1,000,000 Shares
AUTOBOND ACCEPTANCE CORPORATION
___% Series A Cumulative Preferred Stock
, 1998
UNDERWRITING AGREEMENT
TEJAS SECURITIES GROUP, INC.
As Representative of the Several Underwriters
c/o: Tejas Securities Group, Inc.
0000 Xxxxxxx xx Xxxxx Xxx. South Building Two
Suite 000
Xxxxxx, Xxxxx 00000
Dear Sirs:
AutoBond Acceptance Corporation, a Texas Corporation (the "Company"),
proposes to sell to you and the other underwriters named in Schedule I hereto
(collectively, the "Underwriters"), for whom Tejas Securities Group, Inc. is
acting as managing underwriter and representative (the "Representative"), in the
respective amounts set forth opposite each Underwriter's name in Schedule I
hereto, an aggregate of 1,000,000 shares of ___% Series A Cumulative Preferred
Stock, no par value (the "Series A Preferred"), of the Company (such shares are
hereinafter collectively referred to as the "Underwritten Securities"). The
Company also proposes to grant to the Underwriters (i) the Underwriters' Option
(described in Section 2(b) hereof) to purchase up to an aggregate of 150,000
additional shares of Series A Preferred solely to cover over-allotments in the
sale of the Underwritten Securities (such additional shares are collectively
referred to herein as the "Option Securities"); and (ii) the Underwriters'
Warrants (defined in Section 7 hereof) to purchase shares of Common Stock of the
Company, no par value (the "Common Stock") (such Underwriters' Warrants and
shares of Common Stock, 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."
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 at the Effective Date that omits Rule 430A Information (as defined
below). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the most recent Preliminary Prospectus which predates or
coincides with the Execution Time. "Prospectus" shall mean the final prospectus
with respect to the offering of the Securities that contains the Rule 430A
Information. "Registration Statement" shall mean (a) the registration statement
referred to in Section 1(a) below, including Exhibits and Financial Statements,
in the form in which it has or shall become effective, (b) in the event any
post-effective amendment thereto becomes effective prior to the Closing Date (as
hereinafter defined) or any settlement date pursuant to Section 3(c) hereof,
such registration statement as so amended on such date, and (c) in the event of
the filing of any abbreviated registration statement increasing the size of the
offering (a "Rule 462 Registration Statement"), pursuant to Rule 462(b) (as
defined below), which registration statement became effective upon filing the
Rule 462 Registration Statement. Such term shall include Rule 430A Information
(as defined below) deemed to be included therein at the Effective Date as
provided by Rule 430A. "Rule 424," "Rule 462(b)" and "Rule 430A" refer to such
rules promulgated under the Securities Act of 1933, as amended (the "Act").
"Rule 430A Information" means information with respect to the Securities and the
offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A.
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1. Representations and Warranties of the Company.
The Company represents and warrant to, and agrees with, each Underwriter
that:
(a) The Company meets the requirements for the use of Form S-1 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 S-1 (Commission File No.
333-41257) (the "Registration Statement") for the registration under the
Act of the Securities. The Company may have filed one or more amendments
thereto, including related Preliminary Prospectuses, each of which has
previously been furnished to you. The Company will next file with the
Commission either prior to effectiveness of such Registration Statement, a
further amendment thereto (including the form of Prospectus) or, after
effectiveness of such Registration Statement, a Prospectus in accordance
with Rules 430A and 424(b)(1) or (4). As filed, such amendment and form of
Prospectus, or such Prospectus, shall include all Rule 430A Information
and, except to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus)
as the Company has advised you in writing, prior to the Execution Time,
will be included or made therein.
(b) Each 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 Representative specifically for use
in connection with the preparation of the Registration Statement or the
Prospectus (or any supplements thereto).
(c) The Company has no subsidiaries other than those listed in Exhibit
21.1 the Registration Statement as of the Effective Date.
(d) Each Company and each of its subsidiaries set forth in Exhibit
21.1 of the Registration Statement (the "Subsidiaries") 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 and the Subsidiaries, taken as a whole ("Material
Adverse Effect"). Each of the Company and each Subsidiary 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
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not have a Material Adverse Effect.
(e) The Company does not own any shares of capital stock or any other
securities of any corporation or any equity interest in any firm,
partnership, association or other entity other than the Subsidiaries.
(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
therefor are in valid and sufficient form; there are, and, on the Effective
Date, the Closing Date (as defined in Section 3(a) hereof) 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 Prospectus, there are, and, on the
Closing Date and any settlement date pursuant to Section 3(b) hereof, there
will be, no options, warrant or rights to acquire, or debt instruments
convertible into or exchangeable for, or other agreements or understandings
to which the Company is a party, outstanding or in existence, entitling any
person to purchase or otherwise acquire shares of capital stock of the
Company; the issuance and sale of the Securities have been duly and validly
authorized and, when issued and delivered and paid for, the Securities will
be fully paid and nonassessable and free from preemptive rights, and will
conform in all respects to the description thereof contained in the
Prospectus; the Underwriters' Warrants will, when issued, constitute valid
and binding obligations of the Company enforceable in accordance with their
terms and the Company has reserved a sufficient number of shares of Common
Stock for issuance upon exercise thereunder; the Securities will, when
issued, possess the rights, privileges and characteristics as described in
the Prospectus; the certificates for the Securities are in valid and
sufficient form; the Company has reserved a sufficient number of shares of
Common Stock for issuance upon redemption of the Series A Preferred; and
any Common Stock issued upon redemption of the Series A Preferred will be,
when so issued, duly and validly authorized and issued, fully paid and
nonassessable, and freely tradeable under Rule 144 of the Act and shall not
bear a restrictive legend. Each offer and sale of securities of the Company
referred to in Item 15 of Part II of the Registration Statement was
effected in compliance with the Act and the rules and regulations
thereunder, and with all applicable blue sky ("Blue Sky") laws.
