EXHIBIT 1.1
▇▇▇▇▇▇▇.▇▇▇, INC.
320,000 Units
________, 2000
UNDERWRITING AGREEMENT
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INSTITUTIONAL EQUITY CORPORATION
CAPITAL WEST SECURITIES, INC.
As Representatives of the Several Underwriters
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
▇▇▇▇▇▇▇.▇▇▇, Inc., an Oklahoma corporation (the "Company"), proposes to
sell to you and the other underwriters named in Schedule I hereto (collectively,
the "Underwriters"), for whom Institutional Equity Corporation and Capital West
Securities, Inc. are acting as managing underwriters and representatives (the
"Representatives"), in the respective amounts set forth opposite each
Underwriter's name in Schedule I hereto, an aggregate of 320,000 Units (each a
"Unit" and collectively the "Units"), each consisting of four shares of Common
Stock, $.01 par value (the "Common Stock") of the Company, and two warrants (the
"Warrants") of the Company. Each Warrant is convertible into one share of the
Common Stock commencing 30 days after, and expiring on the fifth (5th)
anniversary of, the Closing Date (as defined in Section 3 hereof). The Units,
together with (a) the shares of the Common Stock and the Warrants comprising the
Units and (b) the shares of the Common Stock issuable upon exercise of the
Warrants are collectively referred to as the "Underwritten Securities". The
Company also proposes to grant to the Underwriters the Underwriters' Option
(described in Section 2(b) hereof) to purchase up to an aggregate of 48,000
Units solely to cover over-allotments in the sale of the Units (such additional
Units, together with (a) the shares of the Common Stock and the Warrants
comprising such additional Units and (b) the shares of the Common Stock issuable
upon exercise of the Warrants, are collectively referred to herein as the
"Option Securities"). Additionally, the Company proposes to grant to the
Representatives the Representatives' Warrants (defined in Section 7 hereof) to
purchase up to 32,000 Units (the Representatives' Warrants and the underlying
additional Units, together with (a) the shares of the Common Stock and the
Warrants comprising such additional Units and (b) the shares of the Common Stock
issuable upon exercise of the Warrants, are collectively referred to herein as
the are collectively referred to herein as the "Warrant Securities"). The
Underwritten Securities, the Option Securities and the Warrant Securities are
collectively referred to herein as the "Securities".
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The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Effective Date" shall mean each date that the
Registration Statement (as defined below) and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean the
date and time that this Agreement is executed and delivered by the parties
hereto. The term "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in Section 1(a) below with respect to the offering of the
Securities, and any preliminary prospectus included in the Registration
Statement on the Effective Date that omits Rule 430A Information (as defined
below). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the most recent Preliminary Prospectus which predates or
coincides with the Execution Time. "Prospectus" shall mean the final prospectus
with respect to the offering of the Underwritten Securities and the Option
Securities that contains the Rule 430A Information. "Registration Statement"
shall mean (a) the registration statement referred to in Section 1(a) below,
including Exhibits and Financial Statements, in the form in which it has or
shall become effective, (b) in the event any post-effective amendment thereto
becomes effective prior to the Closing Date (as defined in Section 3 hereof) or
any settlement date pursuant to Section 3 hereof, such registration statement as
so amended on such date, and (c) in the event of the filing of any abbreviated
registration statement increasing the size of the offering (a "Rule 462
Registration Statement"), pursuant to Rule 462(b) (as defined below), which
registration statement became effective upon filing the Rule 462 Registration
Statement. Such term shall include Rule 430A Information (as defined below)
deemed to be included therein at the Effective Date as provided by Rule 430A.
"Rule 424," "Rule 462(b)" and "Rule 430A" refer to such rules promulgated under
the Securities Act of 1933, as amended (the "Act"). "Rule 430A Information"
means information with respect to the Underwirtten Securities and the Option
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each Underwriter that:
(a) The Company meets the requirements for the use of Form SB-2 under
the Act and has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a related preliminary
prospectus ("Preliminary Prospectus"), on Form SB-2 (Commission File No.
333-37932) (the "Registration Statement") for the registration under the
Act of the Underwritten Securities and the Option Securities. The Company
may have filed one or more amendments thereto, including related
Preliminary Prospectuses, each of which has previously been furnished to
you. The Company will next file with the Commission either prior to
effectiveness of such Registration Statement, a further amendment thereto
(including the form of Prospectus) or, after effectiveness of such
Registration Statement, a Prospectus in accordance with Rules 430A and
424(b)(1) or (4). As filed, such amendment and form of Prospectus, or such
Prospectus, shall include all Rule 430A Information and, except to the
extent the Representatives shall agree in writing to a modification, shall
be in all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond
that contained in the latest Preliminary Prospectus) as the Company has
advised you in writing, prior to the Execution Time, will be included or
made therein.
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(b) The Preliminary Prospectus at the time of filing thereof,
conformed in all material respects with the applicable requirements of the
Act and the rules and regulations thereunder and did not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading. If the Effective Date is prior to or simultaneous with the
Execution Time, (i) on the Effective Date, the Registration Statement
conformed in all material respects to the requirements of the Act and the
rules and regulations thereunder and did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, and (ii) at the Execution Time, the Registration Statement
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b), the Registration Statement and the Prospectus will conform, in all
material respects to the requirements of the Act and the rules and
regulations thereunder, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state a material fact required to be stated therein or necessary in order
to make the statements therein (and, in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading. If
the Effective Date is subsequent to the Execution Time, on the Effective
Date, the Registration Statement and the Prospectus will conform in all
material respects to the requirements of the Act and the rules and
regulations thereunder, and neither of such documents will contain any
untrue statement of any material fact or will omit to state any material
fact required to be stated therein or necessary to make the statements
therein (and, in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading. The two preceding
sentences do not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any supplements thereto) based upon and in
conformity with information furnished in writing to the Company by or on
behalf of any Underwriter through the Representatives specifically for use
in connection with the preparation of the Registration Statement or the
Prospectus (or any supplements thereto).
(c) The Company does not own or control, directly or indirectly, any
shares of capital stock or equity interests in any corporation,
partnership, association or other entity, except as set forth in the
Prospectus.
(d) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction in which
it is chartered or organized, with full corporate power and corporate
authority to own its properties and conduct its business as described in
the Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which it conducts its business or owns property and in which the failure,
individually or in the aggregate, to be so qualified would have a material
adverse effect on the properties, assets, operations, business, condition
(financial or otherwise) or prospects of the Company ("Material Adverse
Effect"). The Company has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all government regulatory
officials and bodies, to own its properties and conduct its business as
described in the Prospectus except where the absence of any such
authorization, approval, order, license, certificate or permit would not
have a Material Adverse Effect.
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(e) The Company does not own any shares of capital stock or any other
securities of any corporation or any equity interest in any firm,
partnership, association or other entity other than as described in the
Registration Statement.
