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EXHIBIT 1.1
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PROCOM TECHNOLOGY, INC.
(a California corporation)
PLACEMENT AGENCY AGREEMENT
Dated: February 28, 2001
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TABLE OF CONTENTS
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PLACEMENT AGENCY AGREEMENT.................................................. 1
SECTION 1. Representations and Warranties................................... 2
(a) Representations and Warranties by the Company.................... 2
(i) Compliance with Registration Requirements............... 2
(ii) Incorporated Documents.................................. 3
(iii) Independent Accountants................................. 3
(iv) Financial Statements.................................... 3
(v) No Material Adverse Change in Business.................. 3
(vi) Good Standing of the Company............................ 4
(vii) Good Standing of Subsidiaries........................... 4
(viii) Capitalization.......................................... 4
(ix) Authorization of Agreement.............................. 4
(x) Authorization and Description of Securities............. 5
(xi) Absence of Defaults and Conflicts....................... 5
(xii) Absence of Labor Dispute................................ 5
(xiii) Absence of Proceedings.................................. 5
(xiv) Accuracy of Exhibits.................................... 6
(xv) Possession of Intellectual Property..................... 6
(xvi) Absence of Further Requirements......................... 6
(xvii) No Other Sales.......................................... 6
(xviii) Possession of Licenses and Permits...................... 6
(xix) Title to Property....................................... 7
(xx) Compliance with Cuba Act................................ 7
(xxi) Environmental Laws...................................... 7
(b) Officers' Certificates........................................... 8
SECTION 2. Appointment of Placement Agent; Fees; Rights of First Refusal.... 8
(a) Appointment of Placement Agent................................... 8
(b) Fees............................................................. 8
(c) Right of First Refusal - Business Combination.................... 8
(d) Right of First Refusal - Subsequent Offering..................... 9
(e) Subsequent Sale or Business Combination.......................... 9
(f) Escrow........................................................... 9
(g) Closing.......................................................... 9
SECTION 3. Covenants of the Company......................................... 10
(a) Compliance with Securities Regulations and Commission Requests... 10
(b) Filing of Amendments............................................. 10
(c) Delivery of Registration Statements.............................. 10
(d) Delivery of Prospectuses......................................... 10
(e) Continued Compliance with Securities Laws........................ 11
(f) Blue Sky Qualifications.......................................... 11
(g) Rule 158......................................................... 11
(h) Use of Proceeds.................................................. 11
(i) Listing.......................................................... 11
(j) Reporting Requirements........................................... 12
(k) Closing Documents................................................ 12
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TABLE OF CONTENTS (Continued)
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SECTION 4. Payment of Expenses............................................ 12
SECTION 5. Conditions of Placement Agent's Obligations...................... 12
(a) Effectiveness of Registration Statement.......................... 13
(b) Opinion of Counsel for Company................................... 13
(c) Opinion of Counsel for Placement Agent........................... 13
(d) Officers' Certificate............................................ 13
(e) Accountant's Comfort Letter...................................... 13
(f) Bring-down Comfort Letter........................................ 14
(g) Approval of Listing.............................................. 14
(h) No Objection..................................................... 14
(i) Additional Documents............................................. 14
SECTION 6. Indemnification.................................................. 14
(a) Indemnification of Placement Agent............................... 14
(b) Indemnification of Company, Directors and Officers............... 15
(c) Actions against Parties; Notification............................ 15
(d) Settlement without Consent if Failure to Reimburse............... 16
SECTION 7. Contribution..................................................... 16
SECTION 8. Representations, Warranties and Agreements to Survive Delivery... 17
SECTION 9. Termination of Agreement......................................... 18
(a) Termination; General............................................. 18
(b) Liabilities...................................................... 18
(c) Loss of Rights of First Refusal.................................. 18
SECTION 10. Notices......................................................... 18
SECTION 11. Parties......................................................... 18
SECTION 12. Governing Law and Time.......................................... 18
SECTION 13. Effect of Headings.............................................. 19
SCHEDULE
Schedule A - List of Subsidiaries...............................Sch A-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel................... A-1
Exhibit B - Form of Opinion of Placement Agent's Counsel........... B-1
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PLACEMENT AGENCY AGREEMENT
February 28, 2001
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
as Placement Agent
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Procom Technology, Inc. (the "Company") confirms its agreement with
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Placement Agent") with respect to the issue and sale by the Company and the
placement by the Placement Agent of up to $35,000,000 of Common Stock, par value
$.01 per share, of the Company ("Common Stock"), subject to such adjustment as
may be agreed by the Company and the Placement Agent. The shares of Common Stock
to be placed by the Placement Agent are hereinafter called the "Securities."
