1,500,000 Shares*
GENTLE DENTAL SERVICE CORPORATION
Common Stock
(without par value)
Form of
UNDERWRITING AGREEMENT
February __, 1997
Black & Company, Inc.
Wedbush Morgan Securities
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Black & Company, Inc.
One S.W. Columbia, Suite 1200
Portland, Oregon 97258
Ladies and Gentlemen:
Gentle Dental Service Corporation, a Washington corporation (the
"Company"), proposes to sell an aggregate of 1,500,000 shares (the "Firm
Shares") of the Company's common stock, no par value per share (the "Common
Stock"), to you and to the several other underwriters named in Schedule I hereto
(collectively, the "Underwriters"), for whom you are acting as representatives
(the "Representatives"). The Company also proposes to sell at the Underwriters'
option (the "Option") an aggregate of up to 225,000 additional shares of Common
Stock (the "Option Shares") on the terms and for the purposes set forth in
Section 1(b). The Firm Shares and the Option Shares are referred to collectively
herein as the "Shares."
The Company confirms as follows its agreement with the Representatives
and the several other Underwriters.
- ----------------------------
* Plus an option to purchase up to an additional 225,000 shares to cover
overallotments.
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and agreements of
the parties herein contained and subject to all of the terms and conditions of
this Agreement, (i) the Company agrees to sell the Firm Shares to the several
Underwriters and (ii) each of the Underwriters, severally and not jointly,
agrees to purchase from the Company the respective number of Firm Shares set
forth opposite that Underwriter's name in Schedule I hereto, at the purchase
price of $______ for each Firm Share, subject to adjustments in accordance with
Section 8 hereof.
(b) Subject to all the terms and conditions of this Agreement, the
Company grants the Option to the several Underwriters to purchase, severally and
not jointly, up to the maximum number of Option Shares at the same price per
share as the Underwriters shall pay for the Firm Shares. The Option may be
exercised only to cover overallotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time (but not more
than once) on or before the 30th day after the date of this Agreement upon
written or telegraphic notice (the "Option Shares Notice") by the
Representatives to the Company no later than 12:00 noon, New York City time, at
least two and no more than five business days before the date specified for the
closing in the Option Shares Notice (the "Option Closing Date") setting forth
the aggregate number of Option Shares to be purchased and the time and date for
such purchase. The number of Option Shares to be purchased by each Underwriter
shall be in the same proportion to the total number of Option Shares being
purchased as the number of Firm Shares being purchased by such Underwriter bears
to the total number of Firm Shares, adjusted by you in such manner as to avoid
fractional shares.
2. Delivery and Payment.
(a) Payment for the Firm Shares to be sold hereunder is to be made in
New York Clearing House funds by wire transfer to an account designated in
writing by the Company for the Shares to be sold by it against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters at such location in New York, New York as may be specified by the
Representatives. Such payment and delivery are to be authorized at a closing to
take place at the offices of Tonkon, Torp, Galen, Marmaduke & Booth, 888 S.W.
Fifth Avenue, Portland, Oregon, at 7:00 a.m., Portland time, on the fourth
business day after the date of this Agreement or at such other time and date not
later than four business days thereafter as you and the Company shall agree
upon, such time and date being herein referred to as the "Closing Date." (As
used herein, "business day" means a day on which the New York Stock Exchange is
open for trading and on which banks in New York are open for business and not
permitted by law or executive order to be closed.)
(b) To the extent the Option is exercised, delivery of the Option
Shares against payment by the Underwriters (in the manner specified above) will
take place at the offices specified above at the time and date (which may be the
Closing Date) specified in the Option Shares Notice.
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(c) Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and such denominations as the Representatives
shall request at least two business days prior to the Closing Date or the Option
Closing Date, as the case may be, by written notice to the Company. For the
purpose of expediting the checking and packaging of certificates for the Shares,
the Company agrees to make such certificates available for inspection at 10:00
a.m. on the business day preceding the Closing Date or the Option Closing Date,
as the case may be.
