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EXHIBIT 1
AUSTIN XXXXXXX.XXX CORPORATION
(Holding Company for Austin Funding Corporation)
$10,000,000 Debenture Offering
MARKETING AGREEMENT
December _____, 1999
Choice Investments, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Gentlemen:
Austin Xxxxxxx.xxx Corporation, a Nevada corporation (the "Company")
hereby confirms its agreement with Choice Investments, Inc. ("Choice" or the
"Agent" or "you") as follows:
Section 1. The Offering. The Company is offering up to $10,000,000 of
its 8% Secured Subordinated Debentures due December 31, 2015 (the "Debentures"),
in an offering (the "Offering"). The Debentures are to be offered in Principal
Amounts of $5,000 or larger in integral multiples of $1,000, not to exceed
$1,000,000 to any one investor, in accordance with the Prospectus (as
hereinafter defined). The amount of the Offering may be changed by the Company
after consultation with, and the consent of, the Agent, subject to such
declaration of effectiveness of an amendment to the Prospectus by the Securities
and Exchange Commission (the "SEC") as may be required, and the offering may
occur in one or more stages. The initial Offering will commence on December __,
1999, and subscriptions will be accepted until 4:00 p.m., C.S.T., on February
11, 2000, subject to the Company's right to extend the initial subscription
period until __________, 2000, or terminate the initial Offering prior to
February 11, 2000 (the "Expiration Date"). All purchases in the Offering will be
subject to certain minimum and maximum purchase limitations and other terms and
conditions, including the right of the Company, in its sole discretion, to
reject orders in whole or in part.
The Company's obligation to pay the Debentures will be secured by a
pledge of one or more non-callable United States government or government agency
Zero Coupon Bonds due in or about December 2015 with a total face amount equal
to the total amount of Debentures issued in the offering. These bonds will be
purchased from Choice at the closing of the offering and pledged to the Trustee
as security for payment of the Debentures.
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The Company has filed with the SEC a registration statement on
Form SB-2 (File No. 333-90909) containing a prospectus relating to the Offering
for the registration of the Debentures under the Securities Act of 1933, as
amended (the "1933 Act"), and has filed such amendments thereof and such amended
prospectuses as may have been required to the date hereof. Such Registration
Statement, including any documents incorporated by reference therein and all
financial schedules and exhibits thereto, as amended, including post-effective
amendments, is herein called the "Registration Statement." The prospectus, as
amended, on file with the SEC at the time the Registration Statement initially
became effective is hereinafter called the "Prospectus," except that if any
prospectus is filed by the Company pursuant to Rule 430A or Rule 424(b) or (c)
of the rules and regulations of the SEC under the 1933 Act (the "1933 Act
Regulations") differing from the prospectus on file at the time the Registration
Statement initially becomes effective, the term "Prospectus" shall refer to the
prospectus filed pursuant to Rule 430A or Rule 424(b) or (c) from and after the
time said prospectus is filed with the SEC.
Section 2. Appointment of the Agent. Subject to the terms and
conditions of this Agreement, the Company hereby appoints the Agent, as its
financial advisor and marketing agent, to consult with and advise the Company in
connection with the Offering, but not to solicit subscriptions for Debentures in
the Offering. On the basis of the representations, warranties and agreements
herein contained, the Agent accepts such appointment and agrees to assist the
Company in the Offering as follows: (i) assist in preparing the Prospectus and
marketing materials in connection with the Offering; (ii) assist in developing
supplemental marketing material items; (iii) organize Debenture information with
Company employees and equipment; (iv) hold employee and director training
sessions; (v) develop targeted investor lists in cooperation with Company
directors and management; and (vi) respond to direct inquiries by providing
Agent personnel at the Sales Center on the first three days and the last three
days of the Offering and three other days as needed; to the extent necessary,
Agent personnel will respond to non-routine questions of a financial or
investment nature; on those days when Agent personnel are at the Sales Center,
such personnel will be available to discuss the merits of an investment in the
Company on an individual basis with prospective investors; provided, however,
that the Agent shall not be responsible for obtaining subscriptions of any
specific amount of Debentures and shall not be obligated to take any action
which is inconsistent with any applicable laws, rules, regulations, decisions or
orders. Subscriptions will be offered by means of Debenture Order Forms as
described in the Prospectus.
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, Choice
accepts such appointment and agrees to consult with and advise the Company as to
the matters set forth herein and in the letter agreement ("Letter Agreement"),
dated October 8, 1999, between the Company and Choice , a copy of which is
attached hereto as Exhibit "A". It is acknowledged by the Company that Choice
shall not be required to purchase any Debentures.
The Company agrees and acknowledges that the Agent may utilize its
broker network in the Offering to distribute the Debentures, on a "best efforts"
basis, and, if deemed appropriate by the Agent, other broker/dealers which are
members of the National Association
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of Securities Dealers, Inc. (the "NASD") pursuant to the terms and conditions of
a Selected Dealers' Agreement between the Agent and such broker/dealers, the
form of which is attached hereto as Exhibit "B". The Agent hereby agrees that
prior to utilizing its other broker/dealers, the Agent will consult with the
Company regarding its determination and will not take any action in this regard
which is not approved in writing by the Company.
The Company hereby further agrees and acknowledges that, having
appointed the Agent hereunder, only personnel employed by the Agent, and such
other personnel as are assigned for specific services or services contemplated
by this Agreement to be performed by the Agent, will be involved in providing
the services described herein.
All subscription funds received by the Agent or by other broker/dealers
soliciting subscriptions, if any, shall be promptly transmitted (either by U.S.
Mail or similar type of transmittal) to Compass Bank (the "Escrow Agent") for
deposit in a separate interest-bearing account (the "Escrow Account") by noon of
the following business day.
The obligations of the Agent pursuant to this Agreement shall terminate
upon the completion or termination or abandonment of the Offering, but in no
event later than _________, 2000 (the "End Date"). All fees or expenses due to
the Agent but unpaid will be payable to the Agent in next day funds at the
earlier of the Closing Date (as hereinafter defined) or the End Date. In the
event the Offering is extended beyond the End Date, the Company and the Agent
may mutually agree to renew this Agreement under mutually acceptable terms.
Section 3. Fees. In addition to the expenses specified in Sections 7
and 8 hereof, as compensation for the Agent's services under this Agreement, the
Company will pay the following fees to the Agent:
(a) A financial advisory fee of $50,000 payable in two
installments: the first installment of $25,000 was paid on the execution of the
Letter Agreement and the second installment of $25,000 is payable when the
Registration Statement (as defined hereinafter) becomes effective. Such fees
shall be deemed to have been earned when due. Should the Offering be terminated
for any reason not attributable to the action or inaction of the Agent, Agent
shall be deemed to have earned, and shall be paid, fees accruing through the
stage at which point the termination occurred, including any accrued legal fees
expended by the Agent.
(b) A commission equal to 5% of the aggregate actual purchase
price of the Debentures sold in the Offering by Choice, if any. In the event
that a syndicate of selected broker-dealers are used to assist in the Offering,
the Agent will allocate to such selected broker-dealers who assist in the
Offering an amount competitive with gross underwriting discounts charged at such
time for comparable amounts of Debentures sold in a similar market environment.
Fees with respect to purchases affected through selected broker-dealers other
than the Agent shall be transmitted by the Agent to such selected broker-dealer.
The decision to utilize selected broker-dealers will be made by the Company with
consent of the Agent.