(f) The Company's equity capitalization is as set forth in the
Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; all
outstanding shares of Common Stock have been duly and validly authorized
and issued and are fully paid and nonassessable, and the certificates
therefore are in valid and sufficient form; there are, and, on the
Effective Date, the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), there will be, no other classes of stock outstanding
except Common Stock; all outstanding options to purchase shares of Common
Stock have been duly and validly authorized and issued; except as described
in the Registration Statement, there are, and, on the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), there will be, no
options, warrants or rights to acquire, or debt instruments convertible
into or exchangeable for, or other agreements or understandings to which
the Company is a party, outstanding or in existence, entitling any person
to purchase or otherwise acquire shares of capital stock of the Company;
the issuance and sale of the Securities have been duly and validly
authorized and, when issued and delivered and paid for, the Securities will
be fully paid and nonassessable and free from preemptive rights, and will
conform in all respects to the description thereof contained in the
Prospectus; the Warrants and the Representatives' Warrants will, when
issued, constitute valid and binding obligations of the Company enforceable
in accordance with their terms and the Company has reserved a sufficient
number of shares of Common Stock for issuance upon exercise of the Warrants
and the Representatives' Warrants the Securities will, when issued, possess
the rights, privileges and characteristics as described in the Prospectus;
and the certificates for the Securities are in valid and sufficient form.
Each offer and sale of securities of the Company referred to in Item 26 of
Part II of the Registration Statement was effected in compliance with the
Act and the rules and regulations thereunder.
(g) The Securities (other than the Representatives' Warrants) have
been approved for listing on the American Stock Exchange, Inc. ("AMEX"),
upon official notice of issuance.
(h) Other than as described in the Prospectus, there is no pending
or, to the best knowledge of the Company, threatened action, suit or
proceeding before any court or governmental agency, authority or body,
domestic or foreign, or any arbitrator involving the Company required to be
disclosed in the Registration Statement or the Prospectus. There is no
contract or other document required to be described in the Registration
Statement or Prospectus or to be filed as an exhibit that is not described
or filed as required.
(i) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes the legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as rights of indemnity
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and contribution hereunder may be limited by public policy and except as
the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and general principles of equity.
(j) The Company has full corporate power and corporate authority to
enter into and perform its obligations under this Agreement and to issue,
sell and deliver the Securities in the manner provided in this Agreement.
The Company has taken all necessary corporate action to authorize the
execution and delivery of, and the performance of its obligations under,
this Agreement.
(k) Neither the offering, issuance and sale of the Securities, nor
the consummation of any other of the transactions contemplated herein, nor
the fulfillment of the terms hereof, will conflict with or result in a
breach or violation of, or constitute a default under, or result in the
imposition of a lien on any properties of the Company or an acceleration of
indebtedness pursuant to, the Articles of Incorporation or bylaws of the
Company, as currently in effect, or any of the terms of any indenture or
other agreement or instrument to which the Company is a party or by which
the Company or any of its properties are bound, or any law, order,
judgment, decree, rule or regulation applicable to the Company of any
court, regulatory body, administrative agency, governmental body, stock
exchange or arbitrator having jurisdiction over the Company, except for
breaches, violations or defaults that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. The
Company is not in violation of its Articles of Incorporation or bylaws, as
currently in effect, or, except as described in the Prospectus, in breach
of or default under any of the terms of any indenture or other agreement or
instrument to which it is a party or by which it or its properties are
bound, which breach or default would, individually or in the aggregate,
have a Material Adverse Effect.
(l) Except as disclosed in the Prospectus, no person has the right,
contractual or otherwise, to cause the Company to issue to it any shares of
capital stock in consequence of the issue and sale of the Securities, nor
does any person have preemptive rights, or rights of first refusal or other
rights to purchase any of the Securities. Except as referred to in the
Prospectus, no person holds a right to require or participate in a
registration under the Act of Units, Warrants, Common Stock, preferred
stock or any other equity securities of the Company.
(m) The Company has not (i) taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result in,
under the Exchange Act, or otherwise, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities (other than those actions permitted by applicable law) or
(ii) effected any sales of shares of securities that are required to be
disclosed in response to Item 26 of Part II of the Registration Statement
(other than transactions disclosed in the Registration Statement or the
Prospectus).
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(n) No consent, approval, authorization or order of, or declaration
or filing with, any court or governmental agency or body is required to be
obtained or filed by or on behalf of the Company in connection with the
transactions contemplated herein, except such as may have been obtained or
made for registration of the Securities under the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and such as may be
required under the Blue Sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters.
(o) The accountants who have certified the Financial Statements filed
or to be filed with the Commission as part of the Registration Statement
are independent accountants as required by the Act.
(p) No stop order preventing or suspending the use of any Preliminary
Prospectus has been issued, and no proceedings for that purpose are pending
or, to the best knowledge of the Company, threatened or contemplated by the
Commission; no stop order suspending the sale of the Securities in any
jurisdiction has been issued and no proceedings for that purpose have been
instituted or, to the best knowledge of the Company, threatened or are
contemplated; and any request of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or
otherwise) has been complied with.
(q) The Company has not sustained any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there have not been any changes in the capital stock or long-
term debt of the Company, or any material adverse change, or a development
known to the Company that could reasonably be expected to have a Material
Adverse Effect in the general affairs, management, financial position,
stockholders' equity, results of operations or prospects of the Company,
otherwise than as set forth in the Prospectus. Except as set forth in the
Prospectus, there exists no present condition or state of facts or
circumstances known to the Company involving its customers which the
Company can now reasonably foresee would have a Material Adverse Effect or
which would result in a termination or cancellation of any agreement with
any customer whose purchases, individually or in the aggregate, are
material to the business of the Company, or which would result in any
material decrease in sales to any such customer or purchases from any
supplier, or which would prevent the Company from conducting its business
as described in the Prospectus in essentially the same manner in which it
has heretofore been conducted.
(r) The Financial Statements and the related notes of the Company,
included in the Registration Statement and the Prospectus present fairly
the financial position, results of operations, cash flow and changes in
shareholders' equity of the Company at the dates and for the periods
indicated, subject in the case of the Financial Statements for interim
periods, to normal and recurring year-end adjustments. The unaudited pro
forma statements of the Company present fairly the financial position and
the results of operations at the dates and for the periods indicated. Such
Financial Statements and the unaudited pro forma financial
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information of the Company were prepared in conformity with the
Commission's rules and regulations and in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(s) The Company owns or possesses, or has the right to use pursuant
to licenses, sublicenses, agreements, permissions or otherwise, adequate
patents, copyrights, trade names, trademarks, service marks, licenses and
other intellectual property rights necessary to carry on its business as
described in the Prospectus, and, except as set forth in the Prospectus,
the Company has not received any notice of either (i) default under any of
the foregoing or (ii) infringement of or conflict with asserted rights of
others with respect to, or challenge to the validity of, any of the
foregoing which, in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could have a Material Adverse Effect, and the
Company knows of no fact which could reasonably be anticipated to serve as
the basis for any such notice.