(d) The cost of any original issue tax stamps and any transfer or
other taxes in connection with the issuance and delivery of the Firm Shares and
Option Shares by the Company to the respective Underwriters shall be borne by
the Company. The Company will hold each Underwriter and any subsequent holder of
the Shares harmless from any and all liabilities with respect to, or resulting
from any failure or delay by the Company in paying, federal and state stamp and
other transfer taxes, if any, that may be payable or determined to be payable in
connection with the original issuance, transfer or sale to such Underwriter of
the Firm Shares and Option Shares.
(e) In addition to the sums payable to you as provided elsewhere
herein, you shall be entitled to receive on the Closing Date for yourself alone,
and not as Representatives of the Underwriters, as additional compensation for
your services for an aggregate purchase price of $150.00, warrants (the
"Representatives' Warrants") to purchase up to 150,000 shares of Common Stock
with an exercise price equal to 120 percent of the initial public offering price
of the Shares.
3. Representations and Warranties of the Company.
The Company represents, warrants and covenants to each Underwriter
that:
(a) A registration statement on Form SB-2 (File No. 333-13529) with
respect to the Shares has been carefully prepared by the Company in conformity
in all material respects with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations")
of the United States Securities and Exchange Commission (the "Commission")
thereunder and has been filed with the Commission. Copies of such registration
statement, including any amendments thereto, the preliminary prospectuses
(meeting the requirements of the Rules and Regulations) contained therein and
the exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such registration
statement, as amended, together with any registration statement filed by the
Company pursuant to Rule 462(b) of the Act, herein referred to collectively as
the "Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the Prospectus
referred to below, has been declared effective by the Commission under the Act
and no post-effective amendment to the Registration Statement has been filed as
of the date of this Agreement. "Prospectus" means (i) the form of prospectus
first filed with the Commission pursuant to Rule 424(b), or (ii) the last
preliminary prospectus included
3
in the Registration Statement filed prior to the time it becomes effective or
filed pursuant to Rule 424(a) under the Act that is delivered by the Company to
the Underwriters for delivery to purchasers of the Shares, together with the
term sheet or abbreviated term sheet filed with the Commission pursuant to Rule
424(b)(7) under the Act. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein referred
to as a "Preliminary Prospectus."
(b) The Company has been duly organized and is an active corporation
under the laws of the State of Washington, with corporate power and authority to
own or lease its properties and conduct its business as described in the
Registration Statement. The Company is duly qualified to transact business as a
foreign corporation in the State of Oregon and in all jurisdictions where the
conduct of its business requires such qualification.
(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued, are fully paid and nonassessable, and were
not issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities. The Shares have been duly authorized by
all necessary corporate action of the Company and when issued and paid for as
contemplated by this Agreement will be validly issued, fully paid and
nonassessable, and no preemptive rights of shareholders exist under any statute
or otherwise with respect to any of the Shares or the issue and sale thereof. No
holder of any securities of the Company or any other person has the right,
contractual or otherwise, which has not been satisfied or effectively waived, to
cause the Company to sell or otherwise issue to them, or to permit them to
underwrite the sale of, any of the Shares or the right to have any shares of
Common Stock or other securities of the Company included in the Registration
Statement or the right, as a result of the filing of the Registration Statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company. Except as described in the Prospectus, there are no
(i) outstanding securities or obligations of the Company convertible into or
exchangeable for or evidencing the right to purchase or subscribe for any
capital stock of the Company, (ii) warrants, rights or options to subscribe for
or purchase from the Company any such capital stock or any such convertible or
exchangeable securities or obligations, or (iii) obligations of the Company to
issue any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
(d) The Representatives' Warrants have been duly authorized for
issuance to the Representatives and will, when issued, possess rights,
privileges, and characteristics as represented in the most recent form of
Representatives' Warrants filed as an exhibit to the Registration Statement; the
securities to be issued upon exercise of the Representatives' Warrants, when
issued and delivered against payment therefor in accordance with the terms of
the Representatives' Warrants, will be duly and validly issued, fully paid,
non-assessable and free of preemptive rights, and all corporate action required
to be taken for the authorization and issuance of the Representatives' Warrants,
and the securities to be issued upon their exercise, has been validly and
sufficiently taken.
4
(e) The information set forth under "Capitalization" in the Prospectus
is true and correct. All of the Shares conform to the description thereof
contained in the Registration Statement.