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Section 4. Accounts; Closing. The Company shall establish and maintain
the Escrow Account for the benefit of the subscribers of Debentures. No funds
deposited into the Escrow Account shall be released or disbursed to the Company,
and no withdrawal authorizations will be exercised by the Company, until all of
the conditions set forth in Section 9 of this Agreement shall have been
fulfilled. In the event the Offering is not consummated for any reason,
including, but not limited to, the inability to sell the Debentures during the
Offering (including any permitted extension thereof), this Agreement shall
terminate and the Company shall refund to any persons who have subscribed for
any of the Debentures the full amount which the Company may have received plus
accrued interest as set forth in the Prospectus.
If all of the Debentures to be sold in the Offering are subscribed for
at the completion of the Offering, the Company agrees on the Closing Date to
issue the Debentures which have been subscribed for against payment therefor
from the aforesaid Escrow Account maintained for the benefit of the subscribers
with the Escrow Agent and to deliver certificates evidencing ownership of such
Debentures in such authorized denominations and registered in such names as
indicated on the Debenture Order Forms directly to the purchasers thereof as
promptly as practicable after the Closing Date. In addition, a closing shall be
held at the offices of Xxxxxx Xxxxxx & Xxxxxx, P.C., or at such other place as
shall be agreed upon between the Company and the Agent, as of the close of
business on a business day to be selected by the Agent, which business day shall
be no less than two business days following the giving of prior notice to the
Company and no more than five business days after the Debentures have been sold
or at such other time as shall be agreed upon between the Company and the Agent.
The Company shall notify the Agent by telephone, confirmed in writing, when
funds shall have been received for all Debentures. At the closing, the Company
shall deliver to the Agent in next day funds the commissions, fees and expenses
due and owing to the Agent as set forth in Sections 3, 9 and 10 hereof, and the
certificates required hereby and other documents deemed reasonably necessary by
the Agent shall be executed and delivered to effect the sale of the Debentures
as contemplated hereby and pursuant to the terms of the Prospectus. The hour and
date upon which the Company shall release for delivery all Debentures, in
accordance with the terms hereof, are referred to herein as the "Closing Date."
Section 5. Representations and Warranties of the Company. In order to
induce the Agent to enter into this Agreement, the Company represents and
warrants to, and agrees with, the Agent that:
(a) The Company has all such power, authority, authorizations,
approvals and orders as may be required to enter into this Agreement, to carry
out the provisions and conditions hereof and to issue and sell the Debentures as
provided herein and as described in the Prospectus. The consummation of the
Offering, the execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated have been duly and validly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and is legal,
valid and binding on it, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights, and subject, as to the enforcement of
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remedies, including the remedy of specific performance and injunctive and other
forms of equitable relief which may be subject to certain equitable defenses and
to the discretion of the court before which any proceedings may be brought, to
general principles of equity regardless of whether the enforceability is
considered a proceeding at law or in equity, and except as the obligations of
the Company under the indemnification and contribution provisions hereof may be
limited by federal or state securities laws or the public policy underlying such
laws.
(b) A Registration Statement on Form SB-2 (Registration No.
___________) with respect to the Debentures has been prepared by the Company in
conformity with the requirements of the Act and the SEC Rules and Regulations,
has been filed with the SEC and has been declared effective by the SEC. At the
time the Registration Statement became effective, and at all times subsequent
thereto up to the Closing Date, the Registration Statement and the Prospectus,
including any amendments or supplements thereto, contained and will contain all
statements that are required to be stated therein in accordance with the Act and
the SEC Rules and Regulations and conformed and will conform in all material
respects to the requirements of the Act and the SEC Rules and Regulations. The
Registration Statement, the Prospectus, any Blue Sky Application or any Sales
Information (as such term is defined in Section 10 hereof), including any
amendments or supplements thereto, did not contain or will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that none of the representations and warranties in this subsection
shall apply to statements in or omissions from any preliminary Prospectus, the
Prospectus, the Registration Statement or any conformity or supplement made in
reliance upon and in conformity with information made in reliance upon and in
conformity with information furnished to the Company in writing by the Agent
expressly for use therein. Without limiting the generality of the foregoing, all
fees, whether of finder's, originators, underwriters or otherwise required to be
disclosed in the Prospectus have been disclosed; all legal or governmental
proceedings pending or threatened involving the Company and required to be
disclosed in the Prospectus have been disclosed; and all contracts, agreements
or other documents of a character required to be described or referred to
therein have been disclosed in the Prospectus. All contracts, agreements and
other documents described or referred to in the Prospectus, to which the Company
is a party, or by which it or its properties are bound or committed are, unless
otherwise disclosed therein, in full force and effect; the descriptions thereof
or references thereto are correct in all material respects; and no default
exists in the due performance or observance of any obligations, agreements or
other document so described or referred to therein, unless otherwise disclosed
therein. As of the Closing Date, the Company will have satisfied the conditions
precedent to their consummation of the Offering in accordance with all
applicable laws, regulations, decisions and orders.
(c) Neither the SEC nor any state authority nor any court or
other governmental agency or body has, by order or otherwise, prevented or
suspended the use of the Prospectus or the offer or sale of the Debentures, or
to the best knowledge of the Company, is any such action threatened.
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(d) Xxxxxxx & Xxxx, L.L.P., which has expressed its opinion
with respect to certain of the financial statements and schedules filed as part
of the Prospectus and included in the Registration Statement, is, with respect
to the Company's subsidiary, Austin Funding Corporation ("AFC"), an independent
certified public accountant within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
(e) The financial statements and schedule(s) of AFC and notes
related thereto included in the Registration Statement and which are part of the
Prospectus present fairly the financial condition of AFC as of the dates
indicated and the results of their operations for the periods specified and
comply as to form in all material respects with the applicable accounting
requirements. Such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis during
the periods involved. The tables and any other financial and numerical data in
the Prospectus fairly present in all material respects the information purported
to be shown thereby at the respective dates thereof and for the respective
periods covered thereby and were prepared on a basis consistent with the audited
financial statements of AFC.
(f) Since the respective dates as of which information is
given in the Prospectus, except as may otherwise be stated therein, (i) there
has not been any material adverse change in the condition of the Company or AFC,
financial or otherwise, or in the results of operations, earnings, affairs or
business prospects of the Company or AFC, whether or not arising from
transactions in the ordinary course of business; (ii) there have not been any
material transactions entered into by the Company or AFC, other than those in
the ordinary course of business; (iii) there has not been any material increase
in the long-term debt of the Company or AFC; (iv) there has not been any
material adverse change in the aggregate dollar amount of the Company's or AFC's
surplus or reserves; (v) there has been no material adverse change in the
Company's or AFC's relationship with its insurance carriers; (vi) there has been
no material change in management of the Company or AFC; and (vii) there has been
no material increase in the Company's or AFC's liability for borrowed money.
(g) The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Nevada, with full
corporate power and authority to own its properties and conduct its business as
described in the Prospectus. The Company has obtained all licenses, permits and
other governmental authorizations currently required for the conduct of its
business, except where the failure to do so would not individually or in the
aggregate have a material adverse effect on the business, prospects, results of
operation or general affairs of the Company; all such licenses, permits and
other governmental authorizations are in full force and effect, and the Company
is in all material respects complying therewith. The Company is not required to
qualify as a foreign corporation in any other jurisdiction in which the failure
to qualify would have a material adverse impact on the conduct of the Company's
business as described in the Prospectus.
(h) The authorized, issued and outstanding equity capital of
the Company is as set forth in the Prospectus under the caption
"Capitalization"; no Debentures have been or will be issued and outstanding
prior to the Closing Date; the Debentures offered in the
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Offering have been duly and validly authorized for issuance and, when issued and
delivered by the Company pursuant to the terms in the Prospectus against payment
of the consideration as set forth in the Prospectus, will be duly and validly
issued and fully paid and nonassessable; and the Company's common stock conforms
to the description thereof contained in the Prospectus. There are no pre-emptive
rights or other rights to subscribe for or to purchase any Debentures pursuant
to the Company's Articles of Incorporation, Bylaws or other governing documents
or any agreement or other instrument to which the Company is a party or by which
it is bound. Neither the filing of the Registration Statement nor the offering
or sale of the Debentures as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any Debentures. The certificates used to evidence the
Debentures are in due and proper form.