(t) Subject to such exceptions as are not likely to result in a
Material Adverse Effect, (A) the Company owns all properties and assets
described in the Registration Statement and the Prospectus as being owned
by it and (B) the Company has good title to all properties and assets owned
by it, free and clear of all liens, charges, encumbrances and restrictions,
except as otherwise disclosed in the Prospectus and except for (i) liens
for taxes not yet due, (ii) mortgages and liens securing debt reflected on
the Financial Statements included in the Prospectus, (iii) materialmen's,
workmen's, vendor's and other similar liens incurred in the ordinary course
of business that are not delinquent, individually or in the aggregate, and
do not have a Material Adverse Effect on the value of such properties or
assets of the Company, or on the use of such properties or assets by the
Company, in its respective business, and (iv) any other liens that,
individually or in the aggregate, are not likely to result in a Material
Adverse Effect. All leases to which the Company is a party and which are
material to the conduct of the business of the Company are valid and
binding and no material default by the Company has occurred and is
continuing thereunder; and the Company enjoys peaceful and undisturbed
possession under all such material leases to which it is a party as lessee.
(u) The books, records and accounts of the Company accurately and
fairly reflect, in reasonable detail, the transactions in and dispositions
of the assets of the Company. The system of internal accounting controls
maintained by the Company is sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(v) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company has not incurred any liabilities
or obligations, direct or contingent, or entered into any
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transactions, in each case, which are likely to result in a Material
Adverse Effect, and there has not been any payment of or declaration to pay
any dividends or any other distribution with respect to the shares of the
capital stock of the Company.
(w) The Company is in compliance in all material respects with all
applicable laws, rules and regulations, including, without limitation,
employment and employment practices, immigration, terms and conditions of
employment, health and safety of workers, customs and wages and hours, and
is not engaged in any unfair labor practice. No property of the Company has
been seized by any governmental agency or authority as a result of any
violation by the Company or any independent contractor of the Company of
any provisions of law. There is no pending unfair labor practice complaint
or charge filed with any governmental agency against the Company. There is
no labor strike, material dispute, slow down or work stoppage actually
pending or, to the best knowledge of the Company, threatened against or
affecting the Company; no grievance or arbitration arising out of or under
any collective bargaining agreements is pending against the Company no
collective bargaining agreement which is binding on the Company restricts
the Company from relocating or closing any of its operations and the
Company has not experienced any work stoppage or other labor dispute at any
time.
(x) The Company has accurately, properly and timely (giving effect to
any valid extensions of time) filed all federal, state, local and foreign
tax returns (including all schedules thereto) that are required to be
filed, and has paid all taxes and assessments shown thereon. Any and all
tax deficiencies asserted or assessed against the Company by the Internal
Revenue Service ("IRS") or any other foreign or domestic taxing authority
have been paid or finally settled with no remaining amounts owed, other
than those being contested in good faith and for which adequate reserves
have been provided. Neither the IRS nor any other foreign or domestic
taxing authority has examined any tax returns of the Company nor has the
IRS or any foreign or domestic taxing authority asserted a position which
conflicts with any tax position taken by the Company. The charges, accruals
and reserves shown in the Financial Statements included in the Prospectus
in respect of taxes for all fiscal periods to date are adequate, and
nothing has occurred subsequent to the date of such Financial Statements
that makes such charges, accruals or reserves inadequate. The Company is
not aware of any proposal (whether oral or written) by any taxing authority
to adjust any tax return filed by the Company.
(y) With such exceptions as are not likely to result in a Material
Adverse Effect, the Company is in compliance with all Federal, state,
foreign and local laws and regulations relating to pollution or protection
of human health or the environment ("Environmental Laws"), there are no
circumstances that may prevent or interfere with such compliance other than
as set forth in the Prospectus, and the Company has not received any notice
or other communication alleging a currently pending violation of any
Environmental Laws. With such exceptions as are not likely to result in a
Material Adverse Effect, other than as set forth in the Prospectus, there
are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the release, emission,
discharge or disposal of any chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and
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petroleum products, that may result in the imposition of liability on the
Company or any claim against the Company or, to the Company's best
knowledge, against any person or entity whose liability for any claim the
Company has or may have assumed either contractually or by operation of
law, and the Company has not received any notice or other communication
concerning any such claim against the Company or such person or entity.
(z) Except as set forth in the Prospectus, there are no outstanding
loans, advances or guaranties of indebtedness by the Company to or for the
benefit of its affiliates, or any of its officers or directors, or any of
the members of the families of any of them, which are required to be
disclosed in the Registration Statement or the Prospectus.
(aa) The Company is not an investment company subject to registration
under the Investment Company Act of 1940, as amended.
(bb) Except as set forth in the Prospectus, the Company has insurance
of the types and in the amounts that it reasonably believes is adequate for
its business, including, but not limited to, casualty and general liability
insurance covering all real and personal property owned or leased by the
Company, as applicable, against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against.
(cc) The Company has not at any time (i) made any contributions to any
candidate for political office, or failed to disclose fully any such
contribution, in violation of law; (ii) made any payment to any state,
federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or allowed by all applicable laws; or (iii) violated, nor is it in
violation of, any provision of the Foreign Corrupt Practices Act of 1977.
(dd) The preparation and the filing of the Registration Statement with
the Commission have been duly authorized by and on behalf of the Company,
and the Registration Statement has been duly executed pursuant to such
authorization by and on behalf of the Company.
(ee) All documents delivered or to be delivered by the Company or any
of its directors or officers to the Underwriters, the Commission or any
state securities law administrator in connection with the issuance and sale
of the Securities were, on the dates on which they were delivered, and will
be, on the dates on which they are to be delivered, true, complete and
correct in all material respects.
(ff) Except as described in the Prospectus, the Company does not
maintain, nor does any other person maintain on behalf of the Company, any
retirement, pension (whether deferred or non-deferred, defined contribution
or defined benefit) or money purchase plan or trust. There are no unfunded
liabilities of the Company with respect to any such plans or trusts that
are not accrued or otherwise reserved for on the Financial Statements.
(gg) Any certificates signed by an officer of the Company and
delivered to the Representatives or the Underwriters or to counsel for the
Underwriters shall also be deemed
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a representation and warranty of the Company to the Underwriters as to the
matters covered thereby. Any certificate delivered by the Company to its
counsel for purposes of enabling such counsel to render the opinions
referred to in Section 6(b) will also be furnished to the Representatives
and counsel for the Underwriters and shall be deemed to be additional
representations and warranties by the Company to the Underwriters as to the
matters covered thereby.
(hh) The Company has obtained and delivered to the Representatives the
written agreements, substantially in the form attached hereto as Exhibit B,
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of the principal shareholders of the Company restricting dispositions of
equity securities of the Company.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to
issue and sell to the Underwriters an aggregate of 320,000 Units. Each of
the Underwriters agrees, severally and not jointly, to purchase from the
Company the number of Units set forth opposite its name in Schedule I
hereto. The purchase price of the Units to be paid by the several
Underwriters to the Company shall be $______ per Unit, representing a 7%
discount from the initial public offering price, for sales of Units to
friends and family of the Company's current stockholders and $______ per
Unit, representing a 10% discount from the initial public offering price,
for sales to all other parties. No value shall be attributable to the
Warrants. The pricing of the Units will be in direct correlation with the
preliminary demand for the Company's Units under the following schedule:
320,000 - 400,000 Units $26.00 per Unit
400,001 - 500,000 Units $27.00 per Unit
500,001 - 600,000 Units $28.00 per Unit
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants
an option (the "Underwriters' Option") to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 48,000 Units, at
the same purchase price per Unit as the price paid for each of the initial
320,000 Units for use solely in covering any over-allotments made by the
Representatives for the account of the Underwriters in the sale and
distribution of the Underwritten Securities. The Underwriters' Option may
be exercised in whole or in part at any time on or before the 45th day
after the Effective Date upon written or telegraphic notice by the
Representatives to the Company setting forth the number of Option
Securities Units which the several Underwriters are electing to purchase
pursuant to the Underwriters' Option and the settlement date. Delivery of
certificates for such Units pursuant to the exercise of the Underwriters'
Option Securities by the Company and payment therefor to the Company shall
be made as provided in Section 3 hereof. The number of Option Securities
Units purchased by each Underwriter pursuant to the Underwriters' Option
shall be determined by multiplying the number of Units to be sold by the
Company pursuant to the Underwriters' Option, as exercised, by a fraction,
the numerator of which is the number of Units to be purchased by such
Underwriter as set forth opposite its name in Schedule I and the
denominator of which is the total number of Units to be purchased by all of
the Underwriters as set forth on Schedule I (subject to such adjustments to
eliminate any fractional share purchases as the Representatives in its
discretion may make).