(g) The Securities (other than the Warrant Securities) have been
approved for listing on the American Stock Exchange ("AMEX"), upon notice
of issuance thereof; the Company's Common Stock is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and is listed on the Nasdaq National Market, and the
Company has taken no action designed to, or likely to, have the effect of
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Nasdaq National Market, nor has the
Company received any notification that the Commission or the National
Association of Securities Dealers, Inc. (the "NASD") is contemplating
terminating such registration or listing.
(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 or any Subsidiary of a
character required to be disclosed in the Registration Statement or the
Prospectus. There is no contract or other document of a character required
to be described in the Registration Statement or Prospectus or to be filed
as an exhibit that is not described or filed as required.
(i) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as rights of indemnity and contribution hereunder may be limited by
public policy and except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and general principles of equity.
(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.
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(k) 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 any Subsidiary or an
acceleration of indebtedness pursuant to, the Articles of Incorporation or
bylaws of the Company, or any Subsidiary, as currently in effect, or any of
the terms of any indenture or other agreement or instrument to which the
Company or any Subsidiary 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 or any Subsidiary of any court,
regulatory body, administrative agency, governmental body, stock exchange
or arbitrator having jurisdiction over the Company or any Subsidiary. None
of the Company nor any Subsidiary is in violation of its Articles of
Incorporation or similar charter document or bylaws, as currently in
effect, or in breach of or default under any of the terms of any indenture
or other agreement or instrument to which it is a party or by which it or
its properties are bound, which breach or default would, individually or in
the aggregate, have a Material Adverse Effect.
(l) Except as disclosed in the Prospectus, no person has the right,
contractual or otherwise, to cause the Company to issue to it any shares of
capital stock in consequence of the issue and sale of the Securities, nor
does any person have preemptive rights, or rights of first refusal or other
rights to purchase any of the Securities. Except as referred to in the
Prospectus, no person holds a right to require or participate in a
registration under the Act of Common Stock, Preferred Stock or any other
equity securities of the Company.
(m) The Company has not (i) taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result in,
under the Exchange Act, or otherwise, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities (other than those actions permitted by applicable law)or
(ii) effected any sales of shares of securities that are required to be
disclosed in response to Item 15 of Part II of the Registration Statement
(other than transactions disclosed in the Registration Statement or the
Prospectus).
(n) No consent, approval, authorization or order of, or declaration or
filing with, any court or governmental agency or body is required to be
obtained or filed by or on behalf of the Company in connection with the
transactions contemplated herein, except such as may have been obtained or
made and registration of the Securities under the Act, and such as may be
required under the Blue Sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters.
(o) The accountants who have certified the Consolidated 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) None of the Company nor any Subsidiary has sustained since
September 30, 1997, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, and, since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there have not been any
changes in the capital stock or long-term debt of the Company, or any
material adverse change, or a development known to the Company that could
reasonably be expected to cause or result in a material adverse change, in
the general affairs, management, financial position, stockholders' equity,
results of operations or prospects of the Company and the Subsidiaries,
taken as a whole, 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 or any
Subsidiary's 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 and the Subsidiaries, taken as a whole,
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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
or any Subsidiary from conducting its business as described in the
Prospectus in essentially the same manner in which it has heretofore been
conducted.
(r) The Consolidated Financial Statements and the related notes of the
Company, including without limitation transactions with unconsolidated
Subsidiaries, 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 and the Subsidiaries at the
dates and for the periods indicated, subject in the case of the
Consolidated Financial Statements for interim periods, to normal and
recurring year-end adjustments. The Consolidated Financial Statement
schedules included in the Registration Statement present fairly the
information required to be stated therein. Such Consolidated Financial
Statements and schedules were prepared in conformity with the Commission's
rules and regulations and in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved,
except as stated therein. The financial information of the Company and the
Subsidiaries set forth in the Prospectus under the captions
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" fairly present, on the basis stated in
the Prospectus, the information included therein.
(s) Each of the Company and each Subsidiary 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, none of the Company nor any Subsidiary has
received any notice of either (i) default under any of the foregoing or
(ii) infringement of or conflict with asserted rights of others with
respect to, or challenge to the validity of, any of the foregoing which, in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a Material Adverse Effect, and 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) each of the Company and each Subsidiary owns
all properties and assets described in the Registration Statement and the
Prospectus as being owned by it and (B) each of the Company and each
Subsidiary 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
Consolidated 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 a Subsidiary, or on the use of such
properties or assets by the Company or any Subsidiary, 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 or a Subsidiary is a party and which are material to the
conduct of the business of the Company and the Subsidiaries are valid and
binding and no material default by the Company or the Subsidiary a party
thereto has occurred and is continuing thereunder; and each of the Company
and each Subsidiary 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 and the Subsidiaries. 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, none of the Company or any Subsidiary has
incurred any liabilities or obligations, direct or contingent, or entered
into any transactions, in each case, which are likely to result in a
Material Adverse Effect, and there has not been any payment of or
declaration to pay any dividends or any other distribution with respect to
the shares of the capital stock of the Company.