(i) The Company has one subsidiary, AFC. Upon the Closing, the
Company will own, directly or indirectly, all of the issued and outstanding
capital stock of AFC, free and clear of any lien, charge or encumbrance and,
except as disclosed in the Prospectus, there are no outstanding warrants, rights
or options to acquire or instruments convertible into, or exchangeable for any
capital stock or other equity interest in AFC.
(j) The Company is not in violation of its Articles of
Incorporation, Bylaws or other corporate governing documents. The Company is not
in violation of or in default, and no event has occurred which with notice of
lapse of time, or both, would constitute default on the part of the Company in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, lease, loan agreement, mortgage, note,
indenture or other material instrument to which it is a party or by which it or
its assets are bound, which default in any individual case or in the aggregate
would have a material adverse effect on the business, prospects, general
affairs, operations or financial condition of the Company, and the execution and
delivery of this Agreement, the incurrence of the obligations herein set forth
and the consummation of the transactions herein contemplated will not conflict
with or constitute a breach of, or default under, or result in the creation of
any material lien, charge or encumbrance upon any of the assets of the Company
pursuant to the Articles of Incorporation or Bylaws of the Company or any
material obligation, agreement, contract, franchise, license, lease, indenture,
note, mortgage loan agreement or other material instrument to which it is a
party or in which it has a beneficial interest in, or by which it may be bound,
or materially violate or conflict with any law, administrative regulation or
administrative or court decree. No consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other governmental
body is required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement, except such as
has been obtained and except for approval of the SEC, compliance with the Act,
the state securities laws ("Blue Sky Laws") applicable to the Offering of the
Debentures and the clearance of such offering with the NASD and the National
Association of Securities Dealers Automated Quotation System ("NASDAQ").
(k) The Company and AFC each have good and marketable title to
all its properties and assets material to its business and to those properties
and assets described in the Prospectus as owned by it, free and clear of all
liens, charges, encumbrances or restrictions,
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except such as are described in the Prospectus or are individually or in the
aggregate are not materially significant or important in relation to the
business of the Company; and all of the leases and subleases material to the
business of AFC under which AFC holds properties, including those described in
the Prospectus, are valid and binding leases and subleases in full force and
effect.
(l) The Company is not subject to nor in violation of any
directive from the State of Nevada or any other governmental authority to make
any material change in the method of conducting its business or affairs; the
Company has conducted and is conducting its business to comply in all material
respects with all applicable statutes and regulations and, except as set forth
in the Prospectus, there is, to the knowledge of the Company, no charge,
investigation, action, suit or proceeding before or by any court, regulatory
authority or governmental agency or body pending or threatened which may
materially and adversely affect the performance of this Agreement or the
consummation of the transactions herein contemplated or which may result in any
material adverse change in the condition (financial or otherwise), business,
operations general affairs or prospects of the Company, or which would
materially affect any of its properties and assets. The Company is in compliance
in all material respects with the applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, and the rules and regulations thereunder.
(m) All documents delivered or to be delivered by the Company
or their representatives in connection with the issuance and sale of the
Debentures or in connection with the Agent's exercise of due diligence, except
for those documents which were prepared by parties other than the Company or its
representatives, to the knowledge of the Company, were on the dates on which
they were delivered, or will be on the dates on which they are to be delivered,
true, complete and correct in all material respects.
(n) The Company and AFC have each filed all required federal,
state and foreign income, sales and franchise tax returns and has paid all taxes
shown as due and payable thereon except where permitted to be extended; neither
the Company nor AFC have any knowledge of any tax deficiency which has been
asserted or threatened against the Company or AFC which could materially and
adversely affect the business or operations or properties of the Company.
(o) Appropriate arrangements have been made for placing the
funds received from subscriptions for Debentures in special interest-bearing
accounts with the Escrow Agent until all Debentures are sold and paid for, with
provision for refund to the purchasers in the event that the closing of the
Debentures is not completed for whatever reason or for delivery to the Company
if all Debentures are sold.
(p) The Company has complied or will comply in all material
respects with each and every undertaking or commitment made by them under the
Blue Sky Laws, including, without limitation, each and every undertaking or
commitment made in connection with the Offering. The Company has used its best
efforts to qualify the Debentures for
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offering in every state designated by the Company and the Agent. The materials
previously filed or filed after the date hereof with any state do not and will
not contain any untrue statements of material fact nor are there or will there
be any omissions of material facts required to be stated therein or that are
necessary to make the statements therein not misleading.
(q) No relationship, direct or indirect, exists between the
Company, on the one hand, and the directors or officers of the Company, on the
other hand, which is required to be described in the Prospectus and which is not
so described.
(r) The Company has not: (i) placed any securities within the
last 18 months; (ii) had any material dealings with any member of the NASD or
any person related to or associated with such member, other than discussions and
meetings relating to the proposed Offering and routine purchases and sales of
U.S. Government and agency securities and other assets; (iii) entered into a
financial or management consulting agreement except as contemplated hereunder
and except for the engagement letter with the Agent attached hereto as Exhibit
"A"; or (iv) engaged any intermediary between the Agent and the Company in
connection with the offering of the Debentures, and no person is being
compensated in any manner for such service.
Any certificate signed by any officers of the Company
and delivered to the Agent or to the Agent's counsel shall be deemed a
representation and warranty of the Company to the Agent as to the matters
covered thereby. Any certificate delivered by the Company to their counsel for
purposes of enabling such counsel to render the opinions referred to in Section
9(e) will also be furnished to the Agent and its counsel and shall be deemed to
be additional representations and warranties by the Company to the Agent as to
the matters covered thereby and the Agent and its counsel are entitled to rely
thereon.
Section 6. Representations and Warranties of Choice.
(a) Choice is a corporation established in 1983 and is validly
existing in good standing under the laws of the State of Texas with full power
and authority to provide the services to be furnished to the Company hereunder.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of Choice, and this Agreement has
been duly and validly executed and delivered by Choice and is a legal, valid and
binding agreement of Choice, enforceable in accordance with its terms except as
the enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors, or by general equity
principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(c) Each of Choice and its employees, agents and
representatives who shall perform any of the serivces hereunder shall be duly
authorized and empowered, and shall have all licenses, approvals and permits
necessary to perform such services.
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(d) The execution and delivery of this Agreement by Choice,
the consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof will not conflict with, or result in a breach of,
any of the terms, provisions or conditions of, or constitute a default (or an
event which with notice or lapse of time or both would constitute a default)
under, the articles of incorporation of Choice or any material agreement,
indenture or other instrument to which Choice is a party or by which it or its
property is bound.
(e) No approval of any regulatory or supervisory or other
public authority is required in connection with Choice's execution and delivery
of this Agreement or the performance of its terms, except as may have been
received.
(f) There is no suit or proceeding or charge or action before
or by any court, regulatory authority or government agency or body or, to the
knowledge of Choice, pending or threatened, which might materially adversely
affect Choice's performance of this Agreement.
Section 7. Agreements of the Company. The Company hereby agrees with
the Agent that:
(a) The Company will use its best efforts to cause the
Registration Statement to be declared effective by the SEC. The Company will
notify the Agent immediately and confirm the notice in writing thereto (i) of
any request by or the receipt of any comments from the SEC with respect to the
transactions contemplated by this Agreement; (ii) of any request by or any
comments or other communications received from the SEC and any request by the
SEC for any amendment or supplement to the Registration Statement or the
Prospectus, or for additional information with respect to the transactions
contemplated therein or by the Offering; and (iii) of the issuance by the SEC or
any court or governmental agency or body of any stop order or other order
suspending or enjoining the effectiveness or approval of the Registration
Statement, the Prospectus or the Offering or of the institution of any
proceedings for that purpose or of any notification of the suspension of
qualification of the Debentures in any jurisdiction or the initiation or
threatening of any proceeding for that purpose or the threat of any such action.