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3. Delivery and Payment.
Certificates in definitive form for the Underwritten Securities to be
purchased by each Underwriter hereunder, and in such denominations and
registered in such names as Representatives may request upon at least 48 hours
prior notice to the Company, shall be delivered by or on behalf of the Company
to you for the account of such Underwriter, against payment by such Underwriter
or on its behalf of the purchase price therefor by certified or official bank
check or checks, payable to the order of the Company in same day funds, at the
offices of the Representatives, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or at such other place as shall be agreed upon by you and
the Company. The time and date of such delivery and payment shall be, with
respect to the Underwritten Securities, 10:00 a.m., Dallas, Texas time, on
November ___, 2000, or at such other time and date as you and the Company may
agree upon in writing (the "Closing Date"), and, with respect to the Units
issuable under the Underwriters' Option Securities, 9:00 a.m., Dallas, Texas
time, on the date specified by you in the written notice given by you of the
Underwriters' election to purchase such Units, or at such other time and date as
you and the Company may agree upon in writing. Said date shall be not earlier
than two (2) or later than ten (10) business days after the date of said notice.
4. Offering by Underwriters. It is understood that the several Underwriters
propose to offer the Units, including the Units issuable under the Underwriters'
Option, for sale to the public as set forth in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution
Time, to become effective as promptly as possible. If the Registration
Statement has become or becomes effective pursuant to Rule 430A, or filing
of the Prospectus is otherwise required under Rule 424(b), the Company will
file the Prospectus, properly completed, pursuant to Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will promptly advise the
Representatives (i) when the Registration Statement shall have become
effective, (ii) when any post-effective amendment thereto shall have become
effective, (iii) of any request by the Commission for any amendment or
supplement of the Registration Statement or the Prospectus or for any
additional information with respect thereto, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of the receipt by the Company of any notification
with respect to the institution or threatening of any proceeding for that
purpose and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the issuance
of any such stop order or suspension and, if issued, to obtain as soon as
possible the withdrawal thereof. The Company will not file any amendment to
the Registration Statement or supplement to the Prospectus without the
prior consent of the Representatives, which will not be unreasonably
withheld, subject however, to compliance with the Act, the Exchange Act,
the rules and regulations thereto and the provisions of this Agreement. The
Company will prepare and file with the Commission, promptly upon your
-12-
request, any amendment to the Registration Statement or supplement to the
Prospectus that you reasonably determine to be necessary or advisable in
connection with the distribution of the Underwriten Securities and the
Option Securities by you, and will use its best efforts to cause the same
to become effective as promptly as possible.
(b) If, at any time when a prospectus relating to the Underwritten
Securities and the Option Securities is required to be delivered under the
Act, any event occurs as a result of which the Prospectus as then
supplemented would include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
if it otherwise shall be necessary to supplement the Prospectus to comply
with the Act or the rules or regulations thereunder, the Company will
promptly prepare and file with the Commission, subject to Section 5(a)
hereof, a supplement that will correct such statement or omission or a
supplement that will effect such compliance.
(c) As soon as practicable (but not later than eighteen months after
the effective date of the Registration Statement), the Company will make
generally available to its security holders and to the Representatives an
earnings statement or statements (which need not be audited) of the Company
covering a period of at least twelve months after the Effective Date (but
in no event commencing later than 90 days after such date), which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 promulgated
thereunder.
(d) The Company will furnish to each of you and counsel for the
Underwriters, without charge, one signed copy of the Registration Statement
and any amendments thereto (including exhibits thereto) and to each other
Underwriter a conformed copy of the Registration Statement and any
amendments thereto (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as many
copies of the Prospectus and each Preliminary Prospectus and any
supplements thereto as the Representatives may reasonably request.
(e) The Company will use its best efforts to register or qualify the
Underwritten Securities and the Option Securities for sale under the laws
of such jurisdictions within the United States and its territories as the
Representatives may designate, will maintain such qualifications in effect
so long as required for the distribution of the Securities and will pay the
fee of the National Association of Securities Dealers, Inc. (the "NASD") in
connection with its review of the offering, provided that the Company shall
not be required to qualify as a foreign corporation or to consent to
service of process under the laws of any such jurisdiction (except service
of process with respect to the offering and sale of the Underwritten
Securities and the Option Securities), and provided further, that the
Company will not be required to register or qualify the Underwritten
Securities and the Option Securities in any jurisdiction wherein the
Underwritten Securities and the Option Securities are subject to exemption
from such qualification or registration.
(f) The Company will apply the net proceeds from the offering
received by it in the manner set forth under the caption "Use of Proceeds"
in the Prospectus.
(g) The Company will (i) cause the Securities (other than the
Representatives' Warrants) to be listed on AMEX and (ii) comply with all
registration, filing and reporting
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requirements of the Exchange Act and the AMEX which may from time to time
be applicable to the Company.
(h) During the five-year period commencing on the date hereof, the
Company will furnish to its shareholders, as soon as practicable after the
end of each respective period, annual reports (including financial
statements audited by independent certified public accountants) and
unaudited quarterly reports of earnings and will furnish to you and, upon
request, to the other Underwriters hereunder (i) concurrent with furnishing
such quarterly reports to its shareholders, statements of income and other
information of the Company for such quarter in the form furnished to the
Company's shareholders; (ii) concurrent with furnishing such annual reports
to its shareholders, a balance sheet of the Company as at the end of such
fiscal year, together with statements of income and surplus and of cash
flow of the Company for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of its
independent certified public accountants; (iii) as soon as they are
available, copies of all reports and financial statements furnished to or
filed with the Commission, the NASD, AMEX, NASDAQ or any other securities
exchange on which any of the Company's securities may be listed; (iv) every
press release and every material news item or article in respect of the
Company or its affairs which was released or prepared by the Company; and
(v) any additional information of a public nature concerning the Company or
its business that you may reasonably request. During such five-year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts
of the Company and its subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary
that is not so consolidated.
(i) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which
may be the same entity as the transfer agent) for the Securities.