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(w) Each of the Company and each Subsidiary 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 or any Subsidiary has been
seized by any governmental agency or authority as a result of any violation
by the Company or any Subsidiary or any independent contractor of the
Company or any Subsidiary of any provisions of law. There is no pending
unfair labor practice complaint or charge filed with any governmental
agency against the Company or any Subsidiary. There is no labor strike,
material dispute, slow down or work stoppage actually pending or, to the
best knowledge of the Company or any Subsidiary, threatened against or
affecting the Company or any Subsidiary; no grievance or arbitration
arising out of or under any collective bargaining agreements is pending
against the Company or any Subsidiary; no collective bargaining agreement
which is binding on the Company or any Subsidiary restricts the Company or
such Subsidiary from relocating or closing any of its operations and none
of the Company or any Subsidiary has 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. All tax
deficiencies asserted or assessed against the Company by the Internal
Revenue Service ("IRS") or any other foreign or domestic taxing authority
have been paid or finally settled with no remaining amounts owed. Neither
the IRS nor any other foreign or domestic taxing authority has examined any
tax returns of the Company nor has the IRS or any foreign or domestic
taxing authority asserted a position which conflicts with any tax position
taken by the Company. The charges, accruals and reserves shown in the
Consolidated 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 Consolidated 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, each of the Company and each Subsidiary 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 none of the
Company nor any Subsidiary has received any notice or other communication
alleging a currently pending violation of any Environmental Laws. With such
exceptions as are not likely to result in a Material Adverse Effect, other
than as set forth in the Prospectus, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge or disposal of any
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products, that may result in the imposition of liability on
the Company or any Subsidiary or any claim against the Company or any
Subsidiary or, to the Company's best knowledge, against any person or
entity whose liability for any claim the Company or any Subsidiary has or
may have assumed either contractually or by operation of law, and none of
the Company nor any Subsidiary has received any notice or other
communication concerning any such claim against the Company or any
Subsidiary 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, each of the Company and
each Subsidiary 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 or such Subsidiary, as
applicable, against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against.
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(cc) None of the Company nor any Subsidiary has 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, none of the Company or any
Subsidiary maintains, nor does any other person maintain on behalf of the
Company or any Subsidiary, 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 or any
Subsidiary with respect to any such plans or trusts that are not accrued or
otherwise reserved for on the Consolidated Financial Statements.
(gg) Any certificates signed by an officer of the Company and
delivered to the Representative or the Underwriters or to counsel for the
Underwriters shall also be deemed a representation and warranty of the
Company to the Underwriters as to the matters covered thereby. Any
certificate delivered by the Company to its counsel for purposes of
enabling such counsel to render the opinions referred to in Section 6(b)
will also be furnished to the Representative and counsel for the
Underwriters and shall be deemed to be additional representations and
warranties by the Company to the Underwriters as to the matters covered
thereby.
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 100,000 shares of Series A Preferred.
Each of the Underwriters agrees, severally and not jointly, to purchase from the
Company the number of Underwritten Securities set forth opposite its name in
Schedule I hereto. The purchase price per Underwritten Security to be paid by
the several Underwriters to the Company shall be $___ per share.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option (the "Underwriters' Option") to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 150,000 shares of Series A
Preferred, at the purchase price of $____ per share for use solely in covering
any over-allotments made by the Representative for the account of the
Underwriters in the sale and distribution of the Underwritten Securities. Said
Underwriters' Option may be exercised in whole or in part at any time on or
before the 45th day after the Effective Date upon written or telegraphic notice
by the Representative to the Company setting forth the number of Option
Securities which the several Underwriters are electing to purchase pursuant to
the Underwriters' Option and the settlement date. Delivery of certificates for
such Option Securities by the Company and payment therefor to the Company shall
be made as provided in Section 3 hereof. The number of Option Securities to be
so purchased by each Underwriter pursuant to the Underwriters' Option shall be
determined by multiplying the number of Option Securities to be sold by the
Company pursuant to the Underwriters' Option, as exercised, by a fraction, the
numerator of which is the number of Underwritten Securities to be purchased by
such Underwriter as set forth opposite its name in Schedule I and the
denominator of which is the total number of Underwritten Securities to be
purchased by all of the Underwriters as set forth on Schedule I (subject to such
adjustments to eliminate any fractional share purchases as the Representative in
its discretion may make).
3. Delivery and Payment.
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(a) If the Underwriters' Option described in Section 2(b) hereof is
exercised on or before the third business day prior to the Closing Date (as
defined below), delivery of the certificates for the Shares described in
Sections 2(a) and 2(b) hereof shall be made by the Company through the
facilities of the Depository Trust Company ("DTC"), and payment therefor, shall
be made at the office of the Company at _____a.m. _______ time, on______, 1998
or such later date (but not later than_____, 1998) as the Representative shall
designate, which date and time may be postponed by agreement among the
Representative and the Company or as provided in Section 9 hereof (such date,
time of delivery and payment for such Securities being herein called the
("Closing Date"). Delivery of the certificates for such Securities to be
purchased on the Closing Date shall be made as provided in the preceding
sentence for the respective accounts of the several Underwriters against payment
by the several Underwriters through Tejas Securities Group, Inc. of the
aggregate purchase price of such Securities being sold by the Company, to or
upon the order of the Company, by certified or official bank check or checks
drawn on or by a Dallas Clearing House bank and payable in next day funds.