The Company will make every reasonable effort to prevent the issuance by the SEC
and any court or governmental agency or body of any stop order or other such
order, or request for amendment or additional information or the commencement of
any proceeding and, if any such order, request or proceeding shall at any time
be issued or commenced, to obtain the lifting thereof, to respond thereto or to
obtain the termination thereof at the earliest possible moment.
(b) The Company will deliver to the Agent, without charge,
from time to time such number of copies of the Prospectus and related documents
(as amended or supplemented), as the Agent may reasonably request. The Company
authorizes the Agent, subject to all requirements of applicable law, to use the
Prospectus (as the same may be amended or supplemented) in connection with the
sale of the Debentures.
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(c) The Company will deliver to the Agent at least two
complete copies (including exhibits) of its Registration Statement on Form SB-2
as originally filed with the SEC and of each amendment thereto.
(d) The Company will comply, at its own expense, with all
requirements imposed upon it by the SEC and by the Act, the Exchange Act and the
SEC Rules and Regulations, including, without limitation, Rules 10b-5 and 10b-6
under the Exchange Act, in each case as from time to time in effect, so far as
necessary to permit the continuance of offers, sales or dealings in Debentures
during such period in accordance with the provisions hereof and the Prospectus.
(e) If, at any time during the period when the Prospectus is
required by law to be delivered, any event occurs as a result of which, in the
opinion of counsel to the Company or the Agent, the Prospectus, including any
amendments or supplements, would contain an untrue statement of a material fact,
or would 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, or if it is necessary in the opinion
of counsel to the Company or the Agent at any time to amend or supplement the
Prospectus, including any amendments or supplements to comply with the Act and
all other laws, the Company, as appropriate, will promptly advise the Agent
thereof and will promptly prepare and file with the SEC and any other authority
with jurisdiction an amendment or supplement.
(f) The Company will not, prior to the Closing Date, incur any
material liability or obligation, direct or contingent, or enter into any
material transaction, other than in the ordinary course of business, except as
disclosed in the Prospectus.
(g) The Company will not acquire any Debentures prior to the
Closing Date.
(h) During the period of three years after the date of the
Prospectus, the Company will furnish to the Agent upon request (i) as soon as
practicable after the end of each fiscal year, the annual report of the Company
containing the balance sheet of the Company as of the close of such fiscal year
and corresponding statements of income, stockholders' equity and changes in
financial position for the year then ended, such financial statements to be
certified by independent public accountants; (ii) as soon as practicable after
the end of each fiscal quarter (other than the last quarter of each fiscal
year), an unaudited balance sheet and statements of income, stockholders' equity
and changes in financial position of the Company as at the end of and for such
quarter; (iii) as soon as available, a copy of each proxy statement, financial
statement and periodic and special reports of the Company mailed to holders of
any class of its securities registered under Section 12 of the Exchange Act;
(iv) as soon as practicable after the filing thereof, of each report or other
statement or document filed by the Company with the SEC or other regulatory
agency or with any national securities exchange or quotation system on which any
securities of the Company may be listed or quoted; and (v) from time to time,
such other information concerning the Company as the Agent may reasonably
request.
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(i) The Company will comply or cause to be complied with the
conditions to the obligations specified in Section 11 hereof.
(j) The Company shall promptly prepare and file with the SEC,
from time to time, such reports as may be required to be filed by the SEC Rules
and Regulations, including, without limitation, reports with respect to the sale
of the Debentures and the application of the proceeds thereof as may be required
in accordance with Rule 463 under the Act.
(k) The Company shall comply in all material respects with the
undertaking given by the Company in connection with the qualification of the
Debentures for offering and sale under the Blue Sky Laws.
(l) The Company shall use the net proceeds from the sale of
the Debentures in the manner set forth in the Prospectus under the caption "Use
of Proceeds."
(m) The Company will not, for a period of 90 days after the
date hereof, without the prior written consent of the Agent, offer for sale,
sell or issue, contract to sell or otherwise dispose of, any Debentures of, or
any securities convertible into or exercisable for, Debentures issued pursuant
to the Offering or sell or grant any options, rights or warrants with respect to
Debentures.
(n) Other than as permitted by applicable law, the Company
will not distribute any Prospectus or other offering material in connection with
the subject offering and sale of the Debentures.
(o) The Company will qualify the Debentures under the Blue Sky
Laws of such jurisdictions as the Company and the Agent mutually agree to make
such applications, file such consents to service of process or other documents
and furnish such other information as may be reasonably requested for that
purpose and to comply with such laws so as to permit the continuance of sales
and dealings in such jurisdictions for as long a period as the Company and the
Agent may mutually agree. The Company will notify the Agent immediately of, and
confirm in writing, the suspension of qualification of the Debentures or the
threat of such action in any jurisdiction. In each jurisdiction where any of the
Debentures shall have been qualified as provided above, the Company will make
and file such statements and reports as are required by, or in the future may be
required by, the laws of such jurisdiction.
(p) At the Closing Date, the Company will have completed the
Offering in all material respects as described in the Prospectus and in
accordance with all applicable laws, regulations, decisions and orders of the
SEC and state securities authorities.
(q) The Company will maintain appropriate arrangements with
the Escrow Agent for depositing all funds received from persons mailing
subscriptions for or orders to purchase Debentures in the Offering in an account
bearing interest at the rate, if any, described
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in the Prospectus until the Closing Date and satisfaction of all conditions
precedent to the release of the Company's obligation to refund payments received
from persons subscribing for or ordering Debentures in the Offering as described
in the Prospectus or until refunds of such funds have been made to the persons
entitled thereto as described in the Prospectus.
(r) The Company will use its best efforts to (i) encourage and
assist a market maker to establish and maintain a market for the Debentures, and
(ii) obtain approval for and maintain quotation of the Debentures on the
Small-Cap Market of the NASDAQ system effective on or prior to the Closing Date.
The Company will take such actions and furnish such information as are
reasonably requested by the Agent in order for the Agent to ensure compliance
with the NASD "Interpretation With Respect to Free Riding and Withholding."
(s) The Company will conduct its business in compliance in all
material respects with all applicable federal and state laws, rules,
regulations, decisions, directives and orders, including all decisions,
directives and orders of the SEC.
(t) The Company shall not deliver the Debentures until it has
satisfied or caused to be satisfied in all material respects each and every
condition set forth in Section 11 hereof unless such condition is waived in
writing by the Agent.
Section 8. Covenants of Choice. Choice hereby covenants with the
Company, during the period when the Prospectus is used, Choice will comply, in
all material respects and at its own expense, with all requirements imposed upon
it, to the extent applicable, by the 1933 Act and the 1934 Act and the rules and
regulations promulgated thereunder and state blue sky laws and regulations
applicable to Choice; Choice will distribute the Prospectuses or offering
materials in connection with the sales of the Debentures only in accordance with
the 1933 Act and the rules and regulations promulgated thereunder.
Section 9. Payment of Expenses of the Company. Subject to the
provisions of Section 10 below, whether or not the transactions contemplated
hereunder are consummated or this Agreement becomes effective or is terminated
for any reason, the Company will pay all costs and expenses incident to the
performance of its obligations hereunder, including, without limiting the
generality of the foregoing:
(a) All fees and expenses of the accountants and counsel of
the Company, all costs and expenses incurred in connection with the preparation,
printing, filing and distribution, including costs of shipping and mailing, of
the Registration Statement and the Prospectus and all amendments and supplements
thereto and other documents in connection with the transactions contemplated by
this Agreement and the Prospectus (including all exhibits and financial
statements) (and all agreements and supplements provided for therein and in this
Agreement and the preliminary and supplemental Blue Sky Memoranda).
