1
Exhibit 1.1
3,025,000 Shares*
PROCOM TECHNOLOGY, INC.
Common Stock
UNDERWRITING AGREEMENT
December __, 1996
MONTGOMERY SECURITIES
DAIN BOSWORTH INC.
As Representatives of the several Underwriters
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Dear Sirs:
SECTION 1
INTRODUCTORY
Procom Technology, Inc., a California corporation (the "Company"),
proposes to issue and sell 2,000,000 shares of its authorized but unissued
Common Stock, having a par value of $.01 per share (the "Common Stock"), and
certain shareholders of the Company named in Schedule B annexed hereto (the
"Selling Shareholders") propose to sell an aggregate of 1,025,000 shares of the
Company's issued and outstanding Common Stock to the several underwriters named
in Schedule A annexed hereto (the "Underwriters"), for whom you are acting as
Representatives. Said aggregate of 3,025,000 shares are herein called the "Firm
Common Shares." In addition, certain of the Selling Shareholders listed under
"Optional Common Shares" in Schedule B annexed hereto propose to grant to the
Underwriters an option to purchase up to 453,750 additional shares of Common
Stock (the "Optional Common Shares"), as provided in Section 5 hereof. The Firm
Common Shares and, to the extent such option is exercised, the Optional Common
Shares are hereinafter collectively referred to as the "Common Shares."
You have advised the Company and the Selling Shareholders that the
Underwriters propose to make a public offering of their respective portions of
the Common Shares on the effective date of the registration statement
hereinafter referred to or as soon thereafter as in your judgment is advisable.
The Company and each of the Selling Shareholders hereby confirm their
respective agreements with respect to the purchase of the Common Shares by the
Underwriters as follows:
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* Plus an option to purchase from certain of the Selling Shareholders, in the
aggregate, up to 453,750 additional shares to cover over-allotments.
2
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLING SHAREHOLDERS.
Each of the Selling Shareholders (other than Frederick Judd) and the
Company, severally and not jointly, represent and warrant to the several
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-15109) with
respect to the Common Shares has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. The Company has prepared and has filed or proposes to file prior to
the effective date of such registration statement an amendment or amendments to
such registration statement, which amendment or amendments have been or will be
similarly prepared. There have been delivered to you three signed copies of such
registration statement and amendments, together with three copies of each
exhibit filed therewith. Conformed copies of such registration statement and
amendments (but without exhibits) and of the related preliminary prospectus have
been delivered to you in such reasonable quantities as you have requested for
each of the Underwriters. The Company will next file with the Commission one of
the following: (i) prior to effectiveness of such registration statement, a
further amendment thereto, including the form of final prospectus, (ii) a final
prospectus in accordance with Rules 430A and 424(b) of the Rules and Regulations
or (iii) a term sheet (the "Term Sheet") as described in and in accordance with
Rules 434 and 424(b) of the Rules and Regulations. As filed, the final
prospectus, if one is used, or the Term Sheet and Preliminary Prospectus, if a
final prospectus is not used, shall include all Rule 430A Information (as
hereinafter defined) and, except to the extent that you shall agree in writing
to a modification, shall be in all substantive respects in the form furnished to
you prior to the date and time that this Agreement was executed and delivered by
the parties hereto or, to the extent not completed at such date and time, shall
contain only such specific additional information and other changes (beyond
those contained in the latest Preliminary Prospectus) as the Company shall have
previously advised you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the First Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended; provided, however, that such
term shall also include (i) all Rule 430A Information deemed to be included in
such registration statement at the time such registration statement becomes
effective as provided by Rule 430A of the Rules and Regulations and (ii) any
registration statement filed pursuant to 462(b) of the Rules and Regulations
relating to the Common Stock. The term "Preliminary Prospectus" shall mean any
preliminary prospectus referred to in the preceding paragraph and any
preliminary prospectus included in the Registration Statement at the time it
becomes effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall mean either (i) the prospectus relating to the
Common Shares in the form in which it is first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations, (ii) if a Term Sheet is
not used and no filing pursuant to Rule 424(b) of the Rules and Regulations is
required, shall mean the form of final prospectus included in the Registration
Statement at the time such registration statement becomes effective or (iii) if
a Term Sheet is used, the Term Sheet in the form in which it is first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations, together
with the Preliminary Prospectus included in the Registration Statement at the
time it becomes effective. The term "Rule
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430A Information" means information with respect to the Common Shares and the
offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A of the Rules and Regulations.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus has
conformed in all material respects to the requirements of the Act and the Rules
and Regulations and, as of its date, has not included any 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; and at the time the
Registration Statement becomes effective, and at all times subsequent thereto up
to and including each Closing Date hereinafter mentioned, the Registration
Statement and the Prospectus, and any amendments or supplements thereto, will
contain all material statements and information required to be included therein
by the Act and the Rules and Regulations and will in all material respects
conform to the requirements of the Act and the Rules and Regulations, and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, no representation or
warranty contained in this subsection 2(b) shall be applicable to information
contained in or omitted from any Preliminary Prospectus, the Registration
Statement, the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter, directly or through the Representatives, specifically
for use in the preparation thereof.
(c) The Company does not own or control, directly or indirectly, any
corporation, association, joint venture or other entity other than the
subsidiaries listed in Exhibit 21.1 to the Registration Statement. The Company
and each of its subsidiaries have been duly incorporated and are validly
existing as corporations in good standing under the laws of their respective
jurisdictions of incorporation, with full power and authority (corporate and
other) to own and lease their properties and conduct their respective businesses
as described in the Prospectus; the Company owns all of the outstanding capital
stock of its subsidiaries free and clear of all claims, liens, charges and
encumbrances; the Company and each of its subsidiaries are in possession of and
operating in compliance with all authorizations, licenses, permits, consents,
certificates and orders material to the conduct of their respective businesses,
all of which are valid and in full force and effect; the Company and each of its
subsidiaries are duly qualified to do business and in good standing as foreign
corporations in each jurisdiction in which the ownership or leasing of
properties or the conduct of their respective businesses requires such
qualification, except for jurisdictions in which the failure to so qualify would
not have a material adverse effect upon the Company and its subsidiaries taken
as a whole; and no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.
(d) The Company, subject to the assumptions set forth in the
Prospectus, has an authorized and outstanding Common Stock as set forth under
the heading "Capitalization" in the Prospectus; the issued and outstanding
shares of capital stock have been duly authorized and validly issued, are fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, were not issued in violation of, or subject to, any
preemptive rights or other rights to subscribe for or purchase securities,
conform in all material respects to the description thereof contained in the
Prospectus and, as of the First Closing Date (defined in Section 5(b) below),
such Common Stock (including, without limitation, the Common Shares) will be
duly listed or
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designated on the National Association of Securities Dealers Automated Quotation
("Nasdaq") National Market, subject to notice of issuance. All issued and
outstanding shares of capital stock of each subsidiary of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as disclosed in or contemplated by the Prospectus and the financial statements
of the Company, and the related notes thereto, included in the Prospectus,
neither the Company nor any subsidiary has outstanding any options to purchase,
or any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
(e) The Common Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner set forth in
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform in all material respects to the description
thereof contained in the Prospectus. No preemptive rights or other rights to
subscribe for or purchase exist with respect to the issuance and sale of the
Common Shares by the Company pursuant to this Agreement. No shareholder of the
Company has any right that has not been waived to require the Company to
register the sale of any shares owned by such shareholder under the Act in the
public offering contemplated by this Agreement. No further approval or authority
of the shareholders or the Board of Directors of the Company will be required
for the transfer and sale of the Common Shares to be sold by the Selling
Shareholders or the issuance and sale of the Common Shares to be sold by the
Company as contemplated herein.
(f) The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding obligation of the Company enforceable in accordance with its
terms. The making and performance of this Agreement by the Company and the
consummation of the transactions herein contemplated will not violate any
provisions of the articles of incorporation or bylaws, or other organizational
documents, of the Company or any of its subsidiaries, and will not conflict
with, result in the breach or violation of, or constitute, either by itself or
upon notice or the passage of time or both, a default under any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties may be bound or affected, any statute or any authorization, judgment,
decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
any of its subsidiaries or any of their respective properties. 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 for compliance with the Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Blue Sky
laws applicable to the public offering of the Common Shares by the several
Underwriters and the clearance of such offering with the National Association of
Securities Dealers, Inc. (the "NASD").
(g) Arthur Andersen LLP has expressed its opinion with respect to the
financial statements and schedule filed with the Commission as a part of the
Registration Statement and
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included in the Prospectus and in the Registration Statement and are independent
accountants as required by the Act and the Rules and Regulations.