The Company understands that the Placement Agent proposes to obtain
indications of interest from institutional investors and/or strategic investors
to purchase the Securities as and when the Placement Agent deems advisable. The
parties intend that one or more of these investors (the "Investors") will
purchase the Securities from the Company on terms to be set forth in a purchase
or subscription agreement (the "Subscription Agreement") between the Investors
and the Company. The Company shall have the right to reject any proposed
purchaser of Securities.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-_____) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Immediately upon the contemplated pricing of the Securities, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in such prospectus that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted the Rule 430A Information that was
used after such effectiveness, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits thereto, schedules thereto, if
any, and the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, at the time it became
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effective and including the Rule 430A Information, as applicable, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final
prospectus, including the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, in the form first furnished to the
Placement Agent for use in connection with the offering of the Securities is
herein called the "Prospectus." For purposes of this Agreement, all references
to the Registration Statement, any preliminary prospectus or the Prospectus or
any amendment or supplement to any of the foregoing shall be deemed to include
the copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to the Placement Agent as of the date hereof and as of
the Closing Time referred to in Section 2(g) hereof, and agrees with the
Placement Agent, as follows:
(i) Compliance with Registration Requirements. The Company meets the
requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information has
been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time, the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations and did not and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither the Prospectus nor any
amendments or supplements thereto, at the time the Prospectus or any
such amendment or supplement was issued and at the Closing Time,
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included or will include an untrue statement of a material fact or
omitted or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and warranties in
this subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by the
Placement Agent expressly for use in the Registration Statement or
Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when
so filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectus delivered to the Placement
Agent for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and the
Prospectus, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectus, at the time the
Registration Statement became effective, at the time the Prospectus was
issued and at the Closing Time, did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedule included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included in the
Registration Statement and the Prospectus, together with the related
schedule and notes, present fairly the financial position of the Company
and its consolidated subsidiaries at the dates indicated and the
statement of operations, shareholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified;
said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved. The supporting
schedule included in the Registration Statement presents fairly in
accordance with GAAP the information required to be stated therein. The
selected financial data included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent
with that of the audited financial statements included in the
Registration Statement.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been
no material adverse change in the condition,
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financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions entered
into by the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, and (C) there
has been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of California and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing in
each other jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each of Procom Technology FSC,
Megabyte Computerhandels AG, Invincible Technology Acquisition Corp.,
Procom AG, Procom SPA, Procom Technology, UK and Scofima Software S.r.l.
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct
of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each such subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any
subsidiary was issued in violation of the preemptive or similar rights
of any securityholder of such subsidiary. The only subsidiaries of the
Company are the subsidiaries listed on Schedule A hereto and no
subsidiary of the Company other than Megabyte Computerhandels AG is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X.
(viii) Capitalization. The shares of issued and outstanding capital
stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; and none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive
or other similar rights of any securityholder of the Company.
(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
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(x) Authorization and Description of Securities. The Securities have
been duly authorized for issuance and sale and, when issued and
delivered by the Company against payment of the consideration therefor,
will be validly issued, fully paid and non-assessable; the Common Stock
conforms to all statements relating thereto contained in the Prospectus
and such description conforms to the rights set forth in the instruments
defining the same; no holder of the Securities will be subject to
personal liability by reason of being such a holder; and the issuance of
the Securities is not subject to the preemptive or other similar rights
of any securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company nor any
of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a party
or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the Subscription Agreement, the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities
as described in the Prospectus under the caption "Use of Proceeds") and
compliance by the Company with its obligations hereunder have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event
(as defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to, the Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will such action result in any violation of the provisions of the
charter or by-laws of the Company or any subsidiary or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any
subsidiary.
(xii) Absence of Labor Dispute. No labor dispute with the employees
of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to result
in a Material Adverse Effect.
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(xiii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge
of the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might reasonably
be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties
or assets thereof or the consummation of the transactions contemplated
in this Agreement or the Subscription Agreement or the performance by
the Company of its obligations hereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any subsidiary
is a party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement, the
Prospectus or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required.
(xv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject
of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities or the consummation of the transactions
contemplated by this Agreement or the Subscription Agreement, except
such as have been already obtained or as may be required under the 1933
Act or the 1933 Act Regulations or state securities laws.
(xvii) No Other Sales. The Company has not and will not, directly or
indirectly (except through the Placement Agent) sell or offer, or
solicit any offer to buy, or otherwise negotiate in respect of, the
Securities.
(xviii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them;
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the Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
(xix) Title to Property. The Company and its subsidiaries have good
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such subsidiary to the continued possession
of the leased or subleased premises under any such lease or sublease.