(f) The Commission has not issued an order preventing or suspending
the use of any Preliminary Prospectus relating to the proposed offering of the
Shares or, to the Company's knowledge, instituted proceedings for that purpose.
The Registration Statement contains, and the Prospectus and any amendments or
supplements thereto will contain, all statements that are required to be stated
therein by, and will conform in all material respects to, the requirements of
the Act and the Rules and Regulations. There are no contracts or documents that
would be required by the Act or by the Rules and Regulations to be filed as
exhibits to the Registration Statement or described in the Registration
Statement that have not been so filed or described. The Registration Statement
and any amendment thereto do not contain, and through the Closing Date will not
contain, any untrue statement of a material fact and do not omit, and through
the Closing Date will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus and any amendments or supplements thereto do not contain and will not
contain, any untrue statement of material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or 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 through the Representatives
specifically for use in the preparation thereof.
(g) The financial statements of the Company, Scott Campbell, DDS, P.S.
and Peter A. Vermeulen, D.D.S., P.S., together with related notes and schedules
as set forth in the Registration Statement, present fairly the financial
position and the results of operations and cash flows of the Company, Scott
Campbell, DDS, P.S. and Peter A. Vermeulen, D.D.S., P.S., at the indicated dates
and for the indicated periods. Such financial statements and related notes and
schedules have been prepared in accordance with generally accepted accounting
principles, consistently applied throughout the periods involved, except as
disclosed therein, and all adjustments necessary for a fair presentation of
results for such periods have been made. The summary financial and statistical
data and the Pro Forma Combined Statement of Operations and financial
information included in the Registration Statement present fairly the
information shown therein, and such data have been compiled on a basis
consistent with the financial statements of the Company presented therein.
(h) Price Waterhouse LLP and Moss Adams LLP (the "Accountants"), who
have certified certain of the financial statements filed with the Commission as
part of the Registration Statement, are independent public accountants as
required by the Act and the Rules and Regulations.
5
(i) Except as disclosed in the Registration Statement, there is no
action, suit, claim or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any of the professional corporations with
which the Company has entered into support services agreements (the
"Professional Corporations"), before any court or administrative agency or
otherwise that if determined adversely to the Company or the Professional
Corporations would (i) result in a material adverse change in the condition
(financial or other), business prospects, net worth or results of operations of
the Company or the Professional Corporations or (ii) prevent the consummation of
the transactions contemplated hereby.
(j) The Company has good and marketable title in fee simple to all
items of real property and marketable title to all personal property owned by
it, in each case free and clear of any security interests, liens, encumbrances,
equities, claims and other defects, other than as disclosed in the financial
statements included in the Registration Statement and except such as do not
materially and adversely affect the value of such property and do not interfere
with the use made or proposed to be made of such property by the Company or the
Professional Corporations, and any real property and buildings held under lease
by the Company are held under valid, subsisting and enforceable leases, with
such exceptions as are not material and do not interfere with the use made or
proposed to be made of such property and buildings by the Company or the
Professional Corporations.
(k) The Company has filed all federal, state and local income tax
returns that have been required to be filed and has paid all taxes indicated by
said returns and all assessments received by it to the extent that such taxes
have become due and are not being contested in good faith. All tax liabilities
have been adequately provided for in the financial statements of the Company.
(l) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, (i) there has not
been a material adverse change in or, to the Company's knowledge, any
development involving a prospective change in or affecting, the condition
(financial or other), business prospects, net worth or results of operations of
the Company or the Professional Corporations, whether or not occurring in the
ordinary course of business; (ii) the Company and the Professional Corporations
have not incurred any material liability or obligation, direct or contingent,
nor entered into any material transaction not in the ordinary course of
business; (iii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock; (iv) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company and (v) there is
no transaction that is probable of being entered into by the Company or the
Professional Corporations that is material to the Company, except in each case
as set forth in the Registration Statement. The Company has no material
contingent obligations that are not disclosed in the Company's financial
statements included in the Registration Statement, as it may be amended or
supplemented.
