standing as a corporation under the laws of the State of Delaware and is
qualified to do business as a foreign corporation in the State of Arizona, with
corporate power and authority to own or lease its properties and to conduct its
business as described in the Memorandum.
(ii) All action required to be taken by the Company as a condition to
the due and proper authorization, issuance, sale, and delivery of the Common
Stock of the Company to subscribers therefor in accordance with the terms of the
Placement Agent Agreement and the Memorandum has been taken; and, assuming the
due and valid execution and delivery by subscribers of Subscription Agreements,
and the payment of the consideration for the Common Stock of the Company
specified in the Memorandum, the Common Stock of the Company issued to
subscribers will be duly and validly issued, fully paid, and non-assessable.
(iii) The authorized and, to our knowledge, issued and outstanding
shares of capital stock of the Company as of April 13, 1998, are as follows:
Par Shares Shares
Title Value Authorized Outstanding
----- ----- ---------- -----------
Common Stock $0.001 50,000,000 12,168,029
The outstanding shares of Common Stock of the Company are duly authorized,
validly issued, fully paid, and nonassessable, with no personal liability
attaching to the ownership thereof, except for personal liability that may
attach to shareholders pursuant to Section 164 of the Delaware General
Corporation Law (the "DGCL"). Except as described in the Memorandum and the
Placement Agent Agreement, to our knowledge, the Company has not granted or
issued, or agreed to grant or issue, any options, warrants, or similar rights to
acquire any of the authorized but unissued shares of its capital stock. Except
as set forth above and in the Memorandum and the Placement Agent Agreement, to
our knowledge, there are no outstanding agreements or understandings to which
the Company is a party with respect to the sale of any shares of the capital
stock of the Company.
(iv) To our knowledge, the capital stock of the Company conforms in all
material respects to the description thereof contained in the Memorandum.
(v) The execution, delivery and performance of the Placement Agent
Agreement, the incurrence of the obligations therein set forth and the
consummation of the transactions contemplated therein and in the Memorandum
(assuming approval of the Offering by the
- 1 -
Company's shareholders) will not conflict with or result in a breach of, or
default under, the cer tificate of incorporation or bylaws of the Company, or to
our knowledge result in a breach of, or default under any material loan
agreement, mortgage, deed of trust, indenture or other agreement or instrument
relating to borrowed money known to us to which the Company is a party or by
which it is bound, except to the extent that the same have been waived or cured,
or any material law, statute, rule or administrative regulation applicable to
the Company or its properties.
(vi) There are no pre-emptive rights or other rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of, any shares of
Common Stock pursuant to the Company's certificate of incorporation, by-laws or,
to such counsels's knowledge, any agreement or other instrument to which the
Company is a party, except as set forth in the Memorandum.
(vii) The Placement Agent Agreement has been duly and validly
authorized, executed and delivered by or on behalf of the Company and
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except as such enforceability
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, rearrangement, liquidation, conservatorship, receivership, or
similar laws relating to or affecting creditors' rights generally and except as
enforceability of the indemnity and contribution provisions contained in Section
7 of the Placement Agent Agreement may be limited by applicable law or
principles of public policy.
(viii) If the Placement Agent and the Company offer the Common Stock
only to "accredited investors" (as such term is defined in the Rules and
Regulations) and up to 35 investors who are not accredited investors, and do not
generally solicit purchasers of the Common Stock, the offering and sale of the
Common Stock in accordance with the Purchase Agreement will be exempt from the
registration provisions of the 1933 Act under Section 4(2) thereof and
Regulation D promulgated thereunder.
(ix) To such counsel's knowledge, no consent, approval, authorization
or order of any court or governmental authority or agency is required for the
consummation by the Company of the transactions contemplated by the Placement
Agent Agreement, except such as may be required by the National Association of
Securities Dealers, Inc., the 1933 Act, the Rules and Regulations, or state
securities or Blue Sky laws.
(x) To such counsel's knowledge, except as set forth in the Memorandum,
there are no legal or governmental proceedings pending to which the Company is a
party or to which any of its properties are subject, which, if determined
adversely to the Company would individually or in the aggregate result in a
material adverse change in the condition (financial or otherwise), business,
properties, or results of operation of the Company, and, to such counsel's
knowledge, no such proceedings have been threatened by governmental authorities
or others.
- 2 -
In addition, such counsel shall state that such counsel has
participated in telephone conferences with officers and other representatives of
the Company, and representatives of the Placement Agent at which the contents of
the Memorandum were discussed and, although such counsel is not passing upon and
does not assume responsibility for the accuracy, completeness or fairness of the
statements contained in the Memorandum, on the basis of the foregoing nothing
has come to the attention of such counsel that causes them to believe that the
Memorandum (as amended and supplemented) as of its date and at the Closing Date
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not, in light of the circumstances under which they were made, not misleading
(it being understood that such counsel need express no opinion with respect to
the financial statements and schedules and other financial and statistical data
included in or omitted from the Memorandum or any supplement or amendment
thereto).
- 3 -