(h) The financial statements and schedule of the Company, and the
related notes thereto, included in the Registration Statement and the Prospectus
present fairly, in all material respects, the financial position of the Company
as of the respective dates of such financial statements and schedule, and the
results of operations and changes in financial position of the Company for the
respective periods covered thereby. Such statements, schedule and related notes
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis as certified by the independent accountants named
in subsection 2(g). No other financial statements or schedules are required to
be included in the Registration Statement. The selected financial and
statistical data set forth in the Prospectus under the captions "Prospectus
Summary," "Capitalization," "Dilution," "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management," "Certain Transactions," "Principal and Selling
Shareholders" and "Shares Eligible for Future Sale" fairly present, in all
material respects, the information set forth therein on the basis stated in the
Registration Statement.
(i) Neither the Company nor any of its subsidiaries is in violation or
default of any provision of its certificate of incorporation or bylaws, or other
organizational documents. Except as disclosed in the Prospectus, and except as
to defaults which individually or in the aggregate would not be material to the
Company and its subsidiaries taken as a whole, neither the Company nor any of
its subsidiaries is in breach of or default with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound. The Company is not aware of any
state of facts which constitutes an event of default on the part of the Company
or any such subsidiary as defined in such documents or which, with notice or
lapse of time or both, would constitute such an event of default.
(j) There is no statute, contract or other document required to be
described in the Registration Statement or contract or other document required
to be filed as an exhibit to the Registration Statement by the Act or by the
Rules and Regulations which has not been described or filed as required. The
statutes, contracts or other documents described in the Registration Statement
and the Prospectus fairly present, in all material respects, the information
required to be provided by the Act and the Rules and Regulations. The contracts
so described in the Prospectus or filed as exhibits to the Registration
Statement are in full force and effect on the date hereof. Except as to breaches
or defaults which in any single case or in the aggregate would not have a
material adverse effect on the Company and its subsidiaries taken as a whole,
neither the Company nor any of its subsidiaries, nor to the best of the
Company's knowledge, any other party is in breach of or default under any of
such contracts. Complete and fully executed copies of such contracts were made
available to counsel for the Underwriters and there exist no agreements or other
documents which modify, change or amend such contracts.
(k) There is no legal or governmental action, suit or proceeding
pending or, to the best of the Company's knowledge, threatened to which the
Company or any of its subsidiaries is or may be a party or of which property
owned or leased by the Company or any of its subsidiaries is or may be the
subject, or related to environmental or discrimination matters, which action,
suit or proceeding might, individually or in the aggregate with all such
actions, suits or proceedings, prevent or adversely affect the transactions
contemplated by this Agreement or result in a material adverse change in the
condition (financial or otherwise), properties, business, results of operations
or
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prospects of the Company and its subsidiaries taken as a whole; and no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent which might be expected to materially adversely affect such
condition, properties, business, results of operations or prospects. Neither the
Company nor any of its subsidiaries is a party or subject to the provisions of
any material injunction, judgment, decree or order of any court, regulatory
body, administrative agency or other governmental body.
(l) The Company or the applicable subsidiary has good and marketable
title to all the properties and assets reflected as owned in the financial
statements described above (or elsewhere in the Prospectus), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those, if any,
reflected in such financial statements (or elsewhere in the Prospectus) or (ii)
those which are not material in amount and do not materially adversely affect
the use made and proposed to be made of such property by the Company and its
subsidiaries. The Company or the applicable subsidiary holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company and its
subsidiaries taken as a whole. Except as disclosed in the Prospectus, the
Company owns or leases all such properties as are necessary to its operations as
now conducted or as proposed to be conducted.
(m) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or written
agreement or other transaction which is not in the ordinary course of business
or which could result in a material reduction in the future net income of the
Company and its subsidiaries taken as a whole; (ii) the Company and its
subsidiaries have not sustained any material loss or interference with their
respective businesses or properties from fire, flood, windstorm, earthquake,
accident or other calamity, whether or not covered by insurance; (iii) the
Company has not paid or declared any dividends or other distributions with
respect to its capital stock and the Company and its subsidiaries are not in
default in the payment of principal or interest on any outstanding material debt
obligations; (iv) there has not been any change in the capital stock (other than
upon the sale of the Common Shares hereunder) or indebtedness material to the
Company and its subsidiaries taken as a whole (other than in the ordinary course
of business); and (v) there has not been any material adverse change in the
condition (financial or otherwise), business, properties, results of operations
or prospects of the Company and its subsidiaries taken as a whole.
(n) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and its subsidiaries have sufficient trademarks, trade
names, patent rights, mask works, copyrights, moral rights, licenses, approvals
and governmental authorizations to conduct their businesses as now conducted;
the expiration of any trademarks, trade names, patent rights, mask works, moral
rights, copyrights, licenses, approvals or governmental authorizations would not
have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company or its subsidiaries
taken as a whole; and the Company has no knowledge of any infringement by it or
its subsidiaries of trademark, trade name rights, patent rights, mask works,
copyrights, moral rights, licenses, trade secret or other similar rights of
others, and there is no claim being made against the Company or its subsidiaries
regarding trademark, trade name, patent, mask work, copyright, moral right,
license, trade secret or other infringement which could have a material adverse
effect on the condition (financial or otherwise), business, results of
operations or prospects of the Company and its subsidiaries taken as a whole.
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(o) The Company has not been advised, and has no reason to believe,
that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations, except
where failure to be so in compliance would not materially adversely affect the
condition (financial or otherwise), business, results of operations or prospects
of the Company and its subsidiaries taken as a whole.
(p) The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes shown
as due thereon; and the Company has no knowledge of any tax deficiency which has
been or might be asserted or threatened against the Company or its subsidiaries
which could materially and adversely affect the business, operations or
properties of the Company and its subsidiaries taken as a whole.
(q) Neither the Company nor any of its subsidiaries is or, after
application of the net proceeds of this offering as described under the caption
"Use of Proceeds" in the Prospectus, will become an "investment company" or an
entity "controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
the rules and regulations of the Commission thereunder. The Company intends to
conduct its business in a manner such that it will not become an "investment
company" subject to regulation under the Investment Company Act.
(r) The Company has not distributed nor caused to be distributed, and
will not distribute nor cause to be distributed prior to the First Closing Date,
any offering material in connection with the offering and sale of the Common
Shares other than the Prospectus, the Registration Statement and the other
materials permitted by the Act.
(s) Each of the Company and its subsidiaries maintains insurance of
such types and in such amounts as are customary for its business, including, but
not limited to, insurance covering real and personal property owned or leased by
the Company and its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
(t) Neither the Company nor any of its subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office or failed to disclose fully any contribution in violation of
law or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.
(u) The Company maintains a system of internal accounting controls that
it believes is sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management's general or specific authorization,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(v) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Common Shares.
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(w) All material transactions that are required to be disclosed in the
Prospectus under applicable Rules and Regulations between the Company and/or any
of its subsidiaries, on the one hand, and any of their officers, directors and
shareholders holding 5% or more of the Company's capital stock, on the other
hand, have been accurately disclosed in all material respects in the Prospectus.
(x) The Company has obtained agreements from each of its directors,
officers and shareholders holding more than 6,000 shares providing that such
person will not, for a period of 180 days directly or indirectly, sell, transfer
the economic risk of ownership in, make any short sale, pledge, offer to sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities exercisable for or exchangeable with or any other rights to purchase
or acquire any shares of Common Stock, other than (i) as a bona fide gift or
gifts where prior notice is provided to you and the donee or donees agree to be
bound to the agreement or (ii) with the prior written consent of Montgomery
Securities, which consent may be withheld at the sole discretion of Montgomery
Securities. Each such person has also agreed and consented to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of shares of Common Stock held by such persons or entity, unless in
compliance with the foregoing restrictions.
(y) The Company is not aware that (A) any executive, key employee or
significant group of employees of the Company or any subsidiary plans to
terminate employment with the Company or any such subsidiary or (B) any such
executive or key employee is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreement that would be
violated by the present or proposed business activities of the Company and its
subsidiaries. Neither the Company nor any subsidiary has or expects to have any
liability for any prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension, profit sharing or
other plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or any other retirement, pension, profit sharing
plan or other plan, to which the Company or any subsidiary makes or ever has
made a contribution and in which any employee of the Company or any subsidiary
is or has ever been a participant. With respect to such plans, the Company and
each subsidiary are in compliance in all material respects with all applicable
provisions of ERISA.
(z) Other than as contemplated by this Agreement, there is no broker,
finder or other party that is entitled to receive from the Company any brokerage
or finder's fee or other fee or commission as a result of any of the
transactions contemplated by this Agreement.