(b) All registration fees and expenses, including, without
limitation, legal fees and disbursements of the Company's counsel incurred in
connection with qualifying or registering all or any part of the Debentures for
offer and sale under the Blue Sky Laws.
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(c) All fees and expenses of the trustee, registrar, paying
agent and any special agents appointed with respect to the Debentures,
preparation, printing, issuance and delivery of the certificates representing
Debentures, all issue and transfer taxes, if any, with respect to the sale and
delivery of the Debentures and all fees of the NASD.
The Company shall reimburse the Agent pursuant to the procedures set
forth in Section 10 for any expense provided in (a) through (c) above which, in
the first instance, was paid by the Agent.
Section 10. Reimbursement of Agent's Expenses. Except for the
reimbursement provided herein, the Agent will pay its own costs and expenses
incurred in connection with the performance of this Agreement and the
transactions contemplated hereunder, including the fees and disbursements of its
counsel, marketing expenses and due diligence expenses. The Company shall
reimburse the Agent for the fees and disbursements of its counsel (up to a
maximum of $20,000.00 for legal fees, including out-of-pocket expenses for
travel and other disbursements of counsel) and $2,500.00 for other expenses of
Choice, which shall be paid within five days of receipt by the Company of an
itemized xxxx summarizing such expenses since the date of the last xxxx, if any,
to the date of the current xxxx. To the extent not previously paid, full payment
of such fees and expenses shall be made in next day funds on the Closing Date
provided that the Company shall have received an itemized xxxx summarizing any
unreimbursed expenses at least two days before the Closing Date or on such later
date if the Company shall have received an itemized xxxx summarizing any
unreimbursed expenses at least two days before such date or, if the Offering is
not completed and is abandoned or terminated for any reason, within five days of
receipt by the Company of a reasonable accounting from the Agent of its
expenses.
The Company may request, and the Agent agrees to provide, copies of
documentary evidence of all expenses of $25.00 or more for which Agent seeks
reimbursement, such as receipts or paid bills, that state information to
establish the amount, date, place and essential character of the expenditure.
Subject to the provisions of this Section 10, in the event the Offering for any
reason is not closed, the Company will reimburse the Agent for its actual,
accountable, reasonable legal fees and expenses.
Section 11. Conditions to the Obligations of the Agent and the Release
of Debentures. The issuance and sale of the Debentures, the delivery of
certificates in respect thereof, and the obligations of the Agent hereunder
shall be subject to the accuracy in all material respects of the representations
and warranties on the part of the Company herein set forth as of the date hereof
and as of the Closing Date to the accuracy in all material respects of the
statements of the officers of the Company made pursuant to the provisions hereof
and to the performance in all material respects by the Company's obligations
hereunder.
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The issuance and sale of the Debentures, the delivery of certificates
in respect thereof, and the obligations of the Agent on the Closing Date shall
also be subject to the following additional conditions (which are solely for the
Agent's benefit), unless waived in writing by the Agent:
(a) The Registration Statement shall have been declared
effective by the SEC; prior to the Closing Date, no stop order or such other
order suspending the offering or the effectiveness of the Registration Statement
or the effectiveness of the Prospectus shall have been issued or proceedings
therefor instituted, initiated or threatened by the SEC or any court or
governmental agency or body and any request of the SEC or any other governmental
agency or body for inclusion of additional information in the Registration
Statement, or otherwise, shall have been complied with. The NASD, upon review of
the terms of this Agreement, shall not have objected to the Agent's performance
of its obligations hereunder or the terms set forth.
(b) The Agent shall not have advised the Company in writing
that the Registration Statement or the Prospectus or any amendment or supplement
thereto contains an untrue statement of fact, which is material or omits to
state a fact which is material and is required to be stated therein or necessary
to make the statements therein not misleading.
(c) The Agent shall have received on the Closing Date
certificates on behalf of the Company, dated as of the Closing Date, signed by
the chief executive officer and the chief financial officer of the Company, in
form and substance reasonably satisfactory to the Agent's counsel, to the effect
that (i) the signers of each of such certificates have carefully examined the
Registration Statement and the Prospectus and that, in their opinion, at the
time the Registration Statement and the Prospectus became effective, neither the
Registration Statement nor the Prospectus contained any untrue statement of a
material fact or omitted to state any material fact required to or stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; (ii) since the
respective effective or approval dates of the Registration Statement and the
Prospectus, no event has occurred which should have been set forth in an
amendment of or supplement to the Registration Statement or the Prospectus which
has not been so set forth, including specifically, but without limitation, any
material adverse change in the condition, financial or otherwise, or in the
earnings, capital, properties, prospects or affairs of the Company and, the
conditions set forth in this Section 11 have been satisfied; (iii) and to the
further effect that the Company has performed all agreements and has satisfied
all conditions on its part to be performed or satisfied at or prior to the
Closing Date and will comply with all obligations to be satisfied by them after
the Offering; (iv) that all the representations and warranties contained in
Section 5 hereof are true and correct on and as of the Closing Date, with the
same force and effect as though expressly made on the Closing Date; (v) no stop
order suspending the effectiveness of the Registration Statement has been
initiated or threatened by the SEC or any state authority; and (vi) no order
suspending the Offering or the effectiveness of the Prospectus has been issued
and no proceedings for that purpose have been initiated or to the best of their
knowledge threatened by the SEC or any state authority.
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(d) The Debentures shall have been qualified or be exempt from
qualification under the Blue Sky Laws of such states as shall have been
identified by the Company. The Company shall have obtained approval for and
shall have in place an arrangement for the quotation of the Debentures on the
Small-Cap Market of the NASDAQ system.
(e) The Agent shall have received on the Closing Date an
opinion of Xxxxxx Xxxxxx & Xxxxxx, P.C., counsel for the Company, dated as of
the Closing Date, addressed to the Agent, substantially to the effect as set
forth in Exhibit "C" hereto.
(f) At the time this Agreement is executed and also on the
Closing Date, there shall be delivered to the Agent a letter addressed to the
Agent, from Xxxxxxx & Xxxx, L.L.P., independent accountant, the first one to be
dated ___________, 1999, the second one to be dated the Closing Date,
substantially identical in form and substance to the unsigned form of letter
heretofore submitted to and approved by the Agent, and which shall contain
information as of a date within five business days of the date of such letter.
(g) Such further certificates, documents and opinions as the
Agent may reasonably request from the Company (including certificates of
officers of the Company) shall have been furnished by the Company.
(h) The Agent's counsel shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the sale of the Debentures as herein contemplated and
related proceedings and in order to evidence the accuracy or completeness of any
of the representations or warranties or the fulfillment of any of the conditions
herein contained; and all proceedings taken by the Company in connection with
the sale of the Debentures as herein contemplated shall be reasonably
satisfactory in form and substance to the Agent and its counsel; provided, any
objection by such counsel to the foregoing shall be made by written advice to
this effect from the Agent accompanied by a written opinion of Xxxx X. Xxxxxxxxx
& Associates, P.C. setting forth such objections.
(i) The representations and warranties of the Company
contained herein shall be true and correct on the date of this Agreement and on
and as of the Closing Date; the Company shall have performed all covenants and
agreements contained herein to be performed on its part at or prior to such
Closing Date.