6
(m) The Company is not, and with the giving of notice or lapse of time
or both will not be, in violation of or in default under its Restated Articles
of Incorporation or bylaws. The Company is not, and with the giving of notice or
lapse of time or both will not be, in violation of or in default under any
agreement, lease, contract, indenture or other instrument or obligation to which
it is a party or by which it, or any of its properties, is bound and which
default is of material significance in respect of the condition (financial or
other), business prospects, net worth or results of operations of the Company.
The execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which the Company is a party or by which the
Company or any of its properties are bound, or of the Restated Articles of
Incorporation or bylaws of the Company or any order, rule or regulation
applicable to the Company of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(n) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby and to file
the Registration Statement, and each has been duly authorized, executed and
delivered by the Company, and this Agreement constitutes a valid and binding
obligation of the Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and except to the extent that rights of indemnity or
contribution under this Agreement may be limited by federal or state securities
laws or the public policies underlying such laws or by general equitable
principles. Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(o) The Company owns or possesses all material trademarks, service
marks, trade names, licenses, copyrights and proprietary or other confidential
information currently employed by it in connection with its businesses, and
neither the Company nor, to the knowledge of its management after due inquiry,
any Professional Corporation has received any notice of infringement of or
conflict with asserted rights of any third party with respect to any of the
foregoing.
(p) Except as to the legal uncertainties described in the Registration
Statement, the Company and the Professional Corporations possess all
certificates, authorizations, licenses and permits issued by the appropriate
federal or state regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor, to
7
the knowledge of the management of the Company after due inquiry, any
Professional Corporation has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization, license or
permit.
(q) There are no strikes, labor disputes, slowdowns or stoppages or
union organizing activities pending or, to the knowledge of the management of
the Company after due inquiry, threatened with respect to the employees of the
Company or any Professional Corporation, and there has been no material
violation by the Company or, to the knowledge of the management of the Company
after due inquiry, any Professional Corporation, of any federal, state or local
law relating to discrimination in the hiring, promotion or pay of employees or
any applicable wage or hour laws.
(r) Neither the Company nor, to the knowledge of the management of the
Company after due inquiry, any of the Professional Corporations is in violation
of any federal or state law or regulation relating to occupational safety and
health or to the storage, handling or transportation of hazardous or toxic
material; and the Company and the Professional Corporations have received all
permits, licenses or other approvals required of them under applicable federal
and state occupational safety and health and environmental laws and regulations
to conduct their respective businesses, and the Company and each Professional
Corporation is in compliance with all terms and conditions of any such permit,
license or approval.
(s) The Company and each Professional Corporation is insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any Professional Corporation has been
refused any insurance coverage sought or applied for; and neither the Company
nor any Professional Corporation has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect
the condition (financial or otherwise), business prospects, net worth, or
results of operations of the Company or Professional Corporation.
(t) Neither the Company nor any Professional Corporation owns any
shares of stock or any other equity securities of any corporation or has any
equity interest in any firm, partnership, association or other entity.
(u) Except as to the legal uncertainties described in the Registration
Statement, the Company and, to the knowledge of the management of the Company
after due inquiry, each Professional Corporation, and their respective
operations comply in all material respects with all applicable laws and
regulations, including, without limitation, those relating to the practice of
dentistry (including the management or operation of dental offices), the
splitting of professional fees with non-dentists, the ownership or control of
the assets of a dental practice, the employment of dentists or other personnel,
the content of advertising, the
8
making of payments in consideration for referrals of patients, limitations on
tasks that may be delegated by a dentist to other staff members, the business of
insurance and reimbursement by governmental agencies. The Company has not been
made aware of, or been put on notice that, any affiliated dentist, specialist,
hygienist or dental assistant is not practicing in material compliance with all
such laws and regulations.
(v) All offers and sales of the Company's capital stock prior to the
date hereof were at all relevant times exempt from the registration requirements
of the Act, and were the subject of an available exemption from the registration
requirements of all applicable state securities or Blue Sky laws; and all
offering materials prepared in connection therewith, if any, did not include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; and the "Franchise Offering Circulars"
dated October 11, 1996 and October 23, 1996 were delivered to the Professional
Corporations and their contents and delivery complied with all applicable
federal and state laws and regulations including, but not limited to, the
Federal Trade Commission Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures (16 C.F.R. ss.ss. 436 to 436.3
(1996)); the State of Washington's Franchise Investment Act (Wash. Rev. Code
ss.ss. 19.100.010 to 19.100.940 (1994)); and Oregon Revised Statutes ss.ss.