(j) The Company will not, for a period of 180 days following the
Effective Date, without the prior written consent of the Representatives,
offer, sell, contract to sell (including, without limitation, any short
sale), transfer, assign, pledge, encumber, hypothecate or grant any option
to purchase or otherwise dispose of, any capital stock, or any options,
rights or warrants to purchase any capital stock of the Company, or any
securities or indebtedness convertible into or exchangeable for shares of
capital stock of the Company, except for (i) sales of Securities as
contemplated by this Agreement, (ii) sales of Common Stock upon the
exercise of the Warrants, other warrants or outstanding options described
in the Prospectus and (iii) granting of options and issuance of underlying
shares pursuant to the Company's stock option plans.
(k) The Company has reserved and shall continue to reserve a
sufficient number of shares of Common Stock for issuance upon exercise of
the Representatives' Warrants.
(l) If the Company elects to rely on Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by
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10:00 p.m., Washington D.C. time, on the date of this Agreement, and the
Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the
Act.
(m) For the five year period from the Closing Date, the
Representatives shall have the right to designate a non-voting advisory
director, who shall be entitled to attend all meetings of the Board of
Directors and receive all correspondence and communications sent by the
Company to the members of the Board of Directors in their capacity as
directors of the Company.
(n) The Company shall solicit the exercise of the Warrants solely
through the Representatives, at the Representatives' election for thirty
(30) months following the closing of the offering and the Company shall pay
to the Representatives the compensation set forth in Section 7 hereof for
such services. The obligation of the Company to solicit the exercise of the
Warrants solely through the Representatives at the Representative's
election set forth in Section 5(n) shall terminate thirty (30) months
following the closing of the offering.
6. Conditions to the Obligations of the Underwriters. The obligations of the
Underwriters to purchase the Securities described in Sections 2(a) and 2(b)
hereof shall be subject to (i) the accuracy of the representations and
warranties on the part of the Company contained herein as of the Execution Time,
the Closing Date and (in the case of any Securities delivered after the Closing
Date) any settlement date pursuant to Section 3 hereof, (ii) the accuracy of the
statements of the Company made in any certificates delivered pursuant to the
provisions hereof, (iii) the performance by the Company of its obligations
hereunder, and (iv) the following additional conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A
under the Act, such post-effective amendment shall become effective) not
later than 5:00 p.m. Eastern Standard Time, on the execution date hereof or
at such later date and time as the Representatives may approve in writing
and, at the Closing Date (and any settlement date pursuant to Section 3(b)
hereof), no stop order suspending the effectiveness of the Registration
Statement or any qualification in any jurisdiction shall have been issued
and no proceedings for that purpose shall have been initiated or, to the
best knowledge of the Company, threatened by the Commission.
(b) The Company shall have furnished to the Representatives the
opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, counsel for the
Company, addressed to the Underwriters and dated the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), or other evidence
satisfactory to the Representatives to the effect that:
(i) The Registration Statement has become effective under the
Act; any required filing of the Prospectus or any supplements thereto
pursuant to Rule 424(b) has been made in the manner and within the
time period required by Rule 424(b); to the knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement or any qualification in any jurisdiction has been issued and
no proceedings for that purpose have been instituted or threatened;
any request from the Commission for additional information has been
complied with; the Registration Statement and the Prospectus (and any
supplements thereto) comply as to form in all material respects with
the applicable requirements of the Act and the rules and
-15-
regulations thereunder (except that such counsel need express no
opinion with respect to the Financial Statements and schedules
included in the Registration Statement and Prospectus).
(ii) To the knowledge of such counsel, the Company does not own
or control, directly or indirectly, any shares of capital stock or
equity interests in any corporation, partnership, association or other
entity, except as set forth in the Prospectus.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full
corporate power and corporate authority to own its properties and
conduct its business as described in the Prospectus, and to the
knowledge of such counsel is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction in which it conducts its business or owns property and in
which the failure, individually or in the aggregate, to be so
qualified would have a Material Adverse Effect. To the knowledge of
such counsel, the Company has all necessary and material
authorizations, approvals, orders, licenses, certificates and permits
of and from all government regulatory officials and bodies, to own its
properties and conduct its business as described in the Prospectus,
except where failure to obtain such authorizations, approvals, orders,
licenses, certificates or permits would not have a Material Adverse
Effect.
(iv) After giving effect to the Underwritten Securities and the
stock split described in the Prospectus, the Company has an authorized
share capitalization as set forth in the Prospectus, and the capital
stock of the Company conforms in all material respects to the
description thereof contained in the Prospectus; all outstanding
shares of Common Stock have been duly and validly authorized and
issued and are fully paid and nonassessable; there are no other
classes of stock outstanding except Common Stock to such counsel's
knowledge; all outstanding options to purchase shares of Common Stock
have been duly and validly authorized and issued; to such counsel's
knowledge except as described in the Prospectus, there are no options,
warrants or rights to acquire, or debt instruments convertible into or
exchangeable for, or other agreements or understandings to which the
Company is a party, outstanding or in existence, entitling any person
to purchase or otherwise acquire any shares of capital stock of the
Company; the issuance and sale of the Securities have been duly and
validly authorized and, when issued and delivered and paid for, the
Securities will be fully paid and nonassessable and free from
preemptive rights under the charter and bylaws of the Company, and
will conform in all respects to the description thereof contained in
the Prospectus; the Warrants and the Representatives' Warrants
constitute valid and binding obligations of the Company enforceable in
accordance with their terms and the Company has reserved a sufficient
number of shares of Common Stock for issuance upon exercise thereof;
the Warrants and the Representatives' Warrants possess substantially
the rights, privileges and characteristics as represented in the most
recent form filed as exhibits to the
-16-
Registration Statement and as described in the Prospectus; the
Securities (other than the Representatives' Warrants) have been
approved for listing on the American Stock Exchange upon notice of
issuance thereof; and the certificates for the Securities are in valid
and sufficient form. To our knowledge and based on the Company's
records reviewed by us, each offer and sale of securities of the
Company described in Item 15 of Part II of the Registration Statement
was effected in compliance with the Act and the rules and regulations
thereunder.
(v) To such counsel's knowledge, other than as described in
the Prospectus, there is no pending or threatened action, suit or
proceeding before any court or governmental agency, authority or body,
domestic or foreign, or any arbitrator involving the Company of a
character required to be disclosed in the Registration Statement or
the Prospectus that is not adequately disclosed in the Prospectus,
and, to the knowledge of such counsel, there is no contract or other
document of a character required to be described in the Registration
Statement or the Prospectus, or to be filed as an exhibit, which is
not described or filed as required.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
agreement and obligation of the Company enforceable against it in
accordance with its terms (subject to standard bankruptcy and
equitable remedy exceptions, and limitations under the Act as to the
enforceability of indemnification provisions).
(vii) The Company has full corporate power and corporate
authority to enter into and perform its obligations under this
Agreement and to issue, sell and deliver the Securities in the manner
provided in this Agreement; and the Company has taken all necessary
corporate action to authorize the execution and delivery of, and the
performance of its obligations under, this Agreement.