(j) The Company shall have not have sustained, since the date
of the latest financial statements included in the Registration Statement, any
material loss or interference with its business, or from any labor dispute or
any court or legislative or other governmental action, order or decree, that is
not set forth in the Prospectus. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there
shall not have been any change in the long-term debt of the Company, or any
change, or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company, otherwise than
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as set forth or contemplated in the Registration Statement and Prospectus, the
effect of which, in any such case described above sufficiently material and
adverse as to make it impracticable or inadvisable to proceed with the Offering
or the delivery of the Debentures on the terms and in the manner contemplated in
the Prospectus.
(k) Prior to and at the Closing Date: (i) there shall have
been no material adverse change in the condition, financial or otherwise, or in
the earnings, the business affairs or business prospects of the Company or AFC
from that as of the latest dates as of which such condition is set forth in the
Prospectus, except as referred to therein; (ii) there shall have been no
material transaction entered into by the Company or AFC from the latest date as
of which the financial condition of the Company is set forth in the Prospectus
other than transactions referred to or contemplated therein; (iii) neither the
Company nor AFC shall have been in default (nor shall an event have occurred
which, with notice or lapse of time or both, would constitute a default) under
any provision of any agreement or instrument relating to any outstanding
indebtedness which default would have a material adverse effect on the Company;
(iv) no action, suit or proceedings, at law or in equity or before or by any
federal or state commission, board or other administrative agency, shall be
pending or, to the knowledge of the Company or AFC, threatened against the
Company or AFC or affecting any of their properties wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
operations, financial condition or income of the Company; and (v) the Debentures
shall have been qualified or registered for offering and sale under the
securities or Blue Sky Laws of the jurisdiction as the Company shall have
agreed.
(l) At or prior to the Closing Date, the Agent shall receive
(i) a copy of the order from the SEC declaring the Registration Statement
effective, and (ii) a certificate of good standing from the State of Nevada
evidencing the good standing and existence of the Company.
(m) Subsequent to the date hereof, there shall not have
occurred any of the following: (i) a suspension or limitation in trading in
securities generally on the New York Stock Exchange or American Stock Exchange
or in the over-the-counter market, or quotations halted generally on the NASDAQ
system, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices for securities have been required by either of such exchanges
or the NASD or by order of the SEC or any other governmental authority; or (ii)
the engagement by the United States in hostilities which have resulted in the
declaration, on or after the date hereof, of a national emergency or war if the
effect of any such event specified in this clause (iii) makes it impracticable
or inadvisable to proceed with the Offering or the delivery of the Debentures on
the terms and in the manner contemplated in the Registration Statement.
(n) On the Effective Date and on the Closing Date, the Agent
shall have received from the Company's legal counsel a Blue Sky Memorandum
setting forth the states in which the Debentures may be sold and the number of
Debentures that may be sold in each such state.
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If any of the material conditions specified in this Section 11 shall
not have been fulfilled when and as required by this Agreement, this Agreement
and all of the Agent's obligations hereunder may be canceled by the Agent by
notifying the Company of such cancellation in writing or by telegram at any time
at or prior to the Closing Date, and any such cancellation shall be without
liability of any party to any other party except as otherwise provided in
Sections 3, 9, 10 and 11 hereof. Notwithstanding the above, if this Agreement is
canceled pursuant to this paragraph, the Company agrees to reimburse the Agent
for all of the Agent's expenses (including without limitation the fees and
expenses of the Agent's counsel) subject to the applicable provisions of
Sections 3 and 10 hereof.
Section 12. Indemnification and Contribution.
(a) The Company hereby agrees (i) to indemnify and hold
harmless the Agent, each of its directors, officers, other employees and agents
and any person who controls the Agent within the meaning of Section 15 or
Section 20(a) of the Exchange Act (the Agent and each person being indemnified
hereinafter called an "Indemnified Party") against any and all losses, claims,
damages or liabilities, joint or several, to which an Indemnified Party may
become subject, under the Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise; (ii) to reimburse
promptly such Indemnified Party for reasonable legal or other expenses incurred
by such Indemnified Party in connection with investigating any claims or
preparing for or defending any actions, commenced or threatened, whether or not
resulting in any liability; and (iii) to reimburse promptly such Indemnified
Party for any amount paid in settlement of any claim or action, commenced or
threatened, if such settlement is effected with the written consent of the
Company; insofar as such losses, claims, damages, liabilities, expenses, actions
or settlements, referred to above, arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, Prospectus or any amendments or supplements thereto, or
in any application filed under any Blue Sky Law, or in any other document,
advertisement, oral statement or communication ("Sales Information") prepared,
made or executed by the Company in connection with or in contemplation of the
transactions contemplated by this Agreement, or in the information furnished or
otherwise made available to the Agent by the Company, 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, in
light of the circumstances under which they were made, not misleading, or arise
from any theory of liability whatsoever relating to or arising from or based
upon the Registration Statement, Prospectus or Sales Information or other
documentation distributed in connection with the Offering or are based on any
oral misstatements made by the Company or its agents, or arise out of any action
or omission to act by the Company, its officers, directors, employees or agents,
which action is willful or negligent. The Company will not be liable in any such
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, the
Prospectus or any amendment or supplement thereto or in any Blue Sky Application
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Agent specifically for use therein. The Company
will not, however, be responsible for claims, liabilities, losses, damages or
expenses to the extent they
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result primarily from actions taken or omitted to be taken by the Agent in bad
faith or from the Agent's negligence. In the event that the Company advances any
amounts alleged to be due under this Section 12(a) to the Indemnified Party and
it is determined by a court of competent jurisdiction that the Indemnified Party
is not entitled to indemnification hereunder, then the Indemnified Party shall
repay, without interest, any amounts so advanced to the Company, as the case may
be. The indemnification obligations of the Company as provided above are in
addition to any liabilities the Company may have under other agreements, under
common law or otherwise. The obligation of indemnity provided for hereunder is
effective immediately in respect of all events prior to or after the date hereof
and shall survive any expiration, termination or other cessation of this
Agreement.
(b) The Agent agrees (i) to indemnify and hold harmless the
Company, each of its directors and officers and each person who controls the
Company within the meaning of the Act (the Company and each person being
indemnified hereinafter called an "Indemnified Party") against any and all
losses, claims, damages or liabilities, joint or several, to which an
Indemnified Party may become subject, under the Act, the Exchange Act, or other
federal or state statutory law or regulations, at common law or otherwise; (ii)
to reimburse promptly such Indemnified Party for reasonable legal or other
expenses incurred by such Indemnified Party in connection with investigating any
claims or preparing for or defending any actions, commenced or threatened,
whether or not resulting in any liability; and (iii) to reimburse promptly such
Indemnified Party for any amount paid in settlement of any claims or actions,
commenced or threatened, if such settlement is effected with the written consent
of the Agent; insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus or any amendment or supplement thereto, or any Blue Sky Application,
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 or arise out of any action or omission to act
by the Agent, its officers, directors, employees or agents, which action is
willful or negligent, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application, in reliance
upon and in conformity with written information furnished to the Company by the
Agent specifically for use in the preparation thereof. The Agent will not,
however, be responsible for claims, liabilities, losses, damages or expenses to
the extent they result primarily from actions taken or omitted to be taken by
the Company in bad faith or from the Company's negligence. In the event that the
Agent advances any amounts alleged to be due under this Section 12(b) to an
Indemnified Party and it is determined by a court of competent jurisdiction that
the Indemnified Party is not entitled to indemnification hereunder, then the
Indemnified Party shall repay, without interest, any amounts so advanced to the
Agent. The indemnification obligations of the Agent as provided above are in
addition to any liabilities the Agent may have under other agreements, under
common law or otherwise. The obligation of indemnity provided for hereunder is
effective immediately in respect of all events prior to or after the date hereof
and shall survive any expiration, termination or other cessation of this
Agreement.