SECTION 3
REPRESENTATIONS. WARRANTIES AND COVENANTS
OF THE SELLING SHAREHOLDERS
(a) Each of the Selling Shareholders, severally and not jointly,
represents and warrants to, and agrees with, the several Underwriters that:
(i) Such Selling Shareholder has, and on the First Closing
Date and the Second Closing Date hereinafter mentioned will have, good and
marketable title to the Common Shares proposed to be sold by such Selling
Shareholder hereunder on such Closing Date and full right, power and authority
to enter into this Agreement and to sell, assign, transfer and deliver such
Common Shares hereunder, free and clear of all voting trust arrangements, liens,
encumbrances, equities, security interests, restrictions and claims whatsoever;
and upon delivery of and payment for such Common Shares hereunder, the
Underwriters will acquire good and marketable title thereto,
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free and clear of all liens, encumbrances, equities, claims, restrictions,
security interests, voting trusts or other defects of title whatsoever.
(ii) Such Selling Shareholder has executed and delivered a
Custody Agreement (hereinafter referred to as the "Custody Agreement") and in
connection herewith such Selling Shareholder further represents, warrants and
agrees that such Selling Shareholder has deposited in custody, under the Custody
Agreement, with the agent named therein (the "Agent") as custodian, certificates
in negotiable form for the Common Shares to be sold hereunder by such Selling
Shareholder, for the purpose of further delivery pursuant to this Agreement.
Such Selling Shareholder agrees that the Common Shares to be sold by such
Selling Shareholder on deposit with the Agent are subject to the interests of
the Company and the Underwriters, that the arrangements made for such custody
are to that extent irrevocable, and that the obligations of such Selling
Shareholder hereunder shall not be terminated, except as provided in this
Agreement or in the Custody Agreement, by any act of such Selling Shareholder,
by operation of law, by the death or incapacity of such Selling Shareholder or
by the occurrence of any other event. If the Selling Shareholder should die or
become incapacitated, or if any other event should occur, before the delivery of
the Common Shares hereunder, the documents evidencing Common Shares then on
deposit with the Agent shall be delivered by the Agent in accordance with the
terms and conditions of this Agreement as if such death, incapacity or other
event had not occurred, regardless of whether or not the Agent shall have
received notice thereof. This Agreement and the Custody Agreement have been duly
executed and delivered by or on behalf of such Selling Shareholder and the form
of such Custody Agreement has been delivered to you.
(iii) The performance of this Agreement and the Custody
Agreement and the consummation of the transactions contemplated hereby and by
the Custody Agreement will not result in a breach or violation by such Selling
Shareholder of any of the terms or provisions of, or constitute a default by
such Selling Shareholder under, any material indenture, mortgage, deed of trust,
trust (constructive or other), loan agreement, lease, franchise, license or
other agreement or instrument to which such Selling Shareholder is a party or by
which such Selling Shareholder or any of its properties is bound, any statute,
or any judgment, decree, order, rule or regulation of any court or governmental
agency or body applicable to such Selling Shareholder or any of its properties.
(iv) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Common Shares.
(b) Frederick Judd represents and warrants that, after due inquiry and
investigation, he is not aware that any of the representations and warranties of
the Company and the other Selling Stockholders set forth in Section 2 above is
untrue, inaccurate or incomplete in any material respect.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS
The Representatives, on behalf of the several Underwriters, represent
and warrant to the Company and to the Selling Shareholders that the information
set forth (i) on the cover page of the Prospectus with respect to price,
underwriting discounts and commissions and terms of offering and (ii) under
"Underwriting" in the Prospectus was furnished to the Company by and on behalf
of the Underwriters for use in connection with the preparation of the
Registration Statement and the Prospectus and is correct in all material
respects. Each Representative represents and warrants that
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it has been authorized by each of the other Underwriters as such Underwriter's
Representative to enter into this Agreement on its behalf and to act for it in
the manner herein provided.
SECTION 5
PURCHASE. SALE AND DELIVERY OF COMMON SHARES
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, (i) the
Company agrees to issue and sell to the Underwriters 2,000,000 of the Firm
Common Shares, and (ii) the Selling Shareholders agree, severally and not
jointly, to sell to the Underwriters in the respective amounts set forth in
Schedule B hereto, an aggregate of 1,025,000 of the Firm Common Shares. The
Underwriters agree, severally and not jointly, to purchase from the Company and
the Selling Shareholders, respectively, the number of Firm Common Shares
described below.
(a) The purchase price per share to be paid by the several Underwriters
to the Company and to the Selling Shareholders, respectively, shall be $ _____
per share. The obligation of each Underwriter to the Company shall be to
purchase from the Company that number of full shares which (as nearly as
practicable, as determined by you) bears to 2,000,000 the same proportion as the
number of shares set forth opposite the name of such Underwriter in Schedule A
hereto bears to the total number of Firm Common Shares. The obligation of each
Underwriter to the Selling Shareholders shall be to purchase from the Selling
Shareholders that number of full shares which (as nearly as practicable, as
determined by you) bears to 1,025,000 the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares.
(b) Delivery of certificates for the Firm Common Shares to be purchased
by the Underwriters and payment therefor shall be made at the offices of
O'Melveny & Myers, 610 Newport Centre Drive, Suite 1700, Newport Beach,
California (or such other place as may be agreed upon by the Company and the
Representatives) at such time and date, not later than the third (or, if the
Firm Common Shares are priced as contemplated by Rule 15c6-1(c) under the
Exchange Act, after 4:30 P.M. Washington DC time, the fourth) full business day
following the first date that any of the Common Shares are released by you for
sale to the public, as you shall designate by at least 48 hours prior notice to
the Company (or at such other time and date, not later than one week after such
third full business day as may be agreed upon by the Company and the
Representatives) (the "First Closing Date"); provided, however, that if the
Prospectus is at any time prior to the First Closing Date recirculated to the
public, the First Closing Date shall occur upon the later of the third or
fourth, as the case may be, full business day following the first date that any
of the Common Shares are released by you for sale to the public or the date that
is 48 hours after the date that the Prospectus has been so recirculated.
(c) Delivery of certificates for the Firm Common Shares shall be made
by or on behalf of the Company and the Selling Shareholders to you, for the
respective accounts of the Underwriters with respect to the Firm Common Shares
to be sold by the Company and by the Selling Shareholders against payment by
you, for the accounts of the several Underwriters, of the purchase price
therefor by a wire transfer of immediately available funds to an account
designated by the Company and of the Agent in proportion to the number of Firm
Common Shares to be sold by the Company and the Selling Shareholders,
respectively. The certificates for the Firm Common Shares shall be registered in
such names and denominations as you shall have requested at least two full
business days prior to the First Closing Date, and shall be made available for
checking and packaging on the business day preceding the First Closing Date at a
location in New York, New
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York, as may be designated by you. Time shall be of the essence, and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Underwriters.
(d) In addition to the Firm Common Shares and on the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, certain of the Selling Shareholders as
indicated in Schedule B annexed hereto, severally and not jointly, hereby grant
an option to the several Underwriters to purchase, severally and not jointly, up
to an aggregate of 453,750 Optional Common Shares at the purchase price per
share to be paid for the Firm Common Shares, for use solely in covering any
over-allotments made by you for the account of the Underwriters in the sale and
distribution of the Firm Common Shares. The option granted hereunder may be
exercised at any time (but not more than once) within 30 days after the first
date that any of the Common Shares are released by you for sale to the public,
upon notice by you to the Selling Shareholders setting forth the aggregate
number of Optional Common Shares as to which the Underwriters are exercising the
option, the names and denominations in which the certificates for such shares
are to be registered and the time and place at which such certificates will be
delivered. Such time of delivery (which may not be earlier than the First
Closing Date), being herein referred to as the "Second Closing Date," shall be
determined by you, but if at any time other than the First Closing Date shall
not be earlier than three nor later than five full business days after delivery
of such notice of exercise. The number of Optional Common Shares to be purchased
by each Underwriter shall be determined by multiplying the number of Optional
Common Shares to be sold by such Selling Shareholders pursuant to such notice of
exercise by a fraction, the numerator of which is the number of Firm Common
Shares to be purchased by such Underwriter as set forth opposite its name in
Schedule A and the denominator of which is 3,025,000 (subject to such
adjustments to eliminate any fractional share purchases as you in your
discretion may make). Certificates for the Optional Common Shares will be made
available for checking and packaging on the business day preceding the Second
Closing Date at a location in New York, New York, as may be designated by you.
The manner of payment for and delivery of the Optional Common Shares shall be
the same as for the Firm Common Shares purchased from such Selling Shareholders
as specified in the two preceding paragraphs. At any time before lapse of the
option, you may cancel such option by giving written notice of such cancellation
to such Selling Shareholders. If the option is canceled or expires unexercised
in whole or in part, the Company will deregister under the Act the number of
Optional Common Shares as to which the option has not been exercised.