(xx) Compliance with Cuba Act. The Company has complied with, and is
and will be in compliance with, the provisions of that certain Florida
act relating to disclosure of doing business with Cuba, codified as
Section 517.075 of the Florida statutes, and the rules and regulations
thereunder (collectively, the "Cuba Act") or is exempt therefrom.
(xxi) Environmental Laws. Except as described in the Registration
Statement and except as would not, singly or in the aggregate, result in
a Material Adverse Effect, (A) neither the Company nor any of its
subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, "Environmental Laws"), (B) the
Company and its subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are each
in compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its subsidiaries and (D) there are no
events or circumstances that might reasonably be expected to form the
basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its subsidiaries relating to
Hazardous Materials or any Environmental Laws.
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(b) Officers' Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to counsel for the Placement Agent
shall be deemed a representation and warranty by the Company to the Placement
Agent as to the matters covered thereby.
SECTION 2. Appointment of Placement Agent; Fees; Rights of First
Refusal.
(a) Appointment of Placement Agent. The Placement Agent will act as
exclusive placement agent for the Company in the placement of the Securities.
The Placement Agent will seek to complete the placement on a reasonable best
efforts basis, acting as the Company's agent and not as a principal in the sale
and placement of the Securities. The Placement Agent may separately engage, at
its own expense and with the prior approval of the Company, sub-agents as it may
deem necessary or appropriate.
(b) Fees. The Company shall pay the Placement Agent for its services a
fee (the "Placement Fee"), equal to 6.5% of the aggregate purchase price of
Securities sold, payable at the Closing Time.
(c) Right of First Refusal - Business Combination. In the event that,
during the period beginning on January 18, 2001 and ending 12 months after the
earlier of the final closing of a sale of Securities or the termination of this
Agreement pursuant to Section 9 hereof (the "Covered Period"), the Company
decides to pursue a Business Combination (in lieu of or in addition to the
placement of the Securities), the Placement Agent shall have the right, but not
the obligation, to act as exclusive financial advisor to the Company in
connection with such Business Combination on terms customarily established by
major investment banking firms for similar services in similar circumstances at
such time, which shall be set forth in an engagement letter to be mutually
agreed on between the Company and the Placement Agent. "Business Combination"
means, whether effected in one transaction or a series of transactions, (a) any
merger, consolidation, reorganization or other business combination involving
the Company in which the shareholders of the Company immediately prior to the
transaction cease to own at least a majority of the voting power of the Company
or the surviving entity in that transaction, including, without limitation, any
joint venture, (b) the acquisition, directly or indirectly, by one or more
Purchasers of more than 30% of the then outstanding capital stock of the
Company, (c) the acquisition, directly or indirectly, by one or more Purchasers
of all or a substantial portion of the assets of, or of any right to all or a
substantial portion of the revenues or income of, the Company by way of a
negotiated purchase, lease, license, exchange, joint venture or other means, or
(d) the acquisition, directly or indirectly, by one or more parties to a
Business Combination of control of the Company otherwise than through the
acquisition of the Company's capital stock; provided that "Business Combination"
shall not include any transaction having a transaction value of less than
$50,000,000. Further, with respect to any Business Combination, it is
specifically agreed that any fees paid or payable to any other financial advisor
engaged by the Company will be the sole obligation of the Company and shall have
no effect on any fees that may be paid to the Placement Agent.
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(d) Right of First Refusal - Subsequent Offering. The Placement Agent
shall, during the Covered Period, have the right, but not the obligation, to act
as sole book-running lead manager or exclusive placement agent, as the case may
be, for any public or private offering of equity or debt securities undertaken
by the Company or any of its subsidiaries (on terms customarily established by
major investment banks for such transactions in similar circumstances at such
time) other than an offering by the Company to Montrose Investments Ltd.
pursuant to any right of first refusal that it has pursuant to that certain
Securities Purchase Agreement dated as of October 31, 2000, between the Company
and Montrose Investments Ltd.
(e) Subsequent Sale or Business Combination. If, at any time during the
Covered Period, the Company or any of its affiliates sells Common Stock, or any
equity interest substantially similar to the Securities, to any party contacted
or proposed to be contacted by the Placement Agent during its engagement
hereunder (so long as that party (i) purchases any Securities or (ii) is
identified to the Company in writing in lists provided by the Placement Agent to
the Company (y) at least monthly through the period ending ten business days
after the earlier of the final closing of a sale of Securities or the
termination of this Agreement pursuant to Section 9 hereof and (z) prior to the
date that the Company or its affiliate closes the applicable transaction), the
Company shall pay to the Placement Agent the Placement Fee with respect to such
transaction, calculated in accordance with Section 2(b) hereof). If, at any time
during the Covered Period, a Business Combination is consummated with any party
contacted or proposed to be contacted by the Placement Agent during its
engagement hereunder (subject to the condition in the earlier parenthetical in
this paragraph), the Company shall pay to the Placement Agent fees customarily
established by major investment banking firms for similar services in similar
circumstances at such time.