650.005 to 650.085 (1995).
(w) The Support Services Agreements between the Company and the
Professional Corporations dated as of January 1, 1996 have each been duly
authorized, executed and delivered by the Company, and each of the Support
Services Agreements constitutes the valid and legally binding obligation of each
of the other parties thereto and are enforceable in accordance with their terms,
except as enforceability may be limited by the legal uncertainties disclosed in
the Prospectus and by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights of creditors generally.
(x) The Company has not taken, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of its capital stock to facilitate the sale or resale of the
Shares.
(y) The Company is not an investment company within the meaning of
such term under the Investment Company Act of 1940, as amended (the "1940 Act")
and the rules and regulations of the Commission thereunder, and this transaction
will not cause the Company to become an investment company subject to
registration under the 1940 Act.
(z) The Company maintains a system of internal accounting controls
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
9
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.
(aa) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, that would cause the loss of
such qualification.
(bb) The Company has not at any time during the last five years (i)
made any unlawful contribution to any candidate for public 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.
(cc) Neither the Company nor any of its officers, directors or
affiliates have caused any person, other than the Underwriters, to be entitled
to reimbursement or compensation of any kind, including, without limitation, any
compensation that would be includable as underwriter compensation under the
NASD's Corporate Financing Rule with respect to the offering of the Shares, as a
result of the consummation of such offering based on any activity of such person
as a finder, agent, broker, investment adviser or other financial service
provider.
4. Agreements of the Company.
The Company agrees with the several Underwriters as follows:
(a) The Company will not, either prior to the date on which the
Registration Statement is declared effective (the "Effective Date") or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sale of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing and the
Representatives shall not have objected thereto in good faith.
10
(b) The Company will use its best efforts to cause the Registration
Statement to become effective and will notify the Representatives and their
counsel promptly, and will confirm such advice in writing, (i) when the
Registration Statement has become effective and when any post-effective
amendment thereto becomes effective, (ii) of any request by the Commission for
amendments or supplements to the Registration Statement or the Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose or the threat thereof, (iv) of
the happening of any event during the period mentioned in the second sentence of
Section 4(e) that in the judgment of the Company makes any statement made in the
Registration Statement or the Prospectus untrue or that requires the making of
any changes in the Registration Statement or the Prospectus in order to make the
statements therein, in light of the circumstances in which they are made, not
misleading, and (v) of receipt by the Company or any representatives or attorney
of the Company of any other communication from the Commission relating to the
Company, the Registration Statement, any Preliminary Prospectus, or the
Prospectus. If at any time the Commission issues any stop order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. If the Company has omitted any information from the
Registration Statement pursuant to Rule 430A of the Rules and Regulations, the
Company will use its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to said Rule 430A and to notify
the Representatives promptly of all such filings.
(c) The Company will furnish to the Representatives or their counsel,
without charge, two signed copies of the Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Representatives, without
charge, for transmittal to each of the other Underwriters, a copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the
Company will deliver to each of the Underwriters, without charge, as many copies
of the Prospectus or any amendment or supplement thereto as the Representatives
may reasonably request. The Company consents to the use of the Prospectus or any
amendment or supplement thereto by the several Underwriters and by all dealers
to whom the Shares may be sold, both in connection with the offering or sale of
the Shares and for any period of time thereafter during which the Prospectus is
required by law to be delivered in connection therewith. If during such period
of time any event shall occur that, in the judgment of the Company or counsel to
the Underwriters, should be set forth in the Prospectus in order to make any
statement therein, in the light of the circumstances under which it was made,
not misleading, or if it is necessary to supplement or amend the Prospectus to
comply with law, the Company will forthwith prepare and duly file with the
Commission an appropriate
11
supplement or amendment thereto and will deliver to each of the Underwriters,
without charge, such number of copies of such supplement or amendment to the
Prospectus as the Representatives may reasonably request.