(viii) Neither the offering, issue and sale of the Securities nor
the consummation of any other of the transactions contemplated herein,
nor the fulfillment of the terms hereof, will conflict with or result
in a breach or violation of, or constitute a default under, or result
in the imposition of a lien on any properties of the Company, or an
acceleration of indebtedness pursuant to, the Articles of
Incorporation (or other charter document) or bylaws of the Company, or
any of the terms of any indenture or other agreement or instrument
listed as an Exhibit to the Registration Statement or any law, order,
judgment, decree, rule or regulation applicable to the Company of any
court, regulatory body, administrative agency, governmental body,
stock exchange or arbitrator having jurisdiction over the Company. The
Company is not in violation of its Articles of Incorporation or
bylaws.
(ix) Except as disclosed in the Prospectus, under the Company's
Certificate of Incorporation, Bylaws, contacts that are listed as
Exhibits to the Registration Statement or to our knowledge, no person
has the right, contractual or
-17-
otherwise, to cause the Company to issue to it any shares of capital
stock in consequence of the issue and sale of the Securities to be
sold by the Company hereunder nor does any person have preemptive
rights, or rights of first refusal or other rights to purchase any of
the Securities. Except as referred to in the Prospectus, no person
holds a right to require or participate in a registration under the
Act of Units, Warrants, Common Stock or any other equity securities of
the Company.
(x) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body
is required to be obtained or filed by or on behalf of the Company in
connection with the transactions contemplated herein, except such as
may have been obtained or made and registration of the Securities
under the Act, the Exchange Act, the rules and regulations promulgated
thereunder, and such as may be required under the Blue Sky laws of any
jurisdiction.
(xi) To the knowledge of such counsel, the Company is not in
violation of or default under any judgment, ruling, decree or order or
any statute, rule or regulation of any court or other United States
governmental agency or body, including any applicable laws respecting
employment, immigration and wages and hours, in each case, where such
violation or default could reasonably be expected to have a Material
Adverse Effect. To such counsel's knowledge, the Company is not
involved in any labor dispute, nor is any labor dispute threatened.
(xii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(xiii) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company, and the Registration Statement has been duly
executed pursuant to such authorization by and on behalf of the
Company.
(xiv) Except as set forth in the Prospectus, neither such
counsel nor, to the knowledge of such counsel, the Company has
received any notice of either (i) default under any licenses,
sublicenses, agreements, permissions patents, copyrights, trade names,
trademarks, service marks, licenses and other intellectual property
rights or (ii) infringement of or conflict with asserted rights of
others with respect to, or challenge to the validity of, any of the
foregoing which, in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could reasonably be expected to have a
Material Adverse Effect.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants of the Company and
representatives of the Underwriters at which the contents of the Registration
Statement and Prospectus were discussed and, although such counsel is not
passing upon and does not assume responsibility for the accuracy, completeness
or fairness of the statements
-18-
contained in the Registration Statement or Prospectus (except as and to the
extent stated in subparagraphs (i) and (v) above), on the basis of the foregoing
and on such counsel's participation in the preparation of the Registration
Statement and the Prospectus, nothing has come to the attention of such counsel
that causes such counsel to believe that the Registration Statement, at the
Effective Date and at the Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, at the date of such Prospectus or at the
Closing Date, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no comment with respect to the Financial Statements and
schedules and other financial or statistical data derived therefrom included in
the Registration Statement or Prospectus). References to the Prospectus in this
Section 6(b) shall include any supplements thereto. In rendering such opinion,
such counsel (a) may rely as to matters of fact (but not as to legal
conclusions), to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. Such opinion shall not state that
it is to be governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal opinions; and (b)
will be entitled to assume that the consideration paid by the Underwriters for
the Securities represent fair market value.
(c) The Representatives shall have received from ▇▇▇▇▇▇▇ ▇▇▇▇ LLP,
counsel for the Underwriters, an opinion dated the Closing Date (and any
settlement date pursuant to Section 3 hereof), with respect to the issuance
and sale of the Securities, and with respect to the Registration Statement,
the Prospectus and other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such counsel
such documents as they may reasonably request for the purpose of enabling
them to pass upon such matters.
(d) The Company shall have furnished to the Representatives a
certificate of the Company, signed by its Chief Executive Officer and its
Chief Financial Officer, dated the Closing Date, to the effect that each
has carefully examined the Registration Statement, the Prospectus (and any
supplements thereto) and this Agreement, and, after due inquiry, that:
(i) As of the Closing Date, the statements made in the
Registration Statement and the Prospectus are true and correct and the
Registration Statement and the Prospectus do not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under
the securities or Blue Sky laws of any jurisdiction is in effect and
no proceeding for such purpose is pending before or, to the knowledge
of such officers, threatened or contemplated by the Commission or the
authorities of any such jurisdiction; and any request for additional
information
-19-
with respect to the Registration Statement or the Prospectus on the
part of the staff of the Commission or any such authorities brought to
the attention of such officers has been complied with to the
satisfaction of the staff of the Commission or such authorities.
(iii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (x) there has
not been any change in the capital stock or long-term debt of the
Company required to be disclosed in the Registration Statement, except
as set forth in or contemplated by the Registration Statement and the
Prospectus, (y) there has not been any material adverse change in the
general affairs, business, prospects, properties, management, results
of operations or condition (financial or otherwise) of the Company,
whether or not arising from transactions in the ordinary course of
business, in each case, other than as set forth in or contemplated by
the Registration Statement and the Prospectus, and (z) the Company has
not sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is
not set forth in the Registration Statement and the Prospectus.
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has been
no material litigation instituted against the Company, any of its
respective officers or directors, or, to the best knowledge of such
officers, any affiliate or promoter of the Company that is required to
be disclosed in the Prospectus, and since such dates there has been no
proceeding instituted or, to the best knowledge of such officers,
threatened against the Company, any of its officers or directors, or,
to the best knowledge of such officers, any affiliate or promoter of
the Company, before any federal, state or county court, commission,
regulatory body, administrative agency or other governmental body,
domestic or foreign, which could reasonably be expected to have a
Material Adverse Effect.
(v) Each of the representations and warranties of the Company
in this Agreement is true and correct in all material respects on and
as of the Execution Time and the Closing Date with the same effect as
if made on and as of the Closing Date.
(vi) Each of the covenants required in this Agreement to be
performed by the Company on or prior to the Closing Date has been
duly, timely and fully performed, and each condition required herein
to be complied with by the Company on or prior to the Closing Date has
been duly, timely and fully complied with.
(e) At the Execution Time and on the Closing Date, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, shall have furnished to the Representatives letters, dated as of such
dates, in form and substance reasonably satisfactory to the
Representatives, confirming that they are independent
-20-
accountants within the meaning of the Act and the applicable rules and
regulations thereunder and stating in effect that:
(i) In their opinion, the audited Financial Statements of the
Company for the fiscal years ended December 31, 1998 and 1999, and the
notes to the Financial Statements and Financial Statement schedules
for those periods included in the Registration Statement and the
Prospectus, comply in all material respects with generally accepted
accounting principles and the applicable accounting requirements of
the Act and the applicable rules and regulations thereunder.