(f) Escrow. The Placement Agent and the Company will arrange for the
deposit of all funds received from the Investors for the purchase of the
Securities into an escrow account to be established by the Company (the
"Escrow") with a nationally recognized bank or trust company acting as the
escrow agent ("Escrow Agent") as selected by the Company, subject to the
approval of the Placement Agent, which approval will not be unreasonably
withheld.
(g) Closing. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the offices of O'Melveny and
Myers LLP, 610 Newport Center Drive, Newport Beach, California 92660 or at such
other place as shall be agreed upon by the Investors and the Company, at 7:00
A.M. (California time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day after the date the
Registration Statement is declared effective, or such other time not later than
ten business days after such date as shall be agreed upon by the Investors and
the Company (such time and date of payment and delivery being herein called
"Closing Time"). The Placement Agent and the Company will provide such joint
escrow instructions (the "Escrow Instructions") to the Escrow Agent as necessary
and appropriate to effect the release at the Closing Time from Escrow to the
Company of the purchase price for the Securities.
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SECTION 3. Covenants of the Company. The Company covenants with the
Placement Agent as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
and will notify the Placement Agent immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Placement Agent
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)) or any amendment, supplement
or revision to either the prospectus included in the Registration Statement at
the time it became effective or to the Prospectus, whether pursuant to the 1933
Act, the 1934 Act or otherwise, will furnish the Placement Agent with copies of
any such documents a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file or use any such document to which the
Placement Agent or counsel for the Placement Agent shall object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Placement Agent and counsel for the Placement Agent, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated by
reference therein) and signed copies of all consents and certificates of
experts. The copies of the Registration Statement and each amendment thereto
furnished to the Placement Agent will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to the Placement
Agent, without charge, as many copies of each preliminary prospectus as the
Placement Agent reasonably requested, and the Company hereby consents to the use
of such copies for purposes permitted by the 1933 Act. The Company will furnish
to the Placement Agent, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such number of
copies of the Prospectus (as amended or supplemented) as the Placement Agent may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Placement Agent will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
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(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement and in the Prospectus. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Placement Agent or for
the Company, to amend the Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include any untrue statements
of a material fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the circumstances existing
at the time it is delivered to an Investor, or if it shall be necessary, in the
opinion of such counsel, at any such time to amend the Registration Statement or
amend or supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and
file with the Commission, subject to Section 3(b), such amendment or supplement
as may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and the
Company will furnish to the Placement Agent such number of copies of such
amendment or supplement as the Placement Agent may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Placement Agent, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
as the Placement Agent may designate and to maintain such qualifications in
effect for a period of not less than one year from the later of the effective
date of the Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b) Registration
Statement.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and will
file with the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies quotations for which are reported by the
Nasdaq National Market.
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(j) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.
(k) Closing Documents. The Company will cause the Subscription Agreement
to provide that the Placement Agent shall be a third party beneficiary of the
representations of the Investors therein, and such representations shall be
reasonably acceptable to the Placement Agent. The Company will deliver, or cause
to be delivered, to the Placement Agent a copy of each document delivered to any
Investor at the Closing Time and will cause each counsel who is furnishing an
opinion to an Investor and each independent public accountant who is furnishing
an accountant's letter to an investor to address it to the Placement Agent (or
to furnish the Placement Agent with a letter stating that it may rely on such
opinion or letter as though it were addressed to the Placement Agent).
SECTION 4. Payment of Expenses. The Company will pay all expenses
incident to the offering, issuance and sale of the Securities and the
performance of its obligations under this Agreement, whether or not the
transactions contemplated by this Agreement are consummated, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation and delivery to the Investors of the Subscription
Agreement, the preparation and delivery to the Escrow Agent of the Escrow
Instructions and the preparation and delivery of such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities, including any stock or other transfer taxes and
any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Investors, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(f) hereof,
(vi) the printing and delivery to the Placement Agent of copies of each
preliminary prospectus and of the Prospectus and any amendments or supplements
thereto, (vii) the preparation, printing and delivery to the Placement Agent of
copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and
expenses of the Escrow Agent and any transfer agent or registrar for the
Securities; (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Placement Agent in connection with, the review
by the National Association of Securities Dealers, Inc. (the "NASD") of the
terms of the sale of the Securities; (x) the fees and expenses incurred in
connection with the inclusion of the Securities in the Nasdaq National Market;
and (xi) the Placement Agent's reasonable documented expenses incurred in
connection with the activities hereunder, including the fees and disbursements
of counsel for the Placement Agent and the travel, lodging and entertainment
expenses of its personnel ("Expenses"), but not in excess of $150,000, not if
the Placement Agent terminates this Agreement without cause prior to May 18,
2001 and only if less than $20,000,000 of the Securities are sold hereunder.