Certificates for such Securities shall be registered in such names and in such
denominations as the Representative may request not less than one full business
day in advance of the Closing Date. The Company agrees to have the certificates
for the Securities to be purchased on the Closing Date available at the office
of the DTC, not later than ____ a.m. _____ time at least one business day prior
to the Closing Date.
(b) If the Underwriters' Option is exercised after the third business day
prior to the Closing Date, (i) delivery of the certificates for the Shares
described in Section 2(a) hereof and payment therefor will be governed by the
provisions of Section 3(a) hereof and (ii) the Company will deliver (at the
expense of the Company) on the date specified by the Representative (which shall
not be less than one nor more than five business days after exercise of the
Underwriters' Option), certificates for the Shares described in Section 2(b)
hereof in such names and denominations as the Representative shall have
requested against payment at the office of Tejas Securities Group, Inc. of the
purchase price therefor, to or upon the order of the Company, by certified or
official bank check or checks drawn on or by a Dallas Clearing House bank and
payable in next day funds. If settlement for such Securities occurs after the
Closing Date, the Company will deliver to the Representative on the settlement
date for such Securities, and the obligation of the Underwriters to purchase
such Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof. The
Company agrees to have the certificates for the Securities to be purchased after
the Closing Date available at the office of the DTC not later than ____a.m.
_____ time at least one business day prior to the settlement date.
4. Offering by Underwriters. It is understood that the several Underwriters
propose to offer the Securities for sale to the public as set forth in the
Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution Time, to
become effective as promptly as possible. If the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representative of such timely
filing. The Company will promptly advise the Representative (i) when the
Registration Statement shall have become effective, (ii) when any post-effective
amendment thereto shall have become effective, (iii) of any request by the
Commission for any amendment or supplement of the Registration Statement or the
Prospectus or for any additional information with respect thereto, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the receipt by the Company of any notification with
respect to the institution or threatening of any proceeding for that purpose and
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The Company
will use its best efforts to prevent the issuance of any such stop order or
suspension and, if issued, to obtain as soon as possible the withdrawal thereof.
The Company will not file any amendment to the Registration Statement or
supplement to the Prospectus without the prior consent of the Representative.
The Company will prepare and file with the Commission, promptly upon your
request, any amendment to the Registration Statement or supplement to the
Prospectus that you reasonably determine to be necessary or advisable in
connection with the distribution of the Securities by you, and will use its best
efforts to cause the same to become effective as promptly as possible.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event
8
occurs as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it otherwise shall be
necessary to supplement the Prospectus to comply with the Act or the rules or
regulations thereunder, the Company will promptly prepare and file with the
Commission, subject to Section 5(a) hereof, a supplement that will correct such
statement or omission or a supplement that will effect such compliance.
(c) As soon as practicable (but not later than eighteen months after the
effective date of the Registration Statement), the Company will make generally
available to its security holders and to the Representative an earnings
statement or statements (which need not be audited) of the Company covering a
period of at least twelve months after the Effective Date (but in no event
commencing later than 90 days after such date), which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder.
(d) The Company will furnish to each of you and counsel for the
Underwriters, without charge, one signed copy of the Registration Statement and
any amendments thereto (including exhibits thereto) and to each other
Underwriter a conformed copy of the Registration Statement and any amendments
thereto (without exhibits thereto) and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act, as many copies of the
Prospectus and each Preliminary Prospectus and any supplements thereto as the
Representative may reasonably request.
(e) The Company will take all actions necessary for the registration or
qualification of the Securities for sale under the laws of such jurisdictions
within the United States and its territories as the Representative may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities and will pay the fee of the NASD in
connection with its review of the offering, provided that the Company shall not
be required to qualify as a foreign corporation or to consent to service of
process under the laws of any such jurisdiction (except service of process with
respect to the offering and sale of the Securities).
(f) The Company will apply the net proceeds from the offering received by
it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(g) The Company will (i) cause the Securities (other than the Warrant
Securities) to be listed on AMEX and (ii) comply with all registration, filing
and reporting requirements of the Exchange Act, the Nasdaq National Market and
AMEX which may from time to time be applicable to the Company.
(h) The Company shall use its best efforts to list, subject to official
notice of issuance, the shares of Common Stock required to be delivered upon
redemption of shares of Series A Preferred, prior to such redemption, upon each
national securities exchange or automated quotation system, if any, upon which
the outstanding shares of Common Stock are listed or quoted at the time of such
delivery. The Company shall also take any action necessary to ensure that any
shares of Common Stock issued upon the redemption of Series A Preferred are
freely transferable and not subject to any resale restrictions under the Act, or
any applicable state securities or blue sky laws (other than any shares of
Common Stock issued upon redemption of any Series A Preferred which are held by
an "affiliate" (as defined in Rule 144 under the Act) of the Company).