(e) You have advised the Company and the Selling Shareholders that each
Underwriter has authorized you to accept delivery of its Common Shares, to make
payment and to deliver a receipt therefor. You, individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by you by the First Closing Date or the Second
Closing Date, as the case may be, for the account of such Underwriter, but any
such payment shall not relieve such Underwriter from any of its obligations
under this Agreement.
(f) Subject to the terms and conditions hereof, the Underwriters
propose to make a public offering of their respective portions of the Common
Shares as soon after the effective date of the Registration Statement as in the
judgment of the Representatives is advisable and at the public offering price
set forth on the cover page of, and on the terms set forth in, the final
prospectus, if one is used, or on the first page of the Term Sheet, if one is
used.
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SECTION 6
COVENANTS OF THE COMPANY
The Company covenants and agrees that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A of the Rules and Regulations, or the filing of the
Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations,
the Company will file the Prospectus, properly completed, pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to you of such timely
filing. The Company will promptly advise you in writing (i) of the receipt of
any comments of the Commission, (ii) of any request of the Commission for
amendment of or supplement to the Registration Statement (either before or after
it becomes effective), any Preliminary Prospectus or the Prospectus or for
additional information, (iii) when the Registration Statement shall have become
effective and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the institution
of any proceedings for that purpose. If the Commission shall enter any such stop
order at any time, the Company will use its best efforts to obtain the lifting
of such order at the earliest possible moment. The Company will not file any
amendment or supplement to the Registration Statement (either before or after it
becomes effective), any Preliminary Prospectus or the Prospectus unless a copy
of the same has been furnished to you a reasonable time prior to such filing and
will not file any such document to which you reasonably object or which is not
in compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration Statement
or the Prospectus which in your judgment may be necessary or advisable to enable
the several Underwriters to continue the distribution of the Common Shares and
will use its best efforts to cause the same to become effective as promptly as
possible. The Company will fully and completely comply with the provisions of
Rule 430A of the Rules and Regulations with respect to information omitted from
the Registration Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in Section
10(a)(3) of the Act during which a prospectus relating to the Common Shares is
required to be delivered under the Act any event occurs, as a result of which
the Prospectus, including any amendments or supplements, would include an 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 not misleading, or if
it is necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Act or the Rules and Regulations, the Company
will promptly advise you thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will correct
such statement or omission or an amendment or supplement which will effect such
compliance and will use its best efforts to cause the same to become effective
as soon as possible; and, in case any Underwriter is required to deliver a
prospectus after such nine-month period, the Company upon request, but at the
expense of such Underwriter, will promptly prepare such amendment or amendments
to the Registration Statement and such Prospectus or Prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act.
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(d) As soon as practicable, but not later than 45 days after the end of
the first quarter ending after one year following the "effective date of the
Registration Statement" (as defined in Rule 158(c) of the Rules and
Regulations), the Company will make generally available to its security holders
an earnings statement (which need not be audited) covering a period of 12
consecutive months beginning after the effective date of the Registration
Statement which will satisfy the provisions of the last paragraph of Section
11(a) of the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company, at
its expense, but only for the nine-month period referred to in Section 10(a)(3)
of the Act, will furnish to you and the Selling Shareholders or mail to your
order copies of the Registration Statement, the Prospectus, the Preliminary
Prospectus and all amendments and supplements to any such documents in each case
as soon as available and in such quantities as you and the Selling Shareholders
may reasonably request, for the purposes contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in order to
qualify or register the Common Shares for sale under (or obtain exemptions from
the application of) the Blue Sky laws of such jurisdictions as you designate,
will comply with such laws and will continue such qualifications, registrations
and exemptions in effect so long as reasonably required for the distribution of
the Common Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any jurisdiction
or any initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification, registration
or exemption, the Company, with your cooperation, will use its best efforts to
obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company will furnish
to the Representatives and, upon request of the Representatives, to each of the
other Underwriters: (i) as soon as practicable after the end of each fiscal
year, copies of the Annual Report of the Company containing the balance sheet of
the Company as of the close of such fiscal year and statements of income,
shareholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other
report filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or communication
of the Company mailed generally to holders of its Common Stock.
(h) During the period of 180 days after the effective date of the
Registration Statement, without the prior written consent of either Montgomery
Securities or each of the Representatives (which consent may be withheld at the
sole discretion of Montgomery Securities or the Representatives, as the case may
be), the Company will not (other than the grant of additional options, the
issuance of other securities under the Company's 1995 Stock Option Plan or
pursuant to outstanding stock options disclosed in the Prospectus) issue, offer,
sell, grant options to purchase or otherwise dispose of any of the Company's
equity securities or any other securities convertible into, exercisable for or
exchangeable with its Common Stock or other equity security.
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(i) The Company will apply the net proceeds of the sale of the Common
Shares sold by it substantially in accordance with its statements under the
caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to qualify or register its
Common Stock for sale in non-issuer transactions under (or obtain exemptions
from the application of) the Blue Sky laws of the State of California (and
thereby permit market making transactions and secondary trading in the Company's
Common Stock in California), will comply with such Blue Sky laws and will
continue such qualifications, registrations and exemptions in effect for a
period of the shorter of (i) five years after the date hereof and (ii) such date
as the Common Stock is no longer registered under the Exchange Act.
(k) The Company will use its best efforts to designate its Common
Stock, including the Common Shares to be issued and sold by the Company and the
Selling Shareholders, for quotation on the Nasdaq National Market.
(l) The Company will take the steps, if any, necessary to create and
enforce lock-up agreements with each option holder of the Company for a period
of 90 days after the effective date of the Registration Statement and will not
waive any such lock-up agreements during such 90-day period without the prior
written consent of Montgomery Securities.
You, on behalf of the Underwriters, may, in your sole discretion, waive
in writing the performance by the Company of any one or more of the foregoing
covenants or extend the time for their performance.
SECTION 7
PAYMENT OF EXPENSES
Whether or not the transactions contemplated hereunder are consummated
or this Agreement becomes effective or is terminated, the Company and, unless
otherwise paid by the Company, the Selling Shareholders agree to pay all costs,
fees and expenses incurred in connection with the performance of their
obligations hereunder and in connection with the transactions contemplated
hereby, including without limiting the generality of the foregoing, (i) all
expenses incident to the issuance and delivery of the Common Shares (including
all printing and engraving costs), (ii) all fees and expenses of the registrar
and transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Common Shares
to the Underwriters, (iv) all fees and expenses of the Company's and the Selling
Shareholder's counsel and the Company's independent accountants, (v) all costs
and expenses incurred in connection with the preparation, printing, filing,
shipping and distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and financial statements)
and all amendments and supplements provided for herein, this Agreement, the
Agreement Among Underwriters, the Selected Dealers Agreement, the Underwriters'
Questionnaire, the Underwriters' Power of Attorney and the Blue Sky memorandum,
(vi) all filing fees, reasonable attorneys' fees and expenses incurred by the
Company or the Underwriters in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part
of the Common Shares for offer and sale under the Blue Sky laws or with
obtaining clearance from the NASD and (vii) all other fees, costs and expenses
referred to in Item 13 of the Registration Statement. The Underwriters may deem
the Company to be the primary obligor with respect to all costs, fees and
expenses to be paid by the Company and by the Selling Shareholders. Except as
provided in this Section 7, Section 9 and Section 11 hereof, the Underwriters
shall pay all of their own expenses,
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including the fees and disbursements of their counsel (excluding those relating
to qualification, registration or exemption under the Blue Sky laws, the
obtaining of clearance from the NASD and the Blue Sky memorandum referred to
above, which will be paid by the Company). This Section 7 shall not affect any
agreements relating to the payment of expenses between the Company and the
Selling Shareholders.
The Selling Shareholders will pay (directly or by reimbursement) all
fees and expenses incident to the performance of their obligations under this
Agreement which are not otherwise specifically provided for herein, including
but not limited to (i) any fees and expenses of counsel for such Selling
Shareholders, (ii) any fees and expenses of the Agent and (iii) all expenses and
taxes incident to the sale and delivery of the Common Shares to be sold by such
Selling Shareholders to the Underwriters hereunder.
SECTION 8
CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS
The obligations of the several Underwriters to purchase and pay for the
Firm Common Shares on the First Closing Date and the Optional Common Shares on
the Second Closing Date shall be subject to the accuracy of the representations
and warranties on the part of the Company and the Selling Shareholders herein
set forth as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the statements of Company
officers and the Selling Shareholders made pursuant to the provisions hereof, to
the performance by the Company and the Selling Shareholders of their respective
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M. (or in the case of a registration statement filed pursuant to
Rule 462(b) of the Rules and Regulations relating to the Common Shares, not
later than 10 P.M.), Washington, D.C. Time, on the date of this Agreement, or at
such later time as shall have been consented to by you; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of
the Rules and Regulations, the Prospectus shall have been filed in the manner
and within the time period required by Rule 424(b) of the Rules and Regulations;
and prior to such Closing Date, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or, to the knowledge of
the Company, the Selling Shareholders or you, shall be contemplated by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement, or otherwise, shall have been
complied with to your reasonable satisfaction.