(ii) On the basis of a reading of the latest unaudited
Financial Statements made available by the Company, carrying out
certain specified procedures (but not an examination in accordance
with generally accepted auditing standards), a reading of the minutes
of the meetings of the shareholders, directors and committees of the
Company, and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company,
nothing came to their attention that caused them to believe that: (i)
the unaudited Financial Statements of the Company for the nine (9)
months ended September 30, 2000, and the notes to the Financial
Statements and the Financial Statement Schedules for the period then
ended included in the Registration Statement and Prospectus do not
comply in all material respects with generally accepted accounting
principles or the applicable accounting requirements of the Act and
the applicable rules and regulations thereunder; and (ii) with respect
to the period subsequent to September 30, 2000, at a specified date
not more than five business days prior to the date of the letter, (y)
there were any changes in the long-term debt or capital stock of the
Company or its subsidiaries, or decreases in net current assets, net
assets or stockholders' equity of the Company as compared with the
amounts shown on the September 30, 2000 balance sheets included in the
Registration Statement and the Prospectus or (z) there were any
decreases in reserves, sales, net income or income from operations, of
the Company, as compared with the corresponding period in the
preceding year, except for changes or decreases which the Registration
Statement discloses have occurred or may occur and except for changes
or decreases, set forth in such letter, in which case (A) the letter
shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed necessary
by the Representatives and (B) such changes or decreases and the
explanation thereof shall be acceptable to the Representatives, in
their sole discretion.
(iii) They have performed certain other specified procedures as
a result of which they determined that all information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth in the
Registration Statement and the Prospectus and specified by you prior
to the Execution Time, agrees with the accounting records of the
Company.
The Representatives shall also have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
a letter
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stating that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP noted as matters involving the Company's
internal control structure and its operations that they consider to be a
significant deficiency.
References to the Prospectus in this Section 6(e) shall include any
supplements thereto.
(f) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall not
have been (i) any changes or decreases from that specified in the letters
referred to in Section 6(e) hereof or (ii) any change, or any development
involving a prospective change, in or affecting the properties, assets,
results of operations, business, capitalization, net worth, prospects,
general affairs or condition (financial or otherwise) of the Company, the
effect of which is, in the sole judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed
with the public offering or delivery of the Securities as contemplated by
the Registration Statement and the Prospectus.
(g) On or prior to the Effective Date, the Securities (other than the
Representatives' Warrants) shall have been approved for listing on the
AMEX, subject to official notice of issuance.
(h) The Company shall not have sustained any uninsured substantial
loss as a result of fire, flood, accident or other calamity which could
reasonably be expected to have a Material Adverse Effect.
(i) The Company shall have furnished to the Representatives a
certificate of the Secretary of the Company certifying as to certain
information and other matters as the Representatives may reasonably
request.
(j) The Company shall have furnished to the Representatives such
further information, certificates and documents as the Representatives may
reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in any respect when and as provided in this Agreement, or if any of
the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all respects reasonably satisfactory in form and substance to
the Representatives and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date by the Representatives. Notice of such cancellation shall be given to the
Company in writing or by telephone, facsimile or telegraph confirmed in writing.
7. Fees and Expenses and Representatives' Warrants. The Company agrees to pay
or cause to be paid and issue the following:
(a) the fees, disbursements and expenses of its own counsel and
accountants in connection with the registration of the Underwritten
Securities and Option Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any
-22-
Preliminary Prospectus, any Prospectus, and any drafts thereof, and
amendments and supplements thereto, and the mailing and delivery of copies
thereof to the Underwriters and dealers;
(b) all expenses in connection with the qualification of the
Underwritten Securities and Option Securities for offering under state
securities laws, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with
any Blue Sky memorandum, provided that in no event will the attorney fees
of counsel for the underwriters exceed $20,000;
(c) all filing and other fees in connection with filing with the
NASD;
(d) the cost of preparing and printing certificates for the
Securities;
(e) all expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties sellers' and buyers' stamp
taxes or duties on the purchase and sale of the Underwritten Securities and
Option Securities and stock exchange brokerage and transaction levies with
respect to the purchase and, if applicable, the sale of the Underwritten
Securities and Option Securities (the latter to the extent paid and not
reimbursed) (i) incident to the sale and delivery by the Company of the
Underwritten Securities and Option Securities to the Underwriters and (ii)
incident to the sale and delivery of the Underwritten Securities and Option
Securities by the Underwriters to the initial purchasers thereof;
(f) the costs and charges of any transfer agent and registrar;
(g) the fees and expenses in connection with qualification of the
Securities (other than the Representatives' Warrants) for listing on the
AMEX;
(h) a nonaccountable expense allowance of 1.5% of the proceeds
derived from the Units (including the Units issuable under the
Underwriters' Option described in Section 2(b) hereof) payable to the
Representatives, provided the Company's prior payments aggregating $75,000
shall be credited toward payment of amounts due pursuant to this subsection
(h); and
(i) a solicitation fee to the Representatives equal to 5% of the
aggregate proceeds received by the Company as a result of the solicitation
of the exercise of the Warrants, provided that no solicitation fee shall be
payable (i) within one year after the date of the closing of this offering,
(ii) if the market price of the Common Stock is lower than the exercise
price of the Warrants, (iii) if the Warrants are held in a discretionary
account at the time of the exercise, unless prior written approval of the
exercise of such Warrants is received from the beneficial owner of the
Warrants, or (iv) unless the beneficial owner of the Warrants states in
writing that the exercise was solicited by the Representatives and
designates in writing the Representatives to receive the solicitation fee
with respect to the exercise of such Warrants.
Additionally, the Representatives shall be entitled to receive on the
Closing Date, as partial compensation for its services, warrants (the
"Representatives' Warrants") for the purchase of an
-23-
aggregate of 32,000 Units of the Company. The Representatives' Warrants shall be
issued pursuant to a Warrant Agreement in the form of Exhibit A attached hereto
---------
and shall be exercisable, in whole or in part, for a period of four years
commencing one year from the date of the Prospectus, at 135% of the initial
public offering price for the Units offered pursuant to the Prospectus divided
by four.