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(c) Promptly after receipt by an Indemnified Party under this
Section of notice of the commencement of any action, such Indemnified Party
shall, if a claim in respect thereof is to be made against an indemnifying party
under this Section, notify the indemnifying party in writing of the commencement
thereof. In no case shall an indemnifying party be liable under this Agreement
with respect to any loss, claim, damage, liability, expense, action or
settlement unless the indemnifying party shall have been notified in writing by
the Indemnified Party seeking indemnification, of the assertion or filing of the
claim or action giving rise to such loss, claim, damage, liability, expense,
action or settlement promptly after such Indemnified Party shall have been
advised of, or otherwise shall have received information as to, the assertion or
filing of such claim or action. In case any such action is brought against any
Indemnified Party, and such Indemnified Party notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it or he may wish, jointly with all other
Indemnifying Parties, similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such Indemnified Party; provided, however, if
the defendants in any such action include both the Indemnified Party and the
indemnifying party and the Indemnified Party shall have reasonably concluded,
based upon advice of its counsel, that there may be legal defenses available to
it or he and/or any other Indemnified Party which are different from or
additional to those available to the indemnifying party, the Indemnified Party
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
Indemnified Party. Upon receipt of notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense of such action and
approval by the Indemnified Party of counsel, the indemnifying party will not be
liable to such Indemnified Party under this Section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with
defense thereof unless:
(i) the Indemnified Party shall have employed such
counsel in connection with the assumption of legal defenses in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel);
(ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice or commencement of the
action; or
(iii) the indemnifying party has authorized the
employment of counsel at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party, in lieu of
indemnifying such Indemnified Party, shall, subject to the limitations
hereinafter set forth, contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities:
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(i) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Agent from the offering of
the Debentures; or
(ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company and the Agent in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
The respective relative benefits received by the Company and the Agent
shall be deemed to be in such proportion so that the Agent is responsible for
the portion of the losses, claims, damages or liabilities represented by the
percentage that the fee to be paid to the Agent in connection with the
solicitation of subscriptions described in Section 3 hereof bears to the actual
purchase price of the Debentures, and Company and its officers and directors and
controlling persons, in the aggregate, jointly and severally are responsible for
the remaining portion. The relative fault of the Company and the Agent shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or by the Agent and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above shall be
deemed to include, subject to the limitations set forth in paragraph (d) of this
Section, any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim.
The Company and the Agent agree that it would not be just and equitable
if contribution pursuant to this Section were determined by pro rata or per
capita allocation or by any other method or allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section, 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.
Section 13. Effective Date. This Agreement shall become effective
immediately.
Section 14. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Agent or the
Company prior to the Closing Date if, in the Agent's reasonable judgment:
(i) additional material governmental restrictions,
not enforce and effect on the date hereof, shall have been imposed upon trading
in securities general or a suspension or limitation in trading in securities
generally has occurred on the New York Stock Exchange or American Stock Exchange
or in the over-the-counter market, or quotations halted
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generally on the NASDAQ System, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been required by
either of such exchanges or the NASD or by order of the SEC or any other
governmental authority; or the engagement or continued engagement by the United
States in major hostilities or the declaration of a national emergency or war or
a material decline in the price of equity or debt securities if the effect of
such hostilities, national emergency or war or decline, in the Agent's judgment,
make it impracticable or inadvisable to proceed with the Offering or the
delivery of Debentures on the terms and in the manner contemplated in the
Registration Statement and the Prospectus;
(ii) any event shall have occurred or shall exist
which makes untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or the Prospectus or which
is not reflected in the Registration statement or the Prospectus but should be
reflected therein in order to make the statements or information contained
therein not misleading in any material respect (unless the Registration
Statement or the Prospectus, as appropriate, is amended or supplemented
appropriately in a timely manner);
(iii) the Company or AFC shall have sustained a loss
by fire, flood, accident or other calamity which is material to the property,
business or financial condition of the Company or AFC whether or not such loss
shall have been insured, or there shall have been, since the respective dates as
of which information is given in the Prospectus, any material adverse change in
the business, condition or prospects of the Company or AFC whether or not
arising in the ordinary course of business, or in the market for the securities
of the Company, which shall render it inadvisable to proceed with the delivery
of the Debentures.
(b) This Agreement may be terminated by a party upon written
notice to the other party at any time at or prior to the Closing Date if any of
the Conditions specified in Section 11 hereby shall not have been fulfilled when
and as required by this Agreement or if the services to be performed by the
Agent have not been completed by __________, 2000.
Any termination pursuant to this Section 14 shall be without liability
on the part of the Agent to the Company or on the part of the Company to the
Agent (except for the expenses to be paid or reimbursed by the Company pursuant
to Section 3 or Section 10 hereof and except as to indemnification to the extent
provided in Section 12 hereof).
In the event that the Offering is not consummated for any reason,
including, but not limited to, the termination of this Agreement or the
inability of the Company to sell the Debentures during the Offering, this
Agreement shall terminate and the Company shall refund to any persons who have
subscribed for any of the Debentures the full amount which it may have received
from them, together with interest at the rate stated in the Prospectus. Upon
termination of this Agreement, neither party shall have any other obligation to
the other except as otherwise provided for pursuant to Sections 3, 10 and 12
hereof and as provided in Section 25.
22
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Section 15. Representation and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its directors and officers, and of the Agent set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of the Agent or the
Company or any of their respective partners, officers, agents or directors or
any controlling person, as the case may be, and will survive delivery of any
payment for the Debentures sold hereunder.
Section 16. Notice. All communications hereunder will be in writing
and, if sent to the Agent will be mailed, delivered or telegraphed and confirmed
to the Agent c/o Choice Investments, Inc., 0000 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxx, Xxxxx 00000, with a copy to Xxxx X. Xxxxxxxxx & Associates, P.C., 0000
Xxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000; if sent to the Company will
be mailed, delivered or telegraphed and confirmed to the Company at 000 Xxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, with a copy to Xx. Xxxx X. Xxxxxx,
Xxxxxx Xxxxxx & Xxxxxx, P.C., 000 Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000.
Section 17. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors, personal
representatives and assigns, and to the benefit of the officers and directors
and controlling persons referred to in Section 12, and no other person will have
any right or obligation hereunder. The term "successors" shall not include any
purchaser of the Debentures merely by reason of such purchase.
Section 18. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
Section 19. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas.
Section 20. Entire Agreement. This Agreement, including schedules and
exhibits hereto, which are integral parts hereof and incorporated as though set
forth in full, constitutes the entire agreement between the parties pertaining
to the subject matter hereof superseding any and all prior or contemporaneous
oral or prior written agreements, proposals, letters of intent and
understandings, and cannot be modified, changed, waived or terminated except by
a writing which expressly states that it is an amendment, modification or
waiver, refers to this Agreement and is signed by the party to be charged. No
course of conduct or dealing shall be construed to modify, amend or otherwise
affect any of the provisions hereof.
Section 21. Headings. Headings on the Sections in this Agreement are
for reference purposes only and shall not be deemed to have any substantive
effect.
23
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Section 22. Delivery by Telecopier. This Agreement shall become
effective upon execution and delivery hereof by all the parties hereto; delivery
of this Agreement may be made by telecopier to the parties with original copies
promptly to follow by overnight courier.
Section 23. Construction. This Agreement has been negotiated by the
parties and their respective counsel. This Agreement will be fairly interpreted
in accordance with its terms and without any strict construction in favor of or
against either party.
Section 24. Attorneys Fees. If any action at law or in equity,
including an action for declaratory relief, is brought to enforce or interpret
the provisions of this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys fees from the other party, which fees may be set by
the court in the trial of such action or may be enforced in a separate action
brought for that purpose, and which fees shall be in addition to any other
relief which may be awarded.