(b) You shall be reasonably satisfied that since the respective dates
as of which information is given in the Registration Statement and Prospectus,
(i) except as set forth in or contemplated by the Registration Statement or the
Prospectus, there shall not have been any change in the capital stock (other
than pursuant to the exercise of outstanding options disclosed in the
Prospectus) of the Company or any of its subsidiaries or any material change in
the indebtedness (other than in the ordinary course of business) of the Company
or any of its subsidiaries, (ii) except as set forth in or contemplated by the
Registration Statement or the Prospectus, no material verbal or written
agreement or other transaction shall have been entered into by the Company or
any of its subsidiaries, which is not in the ordinary course of business or
which could result in a material reduction in the future net income of the
Company and its subsidiaries taken as a whole, (iii) no loss or damage (whether
or not insured) to the property of the Company or any of its subsidiaries shall
have been sustained which materially and adversely affects the condition
(financial or otherwise),
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business, results of operations or prospects of the Company and its subsidiaries
taken as a whole, (iv) no legal or governmental action, suit or proceeding
affecting the Company or any of its subsidiaries which is material to the
Company and its subsidiaries taken as a whole or which affects or may affect the
transactions contemplated by this Agreement shall have been instituted or
threatened and (v) there shall not have been any material change in the
condition (financial or otherwise), business, management, results of operations
or prospects of the Company and its subsidiaries taken as a whole which makes it
impractical or inadvisable in the judgment of the Representatives to proceed
with the public offering or purchase the Common Shares as contemplated hereby.
(c) There shall have been furnished to you, as Representatives of the
Underwriters, on each Closing Date, in form and substance reasonably
satisfactory to you, except as otherwise expressly provided below:
(i) An opinion of O'Melveny & Myers, counsel for the Company
and the Selling Shareholders, addressed to the Underwriters and dated
the First Closing Date, or the Second Closing Date, as the case may be,
to the following effect.
(1) Each of the Company and its subsidiaries has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business as a foreign
corporation and is in good standing in all other jurisdictions
where the ownership or leasing of properties or the conduct of
its business requires such qualification, except for
jurisdictions in which the failure to so qualify would not
have a material adverse effect on the Company and its
subsidiaries, and has full corporate power and authority to
own its properties and conduct its business as described in
the Registration Statement.
(2) The authorized, issued and outstanding capital
stock of the Company is as set forth under the caption
"Capitalization" in the Prospectus; all necessary and proper
corporate proceedings have been taken in order to authorize
validly such authorized capital stock; all outstanding shares
of such capital stock (including the Firm Common Shares and
any Optional Common Shares) have been duly and validly issued,
are fully paid and nonassessable, have been issued in
compliance with federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase any securities and
conform to the description thereof contained in the
Prospectus; without limiting the foregoing, there are no
preemptive or other rights to subscribe for or purchase any of
the Common Shares to be sold by the Company hereunder.
(3) All of the issued and outstanding shares of the
capital stock of the Company's subsidiaries have been duly and
validly authorized and issued, are fully paid and
nonassessable and are owned beneficially by the Company free
and clear of all liens, encumbrances, equities, claims,
security interests, voting trusts or other defects of title
whatsoever.
(4) The certificates evidencing the Common Shares to
be delivered hereunder are in due and proper form under
California law, and when duly countersigned by the Company's
transfer agent and registrar, and delivered to you or upon
your order against payment of the agreed consideration
therefor in accordance with the provisions of this Agreement,
the Common Shares represented thereby will
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be duly authorized and validly issued, fully paid and
nonassessable, will not have been issued in violation of or
subject to any preemptive rights or other rights to subscribe
for or purchase securities and will conform in all respects to
the description thereof contained in the Prospectus.
(5) Except as disclosed in the Prospectus, to the
best of such counsel's knowledge, there are no outstanding
options, warrants or other rights calling for the issuance of,
and no commitments, plans or arrangements to issue, any shares
of capital stock of the Company or any security convertible
into or exchangeable for capital stock of the Company.
(6) The Company's Common Stock (including the Common
Shares) has been duly approved for listing and quotation on
the Nasdaq National Market.
(7) (A) The Registration Statement has become
effective under the Act, and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement or preventing the use of the Prospectus
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission;
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);
(B) The Registration Statement, the
Prospectus and each amendment or supplement thereto (except
for the financial statements and schedule included therein as
to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act
and the Rules and Regulations;
(C) To the best of such counsel's knowledge,
there are no franchises, leases, contracts, agreements or
documents of a character required to be disclosed in the
Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement which are not disclosed
or filed, as required by the Act and the Rules and
Regulations;
(D) The description in the Registration
Statement and Prospectus of the charter and by-laws of the
Company is accurate in all material respects and such
descriptions fairly present the information required to be
shown by the Act or the Rules and Regulations; the statements
set forth in the Prospectus under the captions "Management,"
"Certain Transactions," "Description of Capital Stock" and
"Shares Eligible for Future Sale," insofar as they represent
summaries of document, contracts, statutes, rules and
regulations, are complete, accurate and fairly present the
information required to be disclosed; and
(E) To the best of such counsel's knowledge,
there are no legal or governmental actions, suits or
proceedings pending or threatened against the Company that are
required under the Act and the Rules and Regulations to be
described in the Prospectus and that are not described as
required.
(8) The Company has full right, power and authority
to enter into this Agreement and to sell and deliver the
Common Shares to be sold by it to the several Underwriters;
this Agreement has been duly and validly authorized by all
necessary
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corporate action by the Company, has been duly and validly
executed and delivered by and on behalf of the Company, and is
a valid and binding agreement of the Company in accordance
with its terms, except as enforceability may be limited by
general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors'
rights generally and except as to those provisions relating to
indemnity or contribution for liabilities arising under the
Act as to which no opinion need be expressed; and no approval,
authorization, order, consent, registration, filing,
qualification, license or permit of or with any court,
regulatory, administrative or other governmental body is
required for the execution and delivery of this Agreement by
the Company or the consummation of the transactions
contemplated by this Agreement, except such as have been
obtained and are in full force and effect under the Act and
such as may be required under applicable Blue Sky laws in
connection with the purchase and distribution of the Common
Shares by the Underwriters and the clearance of such offering
with the NASD.
(9) The execution and performance of this Agreement
and the consummation of the transactions herein contemplated
will not conflict with, result in the breach of, or
constitute, either by itself or upon notice or the passage of
time or both, a default under, any agreement, mortgage, deed
of trust, lease, franchise, license, indenture, permit or
other instrument known to such counsel to which the Company or
any of its subsidiaries is a party or by which the Company or
any of its subsidiaries or any of its or their property may be
bound or affected that is material to the Company and its
subsidiaries, or violate any of the provisions of the charter
or bylaws, or other organizational documents, of the Company
or any of its subsidiaries or, so far as is known to such
counsel, violate any statute, judgment, decree, order, rule or
regulation of any court or governmental body having
jurisdiction over the Company or any of its subsidiaries or
any of its or their property.
(10) Neither the Company nor any subsidiary is in
violation of its charter or bylaws, or other organizational
documents, or to the best of such counsel's knowledge, in
breach of, or in default with respect to, any provision of any
agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument known to such counsel to
which the Company or any such subsidiary is a party or by
which it or any of its properties may be bound or affected,
except where such default would not materially adversely
affect the Company and its subsidiaries; and, to the best of
such counsel's knowledge, the Company and its subsidiaries are
in compliance with all laws, rules, regulations, judgments,
decrees, orders and statutes of any court or jurisdiction to
which they are subject, except where noncompliance would not
materially adversely affect the Company and its subsidiaries.
(11) To the best of such counsel's knowledge, the
Company and each of its subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks,
service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights described in the
Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, and the
Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company or
any of its subsidiaries with respect to the foregoing. The
Company's business as now conducted and as proposed to be
conducted does not and will not infringe or conflict with any
patents, trademarks, service marks, trade names,
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copyrights, trade secrets, licenses or other intellectual
property or franchise right of any person;
(12) To the best of such counsel's knowledge, the
Company and each of its subsidiaries have, and the Company and
each of its subsidiaries as of the Closing Dates will have,
good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned
or proposed to be owned by them which is material to the
business of the Company or any of its subsidiaries, in each
case free and clear of all liens, encumbrances and defects;
and any real property and buildings held under lease by the
Company and its subsidiaries or proposed to be held after
giving effect to the transactions described in the Prospectus
are, or will be as of the Closing Dates, held by them under
valid, subsisting and enforceable leases with such exceptions
as would not have a material adverse effect on the Company and
its subsidiaries considered as a whole;
(13) The Company and each of its subsidiaries are
not, nor will they be immediately after receiving the proceeds
from the sale of the Shares, an "investment company" or an
entity "controlled" by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
(14) To the best of such counsel's knowledge, no
holders of securities of the Company have rights that have not
been waived to the registration of shares of Common Stock or
other securities, because of the filing of the Registration
Statement by the Company or the offering contemplated hereby.