Without limiting in any respect the foregoing obligations of the Company,
which obligations shall survive any termination of this Agreement, if the sale
of the Units (including the Units issuable under the Underwriters' Option
Securities provided for herein is not consummated because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof to be performed or complied with by the
Company other than by reason of a default by any of the Underwriters, the
Company agrees to reimburse the Underwriters, upon demand, for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Units (including the Units issuable under the Underwriters' Option to the
extent the amounts paid pursuant to Section 7(h) hereof are insufficient
therefor.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person who controls any Underwriter within the meaning
of the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in (i) Section 1 of this Agreement, the
Registration Statement, any Preliminary Prospectus or the Prospectus, or in
any amendment thereof or supplement thereto, or (ii) any application or
other document, or any amendment or supplement thereto, executed by the
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Securities under
the securities or Blue Sky laws thereof or filed with the Commission or any
securities association or securities exchange, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the Representatives
specifically for use in the Registration Statement or Prospectus; provided
further, that with respect to any untrue statement or omission, or any
alleged untrue statement or omission, made in any Preliminary Prospectus,
the indemnity agreement contained in this subsection (a) shall not inure to
the benefit of any Underwriter (or to the benefit of any person controlling
any such Underwriter) from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased the
-24-
Securities concerned to the extent that such untrue statement or omission,
or alleged untrue statement or omission, has been corrected in the
Prospectus and the failure to deliver the Prospectus was not a result of
the Company's failure to comply with its obligations under Section 5(d)
hereof. The indemnity agreement will be in addition to any liability which
the Company may otherwise have. The Company will not, without the prior
written consent of each Underwriter, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder
(whether or not such Underwriter or any person who controls such
Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act is a party to such claim, action, suit or proceeding),
unless the settlement or compromise or consent includes an unconditional
release of such Underwriter and each such controlling person from all
liability arising out of such claim, action, suit or proceeding,
satisfactory in form and substance to the Representatives.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of the Company's officers who
signs the Registration Statement, and each person who controls the Company,
within the meaning of the Act or the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with
reference to written information relating to such Underwriter furnished to
the Company by or on behalf of such Underwriter through the Representatives
specifically for use in the Registration Statement or Prospectus. The
obligations of each Underwriter under this subsection (b) shall be in
addition to any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, suit or proceeding, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 8, notify the indemnifying party
in writing of the commencement thereof and the indemnifying party shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of all expenses; but
the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party, unless such
omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. All such expenses shall be paid by the indemnifying
party as incurred by an indemnified party. Any such indemnified party shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed promptly after notice by such
indemnified party to assume the defense of such action or proceeding and
employ counsel reasonably satisfactory to the indemnified party in any such
action, suit or proceeding or (iii) the named parties in any such action or
proceeding (including any impleaded parties) include both such indemnified
party and the indemnifying party, and such indemnified party shall have
been advised by counsel that there may be one or more legal defenses
available to such indemnified party which are different from or additional
to those available to the indemnifying party (in which case, if such
indemnified party notifies the indemnifying party in writing that it elects
to employ separate
-25-
counsel at the expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such action or proceeding
on behalf of the indemnified party or parties, it being understood,
however, that the indemnifying party shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties,
which firm shall be designated in writing to the indemnifying party). Any
such fees and expenses payable by the indemnifying party shall be paid to
or on behalf of the indemnified party entitled thereto as incurred. An
indemnifying party shall not be liable for any settlement of any action or
claim effected without its consent, which consent shall not be unreasonably
withheld.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Sections 8(a) or
8(b) is applicable in accordance with its terms but is for any reason held
by a court to be unavailable from the indemnifying party on grounds of
policy or otherwise, the Company and the Underwriters shall contribute to
the aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating or
defending same) to which the Company and one or more of the Underwriters
may be subject in such proportion so that the Underwriters are responsible
in the aggregate for that portion represented by the total underwriting
compensation in respect of the Securities bears to the public offering
price appearing thereon and the Company is responsible for the balance;
provided, however, that (i) in no case shall any Underwriter (except as may
be provided in the Agreement Among Underwriters relating to the offering of
the Units) be responsible for any amount in excess of the total
underwriting compensation applicable to the Units to be purchased by such
Underwriter hereunder and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person
who controls an Underwriter within the meaning of the Act shall have the
same rights to contribution as such Underwriter, and each person who
controls the Company within the meaning of the Act, each officer of the
Company who shall have signed the Registration Statement and each director
of the Company shall have the same rights to contribution as the Company,
subject in each case to clause (ii) of this Section 8(d). Any party
entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party
or parties under this Section 8(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 other obligation it or they may have hereunder or
otherwise.
(e) For purposes of this Section 8, the terms "control" and
"controls" shall have the meanings set forth in Section 15 of the Act or
Section 20 of the Exchange Act.
-26-
9. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the Units agreed to be purchased by such Underwriter
or Underwriters hereunder and such failure to purchase shall constitute a
default in the performance of its or their obligations under this Agreement, the
remaining Underwriters shall be obligated severally to take up and pay for (in
the respective proportions which the number of Units set forth opposite their
names in Schedule I hereto bears to the aggregate number of Units set forth
opposite the names of all the remaining Underwriters) the Units which the
defaulting Underwriter or Underwriters agreed but failed to purchase; provided,
however, that if the aggregate number of Units which the defaulting Underwriter
or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
number of Units set forth in Schedule I hereto, the remaining Underwriters shall
have the right to purchase all, but shall not be under any obligation to
purchase any, of such Units. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Units which the defaulting Underwriter or
Underwriters so agreed but failed to purchase, the Closing Date shall be
postponed for 24 hours to allow the several Underwriters the privilege of
substituting within 24 hours (including non-business hours) another underwriter
or underwriters (which may include any non-defaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further 24 hours, if necessary
to allow the Company the privilege of finding another underwriter or
underwriters, satisfactory to the Representatives, to purchase the Units which
the defaulting Underwriter or Underwriters so agreed but failed to purchase. If
it shall be arranged for the remaining Underwriters or substituted underwriters
to take up the Units of the defaulting Underwriter or Underwriters as provided
in this paragraph (a), the Company shall have the right to postpone the time of
delivery for a period of not more than seven full business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus , or in any other documents or arrangements, and the
Company agrees promptly to file any amendments to the Registration Statement or
supplements to the Prospectus which may thereby be made necessary, and (b) the
respective number of Units to be purchased by the remaining Underwriters and
substitute underwriters shall be taken as the basis of their underwriting
obligation. If the remaining Underwriters shall not take up and pay for all such
Units so agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Units as aforesaid, then this Agreement shall terminate without
liability to any non-defaulting Underwriter or the Company except as otherwise
provided in Section 7. In the event of a default by any Underwriter as set forth
in this Section 9, the Closing Date shall be postponed for such period, not
exceeding seven days, as the Representatives shall determine in order that the
required changes in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Company or any nondefaulting Underwriter for damages occasioned by its
default hereunder.
10. Termination. This Agreement shall be subject to termination in the
reasonable discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Securities, if prior to such time (a) a
suspension or material limitation in trading in securities
-27-
generally on the New York or American Stock Exchange or the Nasdaq National
Market System shall have occurred, (b) a banking moratorium shall have been
declared by federal or New York state authorities, (c) the United States shall
have engaged in hostilities which shall have resulted in the declaration, on or
after the date hereof, of a national emergency or war, or (d) a change in
national or international political, financial or economic conditions or
national or international equity markets or currency exchange rates shall have
occurred, if the effect of any such event specified above is, in the sole
judgment of the Representatives, so material and adverse as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Securities as contemplated by the Registration Statement and the Prospectus.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers and the Underwriters set forth in, referred to in, or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities until all applicable
statutes of limitation have expired. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and effective
only on receipt, and will be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed:
to the Representatives at:
Institutional Equity Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
to the Company at:
▇▇▇▇▇▇▇.▇▇▇ Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
-28-
13. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers,
directors and controlling persons referred to in Section 8 hereof, and no other
person will have any right or obligation hereunder.
14. Counterparts. This Agreement may be signed in two or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereon and hereon were on the same instrument.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas. Venue will lie in the federal
or state courts of Dallas County, Texas.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Underwriters.
Very truly yours,
▇▇▇▇▇▇▇.▇▇▇, Inc.
By: _________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
Institutional Equity Corporation Capital West Securities, Inc.
By: ______________________________ By: ___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III Name:______________________________
For itself and the other several Underwriters in Schedule I to the foregoing
Agreement.
-29-
SCHEDULE I
Number of
Units
Underwriters to be Purchased
------------ ---------------
Institutional Equity Corporation
Capital West Securities, Inc.
________
Total 320,000
========