(i) During the five-year period commencing on the date hereof, the Company
will furnish to its shareholders, as soon as practicable after the end of each
respective period, annual reports (including financial statements audited by
independent certified public accountants) and unaudited quarterly reports of
earnings and will furnish to you and, upon request, to the other Underwriters
hereunder (i) concurrent with furnishing such quarterly reports to its
shareholders, statements of income and other information of the Company for such
quarter in the form furnished to the Company's shareholders; (ii) concurrent
with furnishing such annual reports to its shareholders, a balance sheet of the
Company as at the end of such fiscal year, together with statements of income
and surplus and of cash flow of the Company for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of its independent certified public accountants; (iii) as soon as they are
available, copies of all reports and financial statements furnished to or filed
with the Commission, the NASD, the Nasdaq National Market, AMEX or any other
securities exchange on which any of the Company's securities may be listed; (iv)
every press release and every material news item or article in respect of the
Company or its affairs which was released or prepared by the Company; and (v)
any additional information of a public nature concerning the Company or its
business that you may reasonably request. During such five-year period, if the
Company shall have active Subsidiaries, the foregoing financial statements shall
be on a consolidated basis to the extent that the accounts
9
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.
(j) 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.
(k) The Company has reserved and shall continue to reserve a sufficient
number of shares of Common Stock for issuance upon exercise of the Underwriters'
Warrants and a sufficient number of shares of Common Stock for issuance upon the
redemption of the Series A Preferred.
(l) If the Company elects to rely on Rule 462(b), the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 p.m., Washington D.C. time, on the date of this Agreement, and
the Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act.
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(b) 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 ___
p.m. _____ time, on the execution date hereof or at such later date and time as
you may approve in writing and, at the Closing Date (and any settlement date
pursuant to Section 3(b) hereof), no stop order suspending the effectiveness of
the Registration Statement or any qualification in any jurisdiction shall have
been issued and no proceedings for that purpose shall have been initiated or, to
the best knowledge of the Company, threatened by the Commission.
(b) The Company shall have furnished to the Representative the opinion of
Xxxxx, Day, Xxxxxx & Xxxxx, counsel for the Company, addressed to the
Underwriters and dated the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), or other evidence satisfactory to the Representative to
the effect that:
(i) The Registration Statement has become effective under the Act; any
required filing of the Prospectus or any supplements thereto pursuant to
Rule 424(b) has been made in the manner and within the time period required
by Rule 424(b); to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or threatened; the
Registration Statement and the Prospectus (and any supplements thereto)
comply as to form in all material respects with the applicable requirements
of the Act and the rules and regulations thereunder.
(ii) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Texas, with
full corporate power and corporate authority to own its properties and
conduct its business as described in the Prospectus. Each of the Company
and each Subsidiary 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.
(iii) The Company has the authorized share capitalization as set forth
in the Prospectus; the capital stock of the Company conforms in all
material respects to the description thereof contained in the Prospectus;
all outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable and the
certificates therefor are in valid and sufficient form in accordance with
applicable state law; there are no other classes of stock outstanding
except Common Stock; all outstanding options to purchase shares of Common
Stock have been duly and validly authorized and issued; except as described
in the Prospectus, there are no options, warrant or rights to acquire, or
debt instruments convertible into or exchangeable for, or other
10
agreements or understandings to which the Company is a party, outstanding
or in existence, entitling any person to purchase or otherwise acquire any
shares of capital stock of the Company; the issuance and sale of the
Securities have been duly and validly authorized and, when issued and
delivered and paid for, the Securities will be fully paid and nonassessable
and free from preemptive rights, and will conform in all respects to the
description thereof contained in the Prospectus; the Underwriters' Warrants
constitute valid and binding obligations of the Company enforceable in
accordance with their terms and the Company has reserved a sufficient
number of shares of Common Stock for issuance upon exercise thereof; the
Underwriters' Warrants possess the rights, privileges and characteristics
as represented in the forms filed as Exhibits to the Registration Statement
and as described in the Prospectus; the Company has reserved a sufficient
number of shares of Common Stock for issuance upon redemption of the Series
A Preferred and any Common Stock issued upon redemption of the Series A
Preferred will be, when so issued, duly and validly authorized and issued,
fully paid and nonassessable, and freely tradeable under Rule 144 of the
Act and shall not be required to bear a restrictive legend; the Securities
(other than the Warrant Securities) have been approved for listing on AMEX
upon notice of issuance thereof; and the certificates for the Securities
are in valid and sufficient form. Each offer and sale of securities of the
Company described in Item 15 of Part II of the Registration Statement was
effected in compliance with the Act and the rules and regulations
thereunder and with all applicable Blue Sky laws.
(vi) Other than as described in the Prospectus, there is no pending
or, to the best knowledge of such counsel, threatened action, suit or
proceeding before any court or governmental agency, authority or body,
domestic or foreign, or any arbitrator involving the Company or any
Subsidiary of a character required to be disclosed in the Registration
Statement or the Prospectus that is not adequately disclosed in the
Prospectus, and, to the best knowledge of such counsel, there is no
contract or other document of a character required to be described in the
Registration Statement or the Prospectus, or to be filed as an exhibit,
which is not described or filed as required.
(vii) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes the legal, valid and binding agreement and
obligation of the Company enforceable against it in accordance with its
terms (subject to standard bankruptcy and equitable remedy exceptions, and
limitations under the Act as to the enforceability of indemnification
provisions).