(15) To the best of such counsel's knowledge, this
Agreement and the Custody Agreement have been duly authorized,
executed and delivered by or on behalf of each of the Selling
Shareholders; the Agent has been duly and validly authorized
to act as the custodian of the Common Shares to be sold by
each such Selling Shareholder; and the performance of this
Agreement and the Shareholders Agreement and the consummation
of the transactions contemplated herein or in the Custody
Agreement by the Selling Shareholders will not result in a
breach of, or constitute a default under, any indenture,
mortgage, deed of trust, trust (constructive or other), loan
agreement, lease, franchise, license or other agreement or
instrument to which any of the Selling Shareholders is a party
or by which any of the Selling Shareholders or any of their
properties may be bound, or violate any statute, judgment,
decree, order, rule or regulation known to such counsel of any
court or governmental body having jurisdiction over any of the
Selling Shareholders or any of their properties; and to the
best of such counsel's knowledge, no approval, authorization,
order or consent of any court, regulatory body, administrative
agency or other governmental body is required for the
execution and delivery of this Agreement or the Custody
Agreement or the consummation by the Selling Shareholders of
the transactions contemplated by this Agreement, except such
as have been obtained and are in full force and effect under
the Act and such as may be required under the rules of the
NASD and applicable Blue Sky laws.
(16) To the best of such counsel's knowledge, the
Selling Shareholders have full right, power and authority to
enter into this Agreement and the Custody Agreement and to
sell, transfer and deliver the Common Shares to be sold on
such Closing Date by such Selling Shareholders hereunder and
good and marketable title
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to such Common Shares so sold, free and clear of all liens,
encumbrances, equities, claims, restrictions, security
interests, voting trusts, or other defects of title
whatsoever, has been transferred to the Underwriters (whom
counsel may assume to be bona fide purchasers) who have
purchased such Common Shares hereunder.
(17) To the best of such counsel's knowledge, this
Agreement and the Custody Agreement are valid and binding
agreements of each of the Selling Shareholders enforceable in
accordance with their terms except as enforceability may be
limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and except with respect to those
provisions relating to indemnities or contributions for
liabilities under the Act, as to which no opinion need be
expressed.
(18) No transfer taxes are required to be paid in
connection with the sale and delivery of the Common Shares to
the Underwriters hereunder.
In rendering such opinion, such counsel may rely as to the matters set
forth in paragraphs (15), (16), (17) and (18), on opinions of other
counsel retained by the Selling Shareholders, as to matters of governed
by the laws of states or jurisdictions other than California or federal
laws, on opinions of local counsel, and as to matters of fact, on
certificates of the Selling Shareholders and of officers of the Company
and of governmental officials, in which case their opinion is to state
that they are so doing and that the Underwriters are justified in
relying on such opinions or certificates and copies of said opinions or
certificates are to be attached to the opinion. In addition to the
matters set forth above, counsel rendering the foregoing opinion shall
also include a statement to the effect that, based upon their
participation in the preparation of the Registration Statement and
Prospectus and their review and discussion of the contents thereof,
nothing has come to such counsel's attention during the course of their
representation that would lead such counsel to believe (i) that (except
for the financial statement and schedule as to which such counsel need
not express any statement) the Registration Statement or Prospectus
included therein, at the time the Registration Statement became
effective, did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) that
(except for the financial statements and schedule as to which such
counsel need not express any statement) the Registration Statement or
Prospectus and any amendment or supplement thereto effected on or
before the First Closing Date or the Second Closing Date, as the case
may be, does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(ii) Such opinion or opinions of Fenwick & West LLP, counsel
for the Underwriters, dated the First Closing Date or the Second
Closing Date, as the case may be, with respect to the incorporation of
the Company, the sufficiency of all corporate proceedings and other
legal matters relating to this Agreement, the validity of the Common
Shares, the Registration Statement and the Prospectus and other related
matters as you may reasonably require, and the Company and the Selling
Shareholders shall have furnished to such counsel such documents and
shall have exhibited to them such papers and records as they may
reasonably request for the purpose of enabling them to pass upon such
matters. In connection with such opinions, such counsel may rely on
representations or certificates of officers of the Company and
governmental officials.
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(iii) A certificate of the Company executed by the Chairman of
the Board or President and the chief financial or accounting officer of
the Company, dated the First Closing Date or the Second Closing Date,
as the case may be, to the following effect.
(1) The representations and warranties of the Company
set forth in Section 2 of this Agreement are true, complete
and correct as of the date of this Agreement and as of the
First Closing Date or the Second Closing Date, as the case may
be, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied on or prior to such Closing Date.
(2) The Commission has not issued any order
preventing or suspending the use of the Prospectus or any
Preliminary Prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending
the effectiveness of the Registration Statement has been
issued; and to the best of the knowledge of the respective
signers, no proceedings for that purpose have been instituted
or are pending or contemplated under the Act.
(3) Each of the respective signers of the certificate
has carefully examined the Registration Statement and the
Prospectus; in his opinion and to the best of his knowledge,
the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all statements
required to be stated therein regarding the Company and its
subsidiaries; and to the best of his knowledge neither the
Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading.
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral,
transaction or event has occurred which should have been set
forth in an amendment to the Registration Statement or in a
supplement to or amendment of any prospectus which has not
been disclosed in such a supplement or amendment.
(5) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, and except as disclosed in or contemplated by the
Prospectus, there has not been any material adverse change or
a development involving a material adverse change in the
condition (financial or otherwise), business, properties,
results of operations, management or prospects of the Company
and its subsidiaries taken as a whole; and no legal or
governmental action, suit or proceeding is pending or
threatened against the Company or any of its subsidiaries
which is material to the Company and its subsidiaries taken as
a whole, whether or not arising from transactions in the
ordinary course of business, or which may adversely affect the
transactions contemplated by this Agreement; since such dates
and except as so disclosed, neither the Company nor any of its
subsidiaries has entered into any verbal or written agreement
or other transaction which is not in the ordinary course of
business or which could result in a material reduction in the
future net income of the Company and its subsidiaries taken as
a whole or incurred any material liability or obligation,
direct, contingent or indirect, made any material change in
its capital stock, made any material change in its short-term
debt or funded debt or repurchased or otherwise acquired any
of the Company's capital stock; and
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the Company has not declared or paid any dividend, or made any
other distribution, upon its outstanding capital stock payable
to shareholders of record on a date prior to the First Closing
Date or Second Closing Date.
(6) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus and except as disclosed in or contemplated by the
Prospectus, the Company and its subsidiaries have not
sustained a material loss or damage by strike, fire, flood,
earthquake, windstorm, accident or other calamity (whether or
not insured).
(iv) On the First Closing Date or the Second Closing Date, as
the case may be, a certificate, dated such Closing Date and addressed
to you, signed by or on behalf of each of the Selling Shareholders to
the effect that the representations and warranties of such Selling
Shareholder in Sections 2 (with respect to each Selling Shareholder
except Frederick Judd) and 3 of this Agreement are true, complete and
correct, as if made at and as of the First Closing Date or the Second
Closing Date, as the case may be, and such Selling Shareholder has
complied with all the agreements and satisfied all the conditions on
his part to be performed or satisfied prior to the First Closing Date
or the Second Closing Date, as the case may be.
(v) On the date before this Agreement is executed and also on
the First Closing Date and the Second Closing Date a letter addressed
to you, as Representatives of the Underwriters, from each of Arthur
Andersen LLP and Coopers & Lybrand L.L.P., independent accountants, the
first one to be dated the day before the date of this Agreement, the
second one to be dated the First Closing Date and the third one (in the
event of a Second Closing) to be dated the Second Closing Date, in form
and substance reasonably satisfactory to you.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Fenwick & West LLP, counsel for the Underwriters. The Company
shall furnish you with such manually signed or conformed copies of such
opinions, certificates, letters and documents as you reasonably request. Any
certificate signed by any officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the
statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you as
Representatives to the Company and the Selling Shareholders without liability on
the part of any Underwriter, the Company or the Selling Shareholders except for
the expenses to be paid or reimbursed by the Company and by the Selling
Shareholders pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof.