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SECTION 5. Conditions of Placement Agent's Obligations. The obligations
of the Placement Agent to provide the Escrow Instructions are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective prior to
Closing Time and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the Placement Agent.
A prospectus containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of rule 430A).
(b) Opinion of Counsel for Company. At Closing Time, the Placement Agent
shall have received the opinion, dated as of Closing Time, of O'Melveny & Myers
LLP, counsel for the Company, substantially to the effect set forth in Exhibit A
hereto.
(c) Opinion of Counsel for Placement Agent. At Closing Time, the
Placement Agent shall have received the favorable opinion, dated as of Closing
Time, of Fenwick & West LLP, counsel for the Placement Agent, to the effect set
forth in Exhibit B hereto. In giving such opinion such counsel may rely, as to
all matters governed by the laws of jurisdictions other than the law of the
State of California and the federal law of the United States, upon the opinions
of counsel reasonably satisfactory to the Placement Agent. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Company and
its subsidiaries and certificates of public officials.
(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Placement Agent shall have
received a certificate of the President or a Vice President of the Company and
of the chief financial or chief accounting officer of the Company, dated as of
Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1(a) hereof are true
and correct with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied in all material respects with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(e) Accountant's Comfort Letter. At the time of the effectiveness of the
Registration Statement, the Placement Agent shall have received from each of
KPMG LLP and Arthur Andersen LLP a letter dated such date, in form and substance
satisfactory to the Placement Agent, containing statements and information of
the type ordinarily included in accountants' "comfort letters" with respect to
the financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
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(f) Bring-down Comfort Letter. At Closing Time, the Placement Agent
shall have received from each of KPMG LLP and Arthur Andersen LLP a letter,
dated as of Closing Time, to the effect that they reaffirm the statements made
in the letter furnished pursuant to subsection (e) of this Section, except that
the specified date referred to shall be a date not more than three business days
prior to Closing Time.
(g) Approval of Listing. At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(h) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) Additional Documents. At the Closing Time, counsel for the Placement
Agent shall have been furnished with such documents as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Securities as herein contemplated, or in order to evidence the accuracy 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 issuance and sale of the Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Placement Agent
and counsel for the Placement Agent.
SECTION 6. Indemnification.
(a) Indemnification of Placement Agent. (1) The Company agrees to
indemnify and hold harmless the Placement Agent, its affiliates and each person,
if any, who controls the Placement Agent within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any document, including
without limitation any information furnished or made available by the
Company (directly, through the Placement Agent, or otherwise) to any
offeree of the Securities or any of their representatives or in the
Registration Statement (or any amendment thereto), including the Rule
430A Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact included
in any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of
the Company;
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(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Placement Agent),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above; and
(iv) against any and all losses, claims, damages and liabilities
arising out of any transaction contemplated by this Agreement.
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Placement Agent expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that the Company will not be liable under
clause (iv) hereof to the extent that any loss, claim, damage or liability is
found in a final judgment by a court of competent jurisdiction to have resulted
from the Placement Agent's bad faith or gross negligence.
(b) Indemnification of Company, Directors and Officers. The Placement
Agent agrees to indemnify and hold harmless the Company, its directors, each of
its officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by the Placement Agent expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by the Placement Agent,
and, in the case of parties indemnified pursuant to Section 6(b) above, counsel
to the indemnified parties shall be selected by the Company. An
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indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement. Notwithstanding the immediately preceding sentence, if at any time
the Indemnified Party shall have requested an indemnifying party to reimburse
the Indemnified Party for fees and expenses of counsel, an indemnifying party
shall not be liable for any settlement of the nature contemplated by Section
6(a)(ii) effected without its consent if such indemnifying party (i) reimburses
such Indemnified Party in accordance with such request to the extent it
considers such request to be reasonable and (ii) provides written notice to the
Indemnified Party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Placement Agent on the other hand from the offering of the
Securities pursuant to this Agreement (whether or not the offering is
consummated) or (ii) if the allocation provided by clause (i) 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 on the one hand and of the Placement Agent on the other hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
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The relative benefits received by the Company on the one hand and the
Placement Agent on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
proportion as the total value received or contemplated to be received (before
deducting expenses) by the Company as a result of or in connection with the
offer and sale of the Securities bears to the total Placement Fee paid or
contemplated to be paid.