(viii) The Company has full corporate power and corporate authority to
enter into and perform its obligations under this Agreement and to issue,
sell and deliver the Securities in the manner provided in this Agreement;
and the Company has taken all necessary corporate action to authorize the
execution and delivery of, and the performance of its obligations under,
this Agreement.
(ix) Neither the offering, issue and sale of the Securities nor the
consummation of any other of the transactions contemplated herein, nor the
fulfillment of the terms hereof, will conflict with or result in a breach
or violation of, or constitute a default under, or result in the imposition
of a lien on any properties of the Company or any Subsidiary, or an
acceleration of indebtedness pursuant to, the Articles of Incorporation (or
other charter document) or bylaws of the Company or any Subsidiary, or any
of the terms of any indenture or other agreement or instrument to which the
Company or any Subsidiary is a party or by which its properties are bound,
or any law, order, judgment, decree, rule or regulation applicable to the
Company or any Subsidiary of any court, regulatory body, administrative
agency, governmental body, stock exchange or arbitrator having jurisdiction
over the Company or any Subsidiary. The Company is not in violation of its
Articles of Incorporation or bylaws or in breach of or default under any of
the terms of any indenture or other agreement or instrument to which it is
a party or by which it or its properties are bound, which breach or default
would, individually or in the aggregate, have a Material Adverse Effect.
(x) Except as disclosed in the Prospectus, no person has the right,
contractual or otherwise, to cause the Company to issue to it any shares of
capital stock in consequence of the issue and sale of the Securities to be
sold by the Company hereunder nor does any person have preemptive rights,
or rights of first refusal or other rights to purchase any of the
Securities. Except as referred to in the Prospectus, no person holds a
right to require or participate in a registration under the Act of Common
Stock or any other equity securities of the Company.
(xi) No consent, approval, authorization or order of, or declaration
or filing with, any court or governmental agency or body is required to be
obtained or filed by or on behalf of the Company in connection with
11
the transactions contemplated herein, except such as may have been obtained
or made and registration of the Securities under the Act, and such as may
be required under the Blue Sky laws of any jurisdiction.
(xiii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(xiv) The preparation and the filing of the Registration Statement
with the Commission have been duly authorized by and on behalf of the
Company, and the Registration Statement has been duly executed pursuant to
such authorization by and on behalf of the Company.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants of the Company and
representatives of the Underwriters at which the contents of the Registration
Statement and Prospectus were discussed and, although such counsel is not
passing upon and does not assume responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement or
Prospectus (except as and to the extent stated in the first one clauses of
subparagraph (v) above), on the basis of the foregoing and on such counsel's
participation in the preparation of the Registration Statement and the
Prospectus, nothing has come to the attention of such counsel that causes such
counsel to believe that the Registration Statement, at the Effective Date and at
the Closing Date (and any settlement date pursuant to Section 3(b) hereof),
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or that the Prospectus, at the date of such
Prospectus or at the Closing Date (or any settlement date pursuant to Section
3(b) hereof), contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no comment with respect to the Consolidated Financial
Statements and schedules and other financial or statistical data included in the
Registration Statement or Prospectus).
References to the Prospectus in this Section 6(b) shall include any
supplements thereto.
(c) The Representative shall have received from Xxxxx, Xxxxxx & Xxxxxx,
LLP, counsel for the Underwriters, an opinion dated the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), with respect to the issuance
and sale of the Securities, and with respect to the Registration Statement, the
Prospectus and other related matters as the Representative may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(d) The Company shall have furnished to the Representative a certificate of
the Company, signed by its Chief Executive Officer and Chief Financial Officer,
dated the Closing Date (and any settlement date pursuant to Section 3(b)
hereof), to the effect that each has carefully examined the Registration
Statement, the Prospectus (and any supplements thereto) and this Agreement, and,
after due inquiry, that:
(i) As of the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), the statements made in the Registration Statement and
the Prospectus are true and correct and the Registration Statement and the
Prospectus do not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under the
securities or Blue Sky laws of any jurisdiction is in effect and no
proceeding for such purpose is pending before or, to the knowledge of such
officers, threatened or contemplated by the Commission or the authorities
of any such jurisdiction; and any request for additional information with
respect to the Registration Statement or the Prospectus on the part of the
staff of the Commission or any such authorities brought to the attention of
such officers has been complied with to the satisfaction of the staff of
the Commission or such authorities.
12
(iii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
change in the capital stock or long-term debt of the Company, except as set
forth in or contemplated by the Registration Statement and the Prospectus,
(y) there has not been any material adverse change in the general affairs,
business, prospects, properties, management, results of operations or
condition (financial or otherwise) of the Company, whether or not arising
from transactions in the ordinary course of business, in each case, other
than as set forth in or contemplated by the Registration Statement and the
Prospectus, and (z) the Company has not sustained any material interference
with its business or properties from fire, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
any court or legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement and the Prospectus.
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has been no litigation
instituted against the Company, any of its respective officers or
directors, or, to the best knowledge of such officers, any affiliate or
promoter of the Company, and since such dates there has been no proceeding
instituted or, to the best knowledge of such officers, threatened against
the Company, any of its officers or directors, or, to the best knowledge of
such officers, any affiliate or promoter of the Company, before any
federal, state or county court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation
or proceeding an unfavorable ruling, decision or finding could have a
Material Adverse Effect.