SECTION 9
REIMBURSEMENT OF UNDERWRITERS' EXPENSES
Notwithstanding any other provisions hereof, if this Agreement shall be
terminated by you pursuant to Section 8, or if the sale to the Underwriters of
the Common Shares at the First Closing is not consummated because of any
refusal, inability or failure on the part of the Company or the Selling
Shareholders to perform any agreement herein or to comply with any provision
hereof, the
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Company agrees to reimburse you and the other Underwriters upon demand for all
out-of-pocket expenses that shall have been reasonably incurred by you and them
in connection with the proposed purchase and the sale of the Common Shares,
including, but not limited to, reasonable fees and disbursements of counsel,
printing expenses, travel expenses, postage, telegraph charges and telephone
charges relating directly to the offering contemplated by the Prospectus. Any
such termination shall be without liability of any party to any other party
except that the provisions of this Section, Section 7 and Section 11 shall at
all times be effective and shall apply.
SECTION 10
EFFECTIVENESS OF REGISTRATION STATEMENT
You, the Company and the Selling Shareholders will use their best
efforts to cause the Registration Statement to become effective, to prevent the
issuance of any stop order suspending the effectiveness of the Registration
Statement and, if such stop order be issued, to obtain as soon as possible the
lifting thereof.
SECTION 11
INDEMNIFICATION
(a) The Company and each of the Selling Shareholders, severally and not
jointly, agree to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter within the meaning of the Act against any
losses, claims, damages, liabilities or expenses, joint or several, to which
such Underwriter or such controlling person may become subject, under the Act,
the Exchange Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company and such Selling
Shareholder), insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof as contemplated below) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state in any of them a material fact
required to be stated therein or necessary to make the statements in any of them
not misleading, or arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Company or such Selling
Shareholder, respectively, contained herein or any failure of the Company or
such Selling Shareholder to perform their respective obligations hereunder or
under law; and will reimburse each Underwriter and each such controlling person
for any legal and other expenses as such expenses are reasonably incurred by
such Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that neither the Company nor
the Selling Shareholders will 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, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity with
the information furnished to the Company pursuant to Section 4 hereof; provided
further, however, that the indemnification obligations contained in this Section
11 shall not apply to any losses, claims, damages, liabilities or expenses with
respect to any Preliminary Prospectus and shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Common Shares which are the subject
thereof (or to the benefit of any person controlling such Underwriter) if at or
prior to the written confirmation of the sale of such
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Common Shares, a copy of the Prospectus (or the Prospectus as amended or
supplemented) was not sent or delivered to such person and the untrue statement
or omission of a material fact contained in such Preliminary Prospectus was
corrected in the Prospectus (or in the Prospectus as amended or supplemented).
In addition to its other obligations under this Section 11(a), the Company and
the Selling Shareholders agree that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding arising out of
or based upon any statement or omission, or any alleged statement or omission,
or any inaccuracy in the representations and warranties of the Company or such
Selling Shareholder, respectively, herein or failure to perform their respective
obligations hereunder, all as described in this Section 11(a), it will reimburse
each Underwriter on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
or such Selling Shareholder;s obligation to reimburse each Underwriter for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, each Underwriter
shall promptly return it to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) announced from time to time
by Bank of America NT&SA, San Francisco, California (the "Prime Rate"). Any such
interim reimbursement payments which are not made to an Underwriter within 30
days of a request for reimbursement, shall bear interest at the Prime Rate from
the date of such request. This indemnity agreement will be in addition to any
liability which the Company or the Selling Shareholders may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, the Selling Shareholders and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages,
liabilities or expenses to which the Company, or any such director, officer,
Selling Shareholder or controlling person may become subject, under the Act, the
Exchange Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, 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, 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, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with the information
furnished to the Company pursuant to Section 4 hereof; and will reimburse the
Company, or any such director, officer, Selling Shareholder or controlling
person for any legal and other expense reasonably incurred by the Company, or
any such director, officer, Selling Shareholder or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. In addition to its other
obligations under this Section 11(b), each Underwriter severally agrees that, as
an interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in this Section 11(b)
which relates to information furnished to the Company pursuant to Section 4
hereof, it will reimburse the Company (and, to the extent applicable, each
officer, director, controlling person or Selling Shareholder) on a quarterly
basis for all reasonable
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legal or other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding, not
withstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company (and, to
the extent applicable, each officer, director, controlling person or Selling
Shareholder) for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company (and, to the extent applicable, each officer, director,
controlling person or Selling Shareholder) shall promptly return it to the
Underwriters together with interest, compounded daily, determined on the basis
of the Prime Rate. Any such interim reimbursement payments which are not made to
the Company (and, to the extent applicable, each officer, director, controlling
person or Selling Shareholder) within 30 days of a request for reimbursement,
shall bear interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, 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;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
to the extent it is not prejudiced as a proximate result of such failure nor
will it relieve any indemnifying party from its contribution obligations or from
any obligations arising otherwise than under the indemnity agreement contained
in this Section. In case any such action is brought against any indemnified
party and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate in,
and, to the extent that it 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 that there may be a
conflict between the positions of the indemnifying party and the indemnified
party in conducting the defense of any such action or that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties 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 or parties. 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 the 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 or (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 of commencement of the
action, in each of which cases the reasonable fees and expenses of counsel shall
be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11 is required
by its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) in respect of any losses, claims, damages, liabilities or expenses referred
to herein, then each applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or
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expenses referred to herein (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company, the Selling Shareholders and the
Underwriters from the offering of the Common Shares 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, the Selling
Shareholders and the Underwriters in connection with the statements or omissions
or inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits received by
the Company, the Selling Shareholders and the Underwriters shall be deemed to be
in the same proportion, in the case of the Company and the Selling Shareholders
as the total price paid to the Company and to the Selling Shareholders,
respectively, for the Common Shares sold by them to the Underwriters (net of
underwriting commissions but before deducting expenses), and in the case of the
Underwriters as the underwriting commissions received by them bears to the total
of such amounts paid to the Company and to the Selling Shareholders and received
by the Underwriters as underwriting commissions. The relative fault of the
Company, the Selling Shareholders and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
or the inaccurate or the alleged inaccurate representation and/or warranty
relates to information supplied by the Company, the Selling Shareholders or the
Underwriters 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,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in subparagraph (c) of this Section 11, any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
subparagraph (c) of this Section 11 with respect to notice of commencement of
any action shall apply if a claim for contribution is to be made under this
subparagraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been given under subparagraph
(c) for purposes of indemnification. The Company, the Selling Shareholders and
the Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 11 were determined solely by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section 11, no Underwriter shall be required to contribute
any amount in excess of the amount of the total underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. 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. The Underwriters' obligations to contribute pursuant to this
Section 11 are several in proportion to their respective underwriting
commitments and not joint.
(e) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 11(a) and 11(b)
hereof, including the amounts of any requested reimbursement payments and the
method of determining such amounts, shall be settled by arbitration conducted
under the provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration
Procedure of the NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an
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arbitration would be conducted in Orange County, California and would be limited
to the operation of the interim reimbursement provisions contained in Sections
11(a) and 11(b) hereof and would not resolve the ultimate propriety or
enforceability of the obligation to reimburse expenses which is created by the
provisions of such Sections 11(a) and 11(b) hereof.
(f) Notwithstanding any other term or provision of this Agreement, the
liability of any Selling Shareholder for indemnification or other claim under
this Agreement shall not exceed the proceeds received by such Selling
Shareholder from the Underwriters.
SECTION 12
DEFAULT OF UNDERWRITERS
It shall be a condition to this Agreement and the obligation of the
Company and the Selling Shareholders to sell and deliver the Common Shares
hereunder, and of each Underwriter to purchase the Common Shares in the manner
as described herein, that, except as hereinafter in this paragraph provided,
each of the Underwriters shall purchase and pay for all the Common Shares agreed
to be purchased by such Underwriter hereunder upon tender to the Representatives
of all such shares in accordance with the terms hereof. If any Underwriter or
Underwriters default in their obligations to purchase Common Shares hereunder on
either the First or Second Closing Date and the aggregate number of Common
Shares which such defaulting Underwriter or Underwriters agreed but failed to
purchase on such Closing Date does not exceed 10% of the total number of Common
Shares which the Underwriters are obligated to purchase on such Closing Date,
the non-defaulting Underwriters shall be obligated severally, in proportion to
their respective commitments hereunder, to purchase the Common Shares which such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of Common
Shares with respect to which such default occurs is more than the above
percentage and arrangements satisfactory to the Representatives and the Company
for the purchase of such Common Shares by other persons are not made within 48
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter or the Company or the Selling
Shareholders except for the expenses to be paid by the Company and the Selling
Shareholders pursuant to Section 7 hereof and except to the extent provided in
Section 11 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than five business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected. As used
in this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section . Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 13
EFFECTIVE DATE
This Agreement shall become effective immediately as to Sections 7, 9,
11, 13, 14 and 16 and, as to all other provisions, (i) if at the time of
execution of this Agreement the Registration Statement has not become effective,
at 2:00 P.M., California time, on the first full business day following the
effectiveness of the Registration Statement, or (ii) if at the time of execution
of this Agreement the Registration Statement has been declared effective, at
2:00 P.M., California time, on
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the first full business day following the date of execution of this Agreement;
but this Agreement shall nevertheless become effective at such earlier time
after the Registration Statement becomes effective as you may determine on and
by notice to the Company or by release of any of the Common Shares for sale to
the public. For the purposes of this Section 13, the Common Shares shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Common Shares or upon the release by you
of telegrams (i) advising Underwriters that the Common Shares are released for
public offering, or (ii) offering the Common Shares for sale to securities
dealers, whichever may occur first.