Section 25. Exhibits. Each and all of the Exhibits referred to herein
and attached hereto are hereby incorporated into this Agreement for all purposes
as fully as if set forth herein. The Exhibits include Exhibits "A" through "C."
Section 26. Arbitration. Any controversy or claim arising out of this
letter of intent or the Agency Agreement, or the breach thereof, shall be
settled by arbitration in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitration may be
entered in any court having jurisdiction thereof. The place for such arbitration
shall be in Austin, Texas. The arbitration agreement set forth herein shall not
limit a court from granting a temporary restraining order or preliminary
injunction in order to preserve the status quo of the parties pending
arbitration. Further, the arbitrator(s) shall have power to enter such orders by
way of interim award, and they shall be enforceable in court.
If the foregoing is in accordance with the Agent's understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the Agent,
all in accordance with its terms.
Very truly yours,
AUSTIN XXXXXXX.XXX CORPORATION
By:
------------------------------------
Xxxxx X. XxXxxxxx, President
24
25
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
CHOICE INVESTMENTS, INC. ("Agent")
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
25
26
EXHIBIT "A"
Letter Agreement
(to be attached)
27
EXHIBIT "B"
SELECTED DEALERS' AGREEMENT
,
----------------- -------
Gentlemen:
We have agreed to assist Austin Xxxxxxx.xxx Corporation (the
"Company"), in connection with the offer and sale (the "Offering") of up to
$10,000,000 of the Company's 8% Secured Subordinated Debentures due December 31,
2015 (the "Debentures"). The minimum purchase is $5,000, and Debentures may be
purchased only in integral multiples of $1,000, not to exceed $1,000,000 by any
individual purchaser. The Debentures to be issued and certain of the terms on
which they are being offered are more fully described in the enclosed Prospectus
dated December 9, 1999 (the "Prospectus").
We are offering the selected dealers (of which you are one) the
opportunity to participate in the solicitation of offers to buy the Debentures,
and we will pay you a fee in the amount of ___% of the dollar amount of the
Debentures sold on behalf of the Company by you, as evidenced by the authorized
designation of your firm on the order form or forms for such Debentures
accompanying the funds transmitted for payment therefor to the special account
established by the Company for the purpose of holding such funds. It is
understood, of course, that payment of your fee will be made only out of
compensation received by us for the Debentures sold on behalf of the Company by
you, as evidenced in accordance with the preceding sentence. As soon as
practicable after the closing date of the Offering, we will remit to you, out of
our compensation as provided above, the fees to which you are entitled
hereunder.
Each order form for the purchase of Debentures must set forth the
identity and address of each person to whom the certificates for such Debentures
should be issued and delivered. Such order form should clearly identify your
firm. You shall instruct any subscriber who elects to send his order form to you
to make any accompanying check payable to "Compass Bank, Escrow Agent" to be
deposited in a segregated account with Compass Bank as Escrow Agent ("Escrow
Agent") by noon of the next business day after receipt.
This offer is made subject to the terms and conditions herein set forth
and is made only to selected dealers who are (i) members in good standing of the
National Association of Securities Dealers, Inc. ("NASD") who are to comply with
all applicable rules of the NASD, including, without limitation, the NASD's
Interpretation With Respect to Free-Riding and Withholding and Section 24 of
Article III of the NASD's Rules of Fair Practice, or (ii) foreign dealers not
eligible for membership in the NASD who agree (A) not to sell any Debentures
within the United States, its territories or possessions or to person who are
citizens thereof or
28
resident therein, and (B) in making other sales to comply with the
above-mentioned NASD Interpretation, Sections 8, 24 and 36 of the
above-referenced Article III as it applies to non-member brokers or dealers in a
foreign country.
Orders for Debentures will be strictly subject to confirmation and we,
acting on behalf of the Company, reserve the right in our uncontrolled
discretion to reject any order in whole or in part, to accept or reject orders
in the order of their receipt or otherwise, and to allot. Neither you nor any
other person is authorized by the Company or by us to give any information or
make any representations other than those contained in the Prospectus in
connection with the sale of any of the Debentures. No selected dealer is
authorized to act as agent for us when soliciting offers to buy the Debentures
from the public or otherwise. No selected dealer shall engage in any stabilizing
(as defined in Rule 10b-7 promulgated under the Securities Exchange Act of 1934)
with respect to the Debentures during the Offering.
We and each selected dealer assisting in selling Debentures pursuant
hereto agree to comply with the applicable requirements of the Securities
Exchange Act of 1934 and applicable state rules and regulations. In addition, we
and each selected dealer confirm that the Securities and Exchange Commission
interprets Rule 15c2-8 promulgated under the Securities Exchange Act of 1934 as
requiring that a Prospectus be supplied to each person who is expected to
receive a confirmation of sale 48 hours prior to delivery of such person's order
form.
We and each selected dealer further agree to the extent that our
customers desire to pay for Debentures with funds held by or to be deposited
with us, in accordance with the interpretation of the Securities and Exchange
Commission of Rule 15c2-4 promulgated under the Securities Exchange Act of 1934,
either (a) upon receipt of an executed order form or direction to execute an
order form on behalf of a customer, to forward the Offering price for the
Debentures ordered on or before twelve noon of the business day following
receipt or execution of an order form by us to the Escrow Agent for deposit in a
segregated account, or (b) to solicit indications of interest in which event (i)
we will subsequently contact any customer indicating interest to confirm the
interest and give instructions to execute and return an order form or to receive
authorization to execute the order form on the customer's behalf, (ii) we will
mail acknowledgements of receipt of orders to each customer confirming interest
on the business day following such confirmation, (iii) we will debit accounts of
such customers on the fifth business day (the "debit date") following receipt of
the confirmation referred to in (i), and (iv) we will forward completed order
forms together with such funds to the Company on or before twelve noon on the
next business day following the debit date for deposit in a segregated account.
We and each selected dealer acknowledge that if the procedure in (b) is adopted,
our customers' funds are not required to be in their accounts until the debit
date.
Unless earlier terminated by us, this Agreement shall terminate upon
the closing date of the Offering. We may terminate this Agreement or any
provisions hereof at any time by written or telegraphic notice to you. Of
course, our obligations hereunder are subject to the successful completion of
the Offering. In the event that the Offering is not consummated for any reason,
including but not limited to the inability to sell all of the Debentures during
the
2
29
Offering (including any permitted extensions thereof), this Agreement shall
terminate and any persons who have subscribed for any of the Debentures shall
have refunded to them the full amount which has been received from such person,
together with interest at the rate specified in the Prospectus, from the date
payment is received as provided in the Prospectus.
You agree that at any time or times prior to the termination of this
Agreement you will, upon our request, report to us the number of Debentures of
Debentures sold on behalf of the Company by you under this Agreement.
We shall have full authority to take such actions as we may deem
advisable in respect of all matters pertaining to the Offering. We shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by us in this Agreement.
Upon application to us, we will inform you as to the states in which we
believe the Debentures has been qualified for sale under, or are exempt from the
requirements of, the respective blue sky laws of such states, but we assume no
responsibility or obligation as to your rights to sell Debentures in any state.
Additional copies of the Prospectus and any supplements thereto will be
supplied in reasonable quantities upon request.
Any notice from us to you shall be deemed to have been duly given if
mailed, telephoned or telegraphed to you at the address to which this Agreement
is mailed.
This Agreement shall be construed in accordance with the laws of the
State of Texas.
Please confirm your agreement hereto by signing and returning the
duplicate copy of this letter at once to us at Choice Investments, Inc., 0000
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000.
CHOICE INVESTMENTS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
ACCEPTED AND AGREED:
-------------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
DATE:
------------------------------
3