(v) Each of the representations and warranties of the Company in this
Agreement is true and correct in all material respects on and as of the
Execution Time and the Closing Date (and any settlement date pursuant to
Section 3(b) hereof) with the same effect as if made on and as of the
Closing Date (and any settlement date pursuant to Section 3(b) hereof).
(vi) Each of the covenants required in this Agreement to be performed
by the Company on or prior to the Closing Date (and any settlement date
pursuant to Section 3(b) hereof) has been duly, timely and fully performed,
and each condition required herein to be complied with by the Company on or
prior to the Closing Date (and any settlement date pursuant to Section 3(b)
hereof) has been duly, timely and fully complied with.
(e) At the Execution Time and on the Closing Date (and any settlement date
pursuant to Section 3(b) hereof), Xxxxxxx & Xxxxxxx, L.L.P., shall have
furnished to the Representative letters, dated as of such dates, in form and
substance satisfactory to the Representative, confirming that they are
independent accountants within the meaning of the Act and the applicable rules
and regulations thereunder and stating in effect that:
(i) In their opinion, the audited Consolidated Financial Statements of
the Company for the fiscal year ended December 31, 1996, and the unaudited
Consolidated Financial Statements for the periods ended September 30, 1996
and 1997, and the notes to the Consolidated Financial Statements and
Financial Statement schedules for those periods included in the
Registration Statement and the Prospectus, including without limitation
transactions with unconsolidated Subsidiaries, 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 Consolidated
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 with respect to the period subsequent to
September 30, 1997, at a specified date not more than five business days
prior to the date of the letter, (y) there were any changes in the
long-term debt or capital stock of the Company, or decreases in net current
assets, net assets or stockholders' equity of the Company as compared with
the amounts shown on the September 30, 1997 balance sheets included in the
Registration Statement and the Prospectus or (z) there were any decreases
in reserves, sales, net income or income from operations, of the Company,
as compared with the corresponding period in the preceding year, except for
changes or decreases which the Registration Statement discloses have
occurred or may occur and except for changes or decreases, set forth in
such letter, in which case (A) the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless said
explanation is not deemed necessary by the Representative and (B) such
changes or decreases and the explanation
13
thereof shall be acceptable to the Representative, in its sole discretion.
(iii) They have performed certain other specified procedures as a
result of which they determined that all information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Company) set forth in the Registration Statement and the Prospectus and
specified by you prior to the Execution Time, agrees with the accounting
records of the Company.
References to the Prospectus in this Section 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 and the Subsidiaries, taken as a whole, the effect of
which is, in the sole judgment of the Representative, so material and adverse as
to make it impractical or inadvisable to proceed with the public offering or
delivery of the Securities as contemplated by the Registration Statement and the
Prospectus.
(g) On or prior to the Effective Date, the Securities (other than the
Warrant Securities) shall have been approved for listing on AMEX.
(h) The Company shall not have sustained any uninsured substantial loss as
a result of fire, flood, accident or other calamity.
(i) The Company shall have furnished to the Representative a certificate of
the Secretary of the Company certifying as to certain information and other
matters as the Representative may reasonably request.
(j) The Company shall have furnished to the Representative such further
information, certificates and documents as the Representative may reasonably
request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in any respect when and as provided in this Agreement, or if any of
the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all respects reasonably satisfactory in form and substance to
the Representative and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date (or any settlement date, pursuant to Section 3(b) hereof), by the
Representative. Notice of such cancellation shall be given to the Company in
writing or by telephone, facsimile or telegraph confirmed in writing.
7. Fees and Expenses and Underwriters' Warrant. The Company agrees to pay or
cause to be paid the following:
(a) the fees, disbursements and expenses of its own counsel and accountants
in connection with the registration of the Securities under the Act and all
other expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus, any Prospectus, and any
drafts thereof, and amendments and supplements thereto, and the mailing and
delivery of copies thereof to the Underwriters and dealers;
(b) all expenses in connection with the qualification of the Securities for
offering under state securities laws, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky Memorandum;
(c) all filing and other fees in connection with filing with the NASD, and
complying with applicable review requirements thereof;
(d) the cost of preparing and printing certificates for the Securities;
(e) all expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties sellers'
14
and buyers' stamp taxes or duties on the purchase and sale of the Securities and
stock exchange brokerage and transaction levies with respect to the purchase
and, if applicable, the sale of the Securities (the latter to the extent paid
and not reimbursed) (i) incident to the sale and delivery by the Company of the
Securities to the Underwriters and (ii) incident to the sale and delivery of the
Securities by the Underwriters to the initial purchasers thereof;
(f) the costs and charges of any transfer agent and registrar;
(g) the fees and expenses in connection with qualification of the
Securities (other than the Warrant Securities) for listing on the AMEX;
(h) a nonaccountable expense allowance of 2.0% of the proceeds derived from
the offering (including the Option Securities described in Section 2(b) hereof)
payable to the Representative; and
(i) all other costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically provided
for in this Section 7.