(f) Prior to any public offering of the Shares, the Company will
cooperate with the Representatives and counsel to the Underwriters in connection
with the registration or qualification of the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the Representatives may
reasonably request; provided, however, that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action that would subject it to general service of
process in any jurisdiction where it is not now so subject.
(g) During the period of five years commencing on the Effective Date,
the Company will furnish to the Representatives and each other Underwriter who
may so request copies of such financial statements and other periodic and
special reports as the Company may from time to time distribute generally to the
holders of any class of its capital stock and will furnish to the
Representatives and each other Underwriter who may so request a copy of each
annual or other report it shall be required to file with the Commission.
(h) The Company will make generally available to holders of its
securities as soon as may be practicable but in no event later than the last day
of the 15th full calendar month following the calendar quarter in which the
Effective Date falls, an earnings statement (which need not be audited but shall
be in reasonable detail) for a period of 12 months ended commencing after the
Effective Date and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations).
(i) The Representatives shall be entitled to receive from the Company,
for itself alone and not as Representatives of the Underwriters, a
nonaccountable expense allowance equal to 0.5 percent of the aggregate offering
price of the Shares sold by the Underwriters in connection with the Offering.
The Representatives shall be entitled to withhold this allowance on the Closing
Date. Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay, or reimburse
if paid by the Representatives, all costs and expenses incident to the
performance of the obligations of the Company under this Agreement, including
but not limited to costs and expenses of or relating to (i) the preparation,
printing and filing of the Registration Statement and the exhibits thereto, each
Preliminary Prospectus, Prospectus and any amendment or supplement to the
Registration Statement or Prospectus, (ii) the preparation and delivery of
certificates representing the Shares, (iii) the printing of this Agreement, the
Agreement among Underwriters, any Dealer Agreements and any Underwriters'
Questionnaires, (iv) furnishing (including costs of shipping and mailing) such
copies of the Registration Statement, the Prospectus and any Preliminary
Prospectus, and all amendments and supplements thereto, as may be requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold, (v) the quotation of the Shares on the
Nasdaq SmallCap Market, (vi) any filings
12
required to be made by the Underwriters with the NASD and the fees,
disbursements and other charges of counsel for the Underwriters in connection
therewith, (vii) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions designated
pursuant to Section 4(f), including the fees, disbursements and other charges of
counsel to the Underwriters in connection therewith, and the preparation and
printing of preliminary, supplemental and final Blue Sky memoranda, (viii) fees,
disbursements and other charges of counsel to the Company (but not those of
counsel for the Underwriters, except as otherwise provided herein) and (ix) the
transfer agent for the Shares.
(j) If this Agreement is terminated by the Company pursuant to any of
the provisions hereof (other than pursuant to Section 8 hereof) or if for any
reason the Company is unable to perform its obligations hereunder, the Company
will reimburse the several Underwriters for all out-of-pocket expenses
(including the fees, disbursements and other charges of counsel to the
Underwriters) reasonably incurred by them in connection herewith.
(k) The Company will not at any time, directly or indirectly, take any
action designed, or that might reasonably be expected, to cause or result in, or
that will constitute, stabilization of the price of the shares of Common Stock
to facilitate the sale or resale of any of the Shares.
(l) The Company will apply the net proceeds from the offering and sale
of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds," and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(m) The Company will not, and will cause each of its officers,
directors and certain shareholders designated by the Representatives to enter
into agreements (the "Lockup Agreements") with the Representatives to the effect
that they will not, without the prior written consent of Black & Company, Inc.,
sell, contract to sell, sell short or otherwise dispose of any shares of Common
Stock or other capital stock of the Company or any other securities exchangeable
for or convertible into Common Stock for a period of one year after the
Effective Date, except (i) directors, officers and shareholders may make bona
fide gifts to donees who agree to be bound by such restrictions and (ii) the
Company may issue Common Stock or options to purchase Common Stock under the
Company's stock option plans described in the Prospectus.
(n) Until a registration statement filed by the Company to register
the Common Stock under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), shall have become effective, the Company will hold
an annual meeting of shareholders and solicit proxies in connection therewith
substantially in compliance with the requirements, other than the filing
requirements, of Section 14 of the Exchange Act and Regulation 14A thereunder.