The relative fault of the Company on the one hand and the Placement
Agent on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Placement Agent and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Placement Agent agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, the Placement Agent
shall not be required to contribute any amount in excess of the amount by which
the aggregate Placement Fee actually paid to the Placement Agent under this
Agreement exceeds the amount of damages that the Placement Agent has otherwise
been required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 7, each person, if any, who controls the
Placement Agent within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as the Placement
Agent, and each director of the Company, each officer of the Company who signed
the Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Company.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties, indemnities and agreements contained
in this Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Placement Agent or controlling person, or by or on behalf of the Company, and
shall survive delivery of the Securities to the Investors.
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SECTION 9. Termination of Agreement.
(a) Termination; General. The Placement Agent may terminate this
Agreement and all of its obligations hereunder, with cause, upon ten days'
notice to the Company. Either the Placement Agent or the Company may terminate
this Agreement, with or without cause, at any time after May 18, 2001 upon ten
days' notice to the Placement Agent. Neither the Placement Agent nor the Company
may terminate this Agreement prior to May 18, 2001 without cause.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 2, 6, 7, 8, 10 and 12 shall survive such termination and remain in full force
and effect. Within ten days of such termination, if at least $20,000,000 of the
Securities have not been sold, the Company will reimburse the Placement Agent
for the Expenses, but not in excess of $150,000 (reduced by the amount of any
Expenses previously reimbursed).
(c) Loss of Rights of First Refusal. Notwithstanding any contrary
provision in this Agreement, if the Company terminates this Agreement pursuant
to Section 9(a) hereof, the Placement Agent shall lose its rights under Sections
2(a), (c) and (d) hereof and, if the Placement Agent terminates this Agreement
pursuant to Section 9(a) hereof, the Placement Agent shall lose its rights under
Sections 2(a), (c), (d) and (e) hereof.
SECTION 10. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Placement
Agent shall be directed to the Placement Agent at North Tower, World Financial
Center, New York, New York 10281-1201, Attn: Gary Dolan, Esq.; 101 California
Street, Suite 1420, San Francisco, California 94111, Attn: Julie Levenson; 5500
Sears Tower, Chicago, Illinois 60606, Attn: Steven Moss; and notices to the
Company shall be directed to it at 58 Discovery, Irvine, California 92618,
attention of Alex Aydin.
SECTION 11. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Placement Agent and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Placement Agent and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Placement Agent and the Company
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation.
SECTION 12. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
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SECTION 13. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Placement Agent and the Company in accordance with its terms.
Very truly yours,
PROCOM TECHNOLOGY, INC.
By
------------------------------
Title:
CONFIRMED AND ACCEPTED, as of the
date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
------------------------------------
Authorized Signatory
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SCHEDULE A
List of Subsidiaries
Procom Technology FSC
Megabyte Computerhandels AG
Invincible Technology Acquisition Corp.
Procom AG
Procom SPA
Procom Technology, UK
Scofima Software S.r.l.
Sch A-1
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Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(b)
March __, 2001
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
As Placement Agent
North Tower
World Financial Center
New York, New York 10281-1209
Re: Sale of Up to $35,000,000 of Common
Stock of Procom Technology, Inc.
Ladies and Gentlemen:
We have acted as counsel to Procom Technology, Inc., a California
corporation (the "Company"), in connection with the issuance and sale by the
Company of up to $35,000,000 of its Common Stock, $.01 par value (the shares
comprising such amount being referred to as the "Company Shares"). This opinion
is being delivered to you pursuant to Section 5(b) of the Placement Agency
Agreement dated February 28, 2001 between the Company and you (the "Placement
Agreement"). The terms used herein without definition shall have the meanings
given those terms in the Placement Agreement.
In our capacity as counsel to the Company, we have examined originals or
copies of those corporate and other records and documents we considered
appropriate. As to relevant factual matters, we have relied upon, among other
things, the Company's factual representations in the Company Certificate dated
March __, 2001 (the "Company Certificate"), a copy of which has been delivered
to you. In addition, we have obtained and relied upon those certificates of
public officials we considered appropriate.
We have examined the registration statement on Form S-3, File No.
333-_______, filed by the Company with the Securities and Exchange Commission
(the "Commission") for the purpose of registering the sale of the Company Shares
under the Securities Act of 1933, as amended (the "Act"), [any Amendments to the
Registration Statement(1)] and the prospectus, dated March __, 2001. The
registration statement, as amended, and the prospectus, excluding the documents
incorporated in them by reference, are herein referred to as the "Registration
Statement" and the "Prospectus," respectively. We also have examined the
Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2000,
its Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2000,
and its Current Reports on Form 8-K filed with the Commission on November 3,
2000 and January 12, 2001 (collectively, the "Incorporated Documents").