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 Company by notice to you
and the Selling Shareholders or by you by notice to the Company and the Selling
Shareholders at any time prior to the time this Agreement shall become effective
as to all its provisions, and any such termination shall be without liability on
the part of the Company or the Selling Shareholders to any Underwriter (except
for the expenses to be paid or reimbursed by the Company and the Selling
Shareholders pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof) or of any Underwriter to the Company or the
Selling Shareholders (except to the extent provided in Section 11 hereof).
(b) This Agreement may also be terminated by you prior to the First
Closing Date by notice to the Company (i) if additional material governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the
American Stock Exchange or in the Nasdaq National Market, or trading in
securities generally shall have been suspended on either such exchange or the
Nasdaq National Market, or a general banking moratorium shall have been
established by federal, New York or California authorities, (ii) if an outbreak
of major hostilities or other national or international calamity or any
substantial change in political, financial or economic conditions shall have
occurred or shall have accelerated or escalated to such an extent, as, in the
judgment of the Representatives, to affect adversely the marketability of the
Common Shares, (iii) if any adverse event shall have occurred or shall exist
which makes untrue, incomplete or incorrect in any material respect any
statement or information contained in the Registration Statement or Prospectus
or which is not reflected in the Registration Statement or Prospectus but should
be reflected therein in order to make the statements or information contained
therein not misleading in any material respect, or (iv) if there shall be any
action, suit or proceeding pending or threatened, or there shall have been any
development or prospective development involving particularly the business or
properties or securities of the Company or any of its subsidiaries or the
transactions contemplated by this Agreement, which, in the reasonable judgment
of the Representatives, may materially and adversely affect the Company's and
its subsidiaries' business or net income taken as a whole and makes it
impracticable or inadvisable to offer or sell the Common Shares. Any termination
pursuant to this subsection (b) shall without liability on the part of any
Underwriter to the Company or the Selling Shareholders or on the part of the
Company or the Selling Shareholders to any Underwriter (except for expenses to
be paid or reimbursed by the Company and the Selling Shareholders pursuant to
Sections 7 and 9 hereof and except to the extent provided in Section 11 hereof.
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SECTION 15
FAILURE OF THE SELLING SHAREHOLDERS TO SELL AND DELIVER
If one or more of the Selling Shareholders shall fail to sell and
deliver to the Underwriters the Common Shares to be sold and delivered by such
Selling Shareholders at the First Closing Date under the terms of this
Agreement, then the Underwriters may at their option, by written notice from you
to the Company and the Selling Shareholders, either (i) terminate this Agreement
without any liability on the part of any Underwriter or, except as provided in
Sections 7, 9 and 11 hereof, the Company or the Selling Shareholders, or (ii)
purchase the shares which the Company and other Selling Shareholders have agreed
to sell and deliver in accordance with the terms hereof. In the event of a
failure by one or more of the Selling Shareholders to sell and deliver as
referred to in this Section , either you or the Company shall have the right to
postpone the Closing Date for a period not exceeding seven business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected.
SECTION 16
REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY
The respective indemnities, agreements, representations, warranties and
other statements of the Company, of its officers, of the Selling Shareholders
and of the several Underwriters 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 any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Shareholders, as
the case may be, and will survive delivery of and payment for the Common Shares
sold hereunder and any termination of this Agreement.
SECTION 17
NOTICES
All communications hereunder shall be in writing and, if sent to the
Representatives, shall be mailed, delivered or telegraphed and confirmed to you
at 600 Montgomery Street, San Francisco, California 94111, Attention: David
DeRuff, with a copy to Laird H. Simons III, Esq., Fenwick & West LLP, Two Palo
Alto Square, Palo Alto, California 94306; and if sent to the Company or the
Selling Shareholders shall be mailed, delivered or telegraphed and confirmed to
the Company at 2181 Dupont Drive, Irvine, California 92715, Attention: Frederick
Judd, with a copy to Jay Herron, Esq., O'Melveny & Myers, 610 Newport Centre
Drive, Suite 1700, Newport Beach, California 92660. The Company, the Selling
Shareholders or you may change the address for receipt of communications
hereunder by giving notice to the others.
SECTION 18
SUCCESSORS
This Agreement will inure to the benefit of and be binding upon the
parties hereto, including any substitute Underwriters pursuant to Section 12
hereof, and to the benefit of the officers and directors and controlling persons
referred to in Section 11, and in each case their respective successors,
personal representatives and assigns, and no other person will have any right or
obligation hereunder. No such assignment shall relieve any party of its
obligations hereunder. The term "successors" shall not include any purchaser of
the Common Shares as such from any of the Underwriters merely by reason of such
purchase.
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SECTION 19
REPRESENTATION OF UNDERWRITERS
You will act as Representatives for the several Underwriters in
connection with all dealings hereunder, and any action under or in respect of
this Agreement taken by you jointly or by Montgomery Securities, as
Representatives, will be binding upon all the Underwriters.
SECTION 20
PARTIAL UNENFORCEABILITY
The invalidity or unenforceability of any Section , subsection,
paragraph or provision of this Agreement shall not affect the validity or
enforceability of any other Section , subsection, paragraph or provision hereof.
If any Section , subsection, paragraph or provision of this Agreement is for any
reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make
it valid and enforceable.
SECTION 21
APPLICABLE LAW
This Agreement shale be governed by and construed in accordance with
the internal laws (and not the laws pertaining to conflicts of laws) of the
State of California.
SECTION 22
GENERAL
This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may be executed in several counterparts, each one of
which shall be an original, and all of which shall constitute one and the same
document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company, the Selling Shareholders and you.
Any person executing and delivering this Agreement as Attorney-in-fact
for the Selling Shareholders represents by so doing that he has been duly
appointed as Attorney-in-fact by such Selling Shareholder pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-fact to
take such action. Any action taken under this Agreement by any of the
Attorneys-in-fact will be binding on all the Selling Shareholders.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company, the Selling Shareholders and
the several Underwriters including you, all in accordance with its terms.
Very truly yours,
PROCOM TECHNOLOGY, INC.
By:____________________________
Name:__________________________
Title:_________________________
SELLING SHAREHOLDERS
_______________________________
Alex Razmjoo
_______________________________
Frank Alaghband
_______________________________
Alex Aydin
_______________________________
Nick Shahrestany
_______________________________
Frederick Judd
The foregoing Underwriting Agreement is hereby confirmed and accepted by us in
San Francisco, California as of the date first above written.
MONTGOMERY SECURITIES
DAIN BOSWORTH INC.
Acting as Representatives of the several Underwriters named in the attached
Schedule A.
By: Montgomery Securities
By:__________________________________
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SCHEDULE A
NUMBER OF FIRM
COMMON SHARES
NAME OF UNDERWRITER TO BE PURCHASED
------------------- ---------------
Montgomery Securities..........................
Dain Bosworth Inc..............................
---------
TOTAL..................................... 3,025,000
=========
33
SCHEDULE B
FIRM COMMON SHARES
NUMBER OF FIRM
COMMON SHARES TO
BE SOLD BY SELLING
NAME OF SELLING SHAREHOLDER SHAREHOLDERS
- --------------------------- ------------------
Alex Razmjoo......................................................................... 250,000
Frank Alaghband...................................................................... 250,000
Alex Aydin........................................................................... 250,000
Nick Shahrestany..................................................................... 250,000
Frederick Judd....................................................................... 25,000
---------
TOTAL....................................................................... 1,025,000
=========
OPTIONAL COMMON SHARES
MAXIMUM
NUMBER OF OPTIONAL
COMMON SHARES TO
BE SOLD BY SELLING
NAME OF SELLING SHAREHOLDER SHAREHOLDERS
- --------------------------- ------------------
Alex Razmjoo........................................................................ 113,440
Frank Alaghband..................................................................... 113,440
Alex Aydin.......................................................................... 113,430
Nick Shahrestany.................................................................... 113,440
-------
Frederick Judd...................................................................... --
TOTAL...................................................................... 453,750
=======