13
5. Conditions of the Obligations of the Underwriters. The obligations of
each Underwriter hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has become effective
shall be received by the Representatives not later than 5:00 p.m., New York City
time, on the date of this Agreement or at such later date and time as shall be
consented to in writing by the Representatives and all filings required by Rule
424 and Rule 430A of the Rules and Regulations shall have been made, and the
Shares shall be qualified or registered for sale in such jurisdictions as the
Representatives shall request, except where the failure to qualify or register
Shares would not, in the reasonable judgment of the Representatives, have a
material adverse effect on its ability to market the Shares.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in effect, and no proceeding for such purpose shall be pending before or
threatened or contemplated by the authorities of any such jurisdiction, except
where the failure to qualify or register Shares in such jurisdiction would not,
in the reasonable judgment of the Representatives, have a material adverse
effect on its ability to market the Shares, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities and (iv) after the date hereof no amendment or supplement to
the Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Representatives and the Representatives do
not object thereto in good faith, and the Representatives shall have received
certificates, dated the Closing Date and the Option Closing Date and signed by
the Chief Executive Officer or the Chairman of the Board of Directors of the
Company and the Chief Financial Officer of the Company (who may, as to
proceedings threatened, rely upon the best of their information and belief) to
the effect of clauses (i), (ii) and (iii).
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or other) or results of operations
of the Company, whether or not arising from transactions in the ordinary course
of business, in each case other than as set forth in the Registration Statement
and the Prospectus and (ii) the Company shall not have sustained any material
loss or interference with its business or properties from fire, explosion, flood
or other casualty, whether or not covered by insurance, or from any labor
dispute or any court or legislative or other governmental order or decree, that
is not set forth in the Registration Statement and the Prospectus, if in the
reasonable judgment of the Representatives any such development makes it
impracticable or inadvisable to consummate the sale and delivery of the Shares
by the Underwriters at the public offering price.
14
(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of its officers or
directors in their capacities as such, before or by any federal, state or local
court, commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding would materially and adversely affect the business,
business prospects, properties, management, condition (financial or other) or
results of operations of the Company.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date and, with respect to the Option Shares, at the Option Closing Date,
and all covenants and agreements contained herein to be performed on the part of
the Company and all conditions contained herein to be fulfilled or complied with
by the Company at or prior to the Closing Date and, with respect to the Option
Shares, at or prior to the Option Closing Date, shall have been duly performed,
fulfilled or complied with.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Stoel Rives LLP, counsel
for the Company, dated the Closing Date, or the Option Closing Date, as the case
may be, addressed to the Underwriters (and stating that it may be relied upon by
counsel to the Underwriters) to the effect that:
(i) The Company has been duly incorporated and is an active
corporation under the laws of the State of Washington, and the Company
is duly qualified to transact business as a foreign corporation in
Oregon.
(ii) The Company has corporate power to own or lease its
properties and the Professional Corporations have corporate power to
conduct their respective businesses as described in the Registration
Statement and the Prospectus, and the Company has corporate power to
enter into this Agreement and to carry out all the terms and
provisions hereof to be carried out by it.
(iii) The Company has authorized, issued and outstanding capital
stock as set forth under the caption "Capitalization" in the
Prospectus; the issued and outstanding shares of the Company's Common
Stock have been duly authorized and validly issued, are fully paid and
non-assessable, and to the actual knowledge of such counsel were not
issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities.
(iv) The Shares have been duly authorized by all necessary
corporate action of the Company and when issued and paid for as
15
contemplated by this Agreement will be validly issued, fully paid and
non-assessable; no preemptive rights of shareholders exist under any
statute or,to the actual knowledge of such counsel, otherwise with
respect to any of the Shares or the issue or sale thereof; the Shares
conform to the description thereof contained in the Registration
Statement; and the certificates for the Shares comply as to form with
the requirements of Washington law.