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1 To be identified as applicable.
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On the basis of such examination and our consideration of those
questions of law we have considered relevant, our reliance upon the assumptions
in this opinion, and subject to the limitations and qualifications in this
opinion, we are of the opinion that:
(i) The Company has been duly incorporated and is validly existing
in good standing under the laws of the State of California.
(ii) The Company has the corporate power and corporate authority to
own, lease and operate its properties and conduct its business
as described in the Prospectus.
(iii) The authorized capital stock of the Company consists of
65,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock. Holders of the capital stock of the Company are
not entitled to any preemptive or other right to subscribe to
any additional shares of the Company's capital stock under the
Company's Articles of Incorporation or Bylaws.
(iv) The Company Shares to be sold by the Company have been duly
authorized and will be, upon issuance and delivery against
payment therefor in accordance with the terms of the applicable
Subscription Agreements, validly issued, fully paid and
non-assessable. No personal liability for the debts of the
Company will be imposed on any holders of the Company Shares
under the laws of the State of California solely as a result of
the ownership of such Company Shares.
(v) The Company has the corporate power and corporate authority to
enter into the Placement Agreement, to issue, sell and deliver
the Company Shares to the Placement Agent and/or the purchasers
of the Company Shares pursuant to the applicable Subscription
Agreements and to perform its obligations under the Placement
Agreement.
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(vi) The execution, delivery and performance of the Placement
Agreement have been duly authorized by all necessary corporate
action on the part of the Company, and the Placement Agreement
has been duly and validly executed and delivered by the Company.
Assuming the due authorization, execution and delivery by you,
the Placement Agreement constitutes the legally valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as rights to
indemnity, contribution and advancement of expenses may be
limited by applicable law, and except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally
(including, without limitation, fraudulent conveyance laws) and
by general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance
or injunctive relief, regardless of whether considered in a
proceeding in equity or at law.
(vii) The Registration Statement has been declared effective under the
Act and, to our knowledge, no stop order suspending the
effectiveness of the Registration Statement or preventing the
use of the Prospectus has been issued by the Commission and no
proceedings for that purpose have been instituted or are pending
or threatened; any required filing of the Prospectus and any
supplement thereto pursuant to Rule 424(b) of the Rules and
Regulations has been made in the manner and within the time
period required by such Rule 424(b).
(viii) The Registration Statement, on the date it was filed, appeared
on its face to comply in all material respects with the
requirements as to form for registration statements on Form S-3
under the Act and the related rules and regulations in effect at
the date of filing, except that we express no opinion concerning
the financial statements and other financial information
contained or incorporated by reference therein. The Incorporated
Documents, on the respective dates they were filed, appeared on
their face to comply in all material respects with the
requirements as to form for reports on Form 10-K, Form 10-Q and
Form 8-K, as the case may be, under the Securities Exchange Act
of 1934, as amended, and the related rules and regulations in
effect at the respective dates of their filing, except that we
express no opinion concerning the financial statements and other
financial information contained therein.
(ix) The statements in the Prospectus under the caption "Description
of Capital Stock - Common Stock," insofar as they summarize
provisions of the Company's Articles of Incorporation and
Bylaws, are correct in all material respects.
(x) The form of certificate evidencing the Company's Common Stock,
par value $.01 per share, complies with the California General
Corporation Law and with any applicable requirements of the
Company's Articles of Incorporation or Bylaws.
(xi) To our knowledge, (a) no legal or governmental actions, suits or
proceedings are pending or threatened to which the Company is a
party or to which the property of the Company is subject that
are required to be described in the Registration Statement or
the Prospectus and (b) no contract or other document is required
to be filed as an exhibit to the Registration Statement that has
not been filed as required.
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(xii) The execution, delivery and performance of the Placement
Agreement and the issuance of the Company Shares to be sold by
the Company will not result in any violation of or conflict with
the Company's Articles of Incorporation or Bylaws or violate or
conflict with any applicable statute, rule or regulation known
to us, or, to our knowledge, any order, writ or decree of any
court or governmental agency or body having jurisdiction over
the Company.
(xiii) No order, consent, permit or approval of any California or
federal governmental authority that we have, in the exercise of
customary professional diligence, recognized as applicable to
the Company or to the transactions of the type contemplated
hereby, is required on the part of the Company for the execution
and delivery of, and performance of its obligations under, the
Placement Agreement or the issuance and sale of the Company
Shares to be sold by the Company, except such as have been
obtained under the Act and such as may be required under state
or other securities or Blue Sky laws governing the purchase or
distribution of the Company Shares.