In addition to the sums payable to the Representative as provided elsewhere
herein and in addition to the Underwriters' Option, the Underwriters shall be
entitled to receive, as partial compensation for their services, warrants (the
"Underwriters' Warrants") for the purchase of an aggregate of 300,000 shares of
Common Stock of the Company. The Underwriters' Warrants shall be issued pursuant
to the Warrant Agreement in the form of Exhibit A attached hereto and shall be
exercisable, in whole or in part, for a period of four years commencing from the
one year anniversary of the date hereof, at 105% of the average closing bid
price per share of Common Stock, as quoted on the Nasdaq National Market for the
five trading days prior to the date hereof. The Underwriters' Warrants, shall be
non-transferable for one year from the date of issuance of the Underwriters'
Warrants, except for (i) transfers to officers or partners of the Underwriters,
(ii) in connection with a merger, consolidation or reorganization of the Company
or (iii) transfers occurring by operation of law.
Without limiting in any respect the foregoing obligations of the Company,
which obligations shall survive any termination of this Agreement, if the sale
of the Securities provided for herein is not consummated because any condition
to the obligations of the Underwriters set forth in Section 6 hereof is not
satisfied, because of any termination pursuant to Section 10 hereof, or because
of any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company agrees to reimburse the
Underwriters, upon demand, for all out-of-pocket expenses (including reasonable
fees and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities to the extent
the amounts paid pursuant to Section 7(h) hereof are insufficient therefor.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person who controls any Underwriter within the meaning of the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in (i) Section 1 of
this Agreement, the Registration Statement, any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or (ii) any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Securities under
the securities or Blue Sky laws thereof or filed with the Commission or any
securities association or securities exchange, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representative
specifically for use in the Registration Statement or Prospectus; provided
further, that with respect to any untrue statement or omission, or any alleged
untrue statement or omission, made in any Preliminary Prospectus, the indemnity
agreement
15
contained in this subsection (a) shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling any such Underwriter)
from whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Securities concerned to the extent that such untrue
statement or omission, or alleged untrue statement or omission, has been
corrected in the Prospectus and the failure to deliver the Prospectus was not a
result of the Company's failure to comply with its obligations under Section
5(d) hereof. The indemnity agreement will be in addition to any liability which
the Company may otherwise have. The Company will not, without the prior written
consent of each Underwriter, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless the settlement or compromise or
consent includes an unconditional release of such Underwriter and each such
controlling person from all liability arising out of such claim, action, suit or
proceeding, satisfactory in form and substance to the Representative.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its directors, each of its 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 Representative specifically for use in the Registration
Statement or Prospectus. The Company acknowledges that the corporate names of
the Underwriters and the information under the heading "Underwriting" in the
Prospectus and in any Preliminary Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters. The
obligations of each Underwriter under this subsection (b) shall be in addition
to any liability which the Underwriters may otherwise have.
(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 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 Section 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 percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the public offering price appearing
thereon
16
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 Securities) be responsible
for any amount in excess of the underwriting discount applicable to the
Securities to be purchased by such Underwriter hereunder and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 8, each person
who controls an Underwriter within the meaning of the Act shall have the same
rights to contribution as such Underwriter, and each person who controls the
Company 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.
9. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the number of Underwritten
Securities set forth opposite their names in Schedule I hereto bears to the
aggregate number of Underwritten Securities set forth opposite the names of all
the remaining Underwriters) the Underwritten Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase; provided, however,
that if the aggregate number of Underwritten Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of
the aggregate number of Underwritten Securities set forth in Schedule I hereto,
the remaining Underwriters shall have the right to purchase all, but shall not
be under any obligation to purchase any, of such Underwritten Securities, and if
such nondefaulting Underwriters do not purchase all of such Underwritten
Securities, this Agreement will terminate without liability to any
non-defaulting Underwriter or the Company except as otherwise provided in
Section 7. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representative shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company or any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company prior to
delivery of and payment for the Securities, if prior to such time (a) a
suspension or material limitation in trading in securities generally on the New
York or American Stock Exchange, the Nasdaq National Market or any
over-the-counter market, the Chicago Board Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade shall have occurred, (b) a
banking moratorium shall have been declared by federal, New York or California
state authorities, (c) the United States shall have engaged in hostilities which
shall have resulted in the declaration, on or after the date hereof, of a
national emergency or war, or (d) a change in national or international
political, financial or economic conditions or national or international equity
markets or currency exchange rates shall have occurred, if the effect of any
such event specified above is, in the sole judgment of the Representative, so
material and adverse as to make it impractical or inadvisable to proceed with
the public offering or delivery of the Securities as contemplated by the
Registration Statement and the Prospectus.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers and the Underwriters set forth in, referred to in, or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and effective only
on receipt, and will be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed:
to the Representative at:
17
Tejas Securities Group, Inc.
0000 Xxxxxxx xx Xxxxx Xxx. South Building Two, Suite 500
Austin, Texas 78746
Attention: Xxxxxx X. Xxxxx, III
Facsimile No. (000) 000-0000
to the Company at:
AutoBond Acceptance Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
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 one 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.
18
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,
AutoBond Acceptance Corporation
By:
----------------------------------
Xxxxxxx X. Xxxxxxxx
Chairman of the Board and Chief Executive Officer
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
Tejas Securities Group, Inc.
By:
----------------------------------
Xxxxxx X. Xxxxx, III
For itself and the other several Underwriters in Schedule I to the foregoing
Agreement.
19
SCHEDULE I
Number of
Underwritten Securities
Underwriters To Be Purchased
------------ ---------------
Tejas Securities Group, Inc.
---------
Total 1,000,000
=========
1
EXHIBIT A
FORM OF WARRANT AGREEMENT
1