In connection with our participation in conferences in connection with
the preparation of the Registration Statement and the Prospectus, we have not
independently verified the accuracy, completeness or fairness of the statements
contained or incorporated therein, and the limitations inherent in the
examination made by us and the knowledge available to us are such that we are
unable to assume, and we do not assume, any responsibility for such accuracy,
completeness or fairness, except as otherwise specifically stated in paragraphs
(viii) and (ix) above. However, on the basis of our participation in conferences
in connection with the preparation of the Registration Statement and the
Prospectus, and relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Company, we do not believe that the
Registration Statement and the Incorporated Documents, considered as a whole as
of the effective date of the Registration Statement, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein not misleading, and we do not believe that
the Prospectus and the Incorporated Documents, considered as a whole on the date
hereof, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. However, we express no
opinion or belief as to any document filed by the Company under the Securities
Exchange Act of 1934, as amended, whether before or after the effective date of
the Registration Statement, except to the extent that any such document is an
Incorporated Document read together with the Registration Statement or the
Prospectus and considered as a whole, nor do we express any opinion or belief as
to the financial statements and other financial information contained or
incorporated by reference in the Registration Statement, the Prospectus or the
Incorporated Documents.
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Our opinion in paragraph (vi) above as to the enforceability of the
Placement Agreement is subject to the unenforceability under certain
circumstances of choice of law provisions.
We have, with your approval, assumed that the certificates for the
Company Shares conform to the specimens examined by us, that the signatures on
all documents examined by us are genuine, that all items submitted to us as
originals are authentic, that all items submitted to us as copies conform to the
originals, and that you are authorized to execute and deliver and did execute
and deliver the Placement Agreement, assumptions which we have not independently
verified.
Our use of the terms "known to us," "to our knowledge," or similar
phrases to qualify a statement in this opinion means that those attorneys in
this firm who have given substantive attention to the representation described
in the introductory paragraph of this opinion do not have current actual
knowledge that the statement is inaccurate. Such terms do not include any
knowledge of other attorneys within our firm (regardless of whether they have
represented or are representing the Company in connection with any other matter)
or any constructive or imputed notice of any matters or items of information. We
have not undertaken any independent investigation to determine the accuracy of
such statements; and no inference as to our knowledge of any matters bearing on
the accuracy of any such statement should be drawn from the fact of our
representation of the Company in connection with this opinion letter or in other
matters.
This opinion is furnished by us as counsel to the Company to you as the
Placement Agent in connection with the sale of the Company Shares and to the
purchasers of the Company Shares from the Company, is solely for your benefit
and the benefit of such purchasers and may not be relied upon by, nor may copies
be delivered to, any other person without our prior written consent.
Respectfully submitted,
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Exhibit B
FORM OF OPINION OF PLACEMENT AGENT'S COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) The Company has been duly incorporated and is validly existing in
good standing under the laws of the State of California.
(ii) The Company has corporate power and corporate authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Placement
Agency Agreement.
(iii) The Securities have been duly authorized for issuance and sale in
accordance with the Placement Agency Agreement and, when issued and delivered by
the Company pursuant to the Subscription Agreements against payment of the
consideration set forth in the Prospectus, will be validly issued and fully paid
and non-assessable.
(iv) The issuance of the Securities is not subject to preemptive or
other similar rights of any securityholder of the Company arising under the
articles of incorporation or bylaws of the Company.
(v) The Placement Agency Agreement has been duly authorized, executed
and delivered by the Company.
(vi) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; the Prospectus has
been filed pursuant to Rule 424(b) within the time period required by Rule
424(b); and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or threatened by the Commission.
(vii) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information, as applicable, the Prospectus, excluding
the documents incorporated by reference therein, and each amendment or
supplement to the Registration Statement and Prospectus, excluding the documents
incorporated by reference therein, as of their respective effective or issue
dates (other than the financial statements and supporting schedule included
therein or omitted therefrom, as to which we need express no opinion) complied
as to form in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations.
(viii) The form of certificate used to evidence the Common Stock
complies in all material respects with the California General Corporate Law and
with any applicable requirements of the charter and by-laws of the Company.
(ix) The information in the Prospectus under "Description of Capital
Stock - Common Stock" to the extent that it constitutes summaries of the
Company's charter and bylaws has been reviewed by us and is correct in all
material respects.
Nothing has come to our attention that would cause us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information (except for financial statements and schedule and other financial
data included or incorporated by reference therein, as to which we need make no
statement), on the date of such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any amendment or
supplement thereto (except for financial statements and schedule and other
financial data included or incorporated by reference therein, as to which we
need make no statement), on the date of the Prospectus, on the date of any such
amended or supplemented prospectus or at the Closing Time, included or includes
an untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
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