(v) The Representatives' Warrants have been authorized for
issuance to the Representatives and will, when issued, possess rights,
privileges, and characteristics as represented in the most recent form
of Representatives' Warrants filed as an exhibit to the Registration
Statement; the Common Stock to be issued upon exercise of the
Representatives' Warrants, when issued and delivered against payment
therefor in accordance with the terms of the Representatives'
Warrants, will be duly and validly issued, fully paid, non-assessable
and, to the actual knowledge of such counsel, free of preemptive
rights, and all corporate action required to be taken for the
authorization and issuance of the Representatives' Warrants, and the
securities to be issued upon their exercise, has been validly and
sufficiently taken.
(vi) Except as described in the Prospectus, to the actual
knowledge of such counsel, there are no (A) outstanding securities or
obligations of the Company convertible or exchangeable into or
evidencing the right to purchase or subscribe for, any shares of
capital stock of the Company or (B) outstanding or authorized options,
warrants or rights of any character obligating the Company to issue
any shares of its capital stock or any securities convertible into or
exchangeable for or evidencing the right to purchase or subscribe for
any capital stock of the Company, and, except as described in the
Prospectus, to the actual knowledge of such counsel, no holder of any
securities of the Company or any other person has the right,
contractual or otherwise, which has not been satisfied or effectively
waived, to cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, any of the Shares or the right
to have any shares of Common Stock or other securities of the Company
included in the Registration Statement or the right, as a result of
the filing of the Registration Statement, to require registration
under the Act of any shares of Common Stock or other securities of the
Company.
(vii) The Registration Statement has been declared effective
under the Act and, to the actual knowledge of such counsel, no stop
order proceedings with respect thereto have been instituted or are
pending or threatened under the Act.
(viii) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material
respects
16
with the requirements of the Act and the Rules and Regulations (except
that such counsel need not express an opinion as to the financial
statements, financial data and related schedules thereto).
(ix) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus that are not
so filed or described as required, and such contracts and documents as
are summarized in the Registration Statement or the Prospectus are
fairly summarized in all material respects.
(x) The statements, other than statements of the Company's
belief, under the captions "Risk Factors--Dependence on Affiliated
Professional Corporations," "Risk Factors--Government Regulation,"
"Risk Factors--Shares Eligible for Future Sale," "Risk
Factors--Possible Adverse Effect of Issuance of Preferred Stock;
Potential Antitakeover Effect of Washington Law," "Business--Support
Services Agreements," "Business--Government Regulation,"
"Business--Service Mark," "Management--1993 Stock Incentive Plan,"
"Certain Transactions," "Description of Capital Stock," and "Shares
Eligible for Future Sale" in the Prospectus and in Item 24 of the
Registration Statement, insofar as such statements constitute a
summary of documents referred to therein or matters of law, fairly
summarize in all material respects the information called for with
respect to such documents and matters.
(xi) To the actual knowledge of such counsel, no legal or
governmental proceedings are pending or threatened to which the
Company or any of the Professional Corporations is a party or to which
the property of the Company or any of the Professional Corporations is
subject that are required to be described in the Registration
Statement or the Prospectus and are not described therein.
(xii) The Support Services Agreements, dated as of January 1,
1996, between the Company and the Professional Corporations have each
been duly authorized, executed and delivered by the Company and each
of the Support Services Agreements constitute the valid and legally
binding obligation of each of the other parties thereto and are
enforceable in accordance with their terms, except as enforceability
may be limited by legal uncertainties disclosed in the Prospectus and
by bankruptcy, insolvency, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of
equity.
17
(xiii) This Agreement has been duly and validly authorized by all
necessary corporate action of the Company, and this Agreement has been
duly and validly executed and delivered by and on behalf of the
Company and is a valid, binding and enforceable agreement of the
Company enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity 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.
(xiv) The issuance, offering and sale of the Shares to the
Underwriters by the Company pursuant to this Agreement, the compliance
by the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (A)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained and such as may be required under state securities
or Blue Sky laws, or (B) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument known to such counsel to which the Company is
a party or by which the Company or any of its properties are bound, or
the Restated Articles of Incorporation or bylaws of the Company, or
any statute or any judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator known to such
counsel and applicable to the Company.
(xv) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement and
application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the
1940 Act.
In rendering such opinion, counsel for the Company may rely as to
matters governed by the laws of states other than Washington or federal laws on
local counsel in such jurisdictions, provided, however, that in each case
counsel for the Company shall state that they believe that they and the
Underwriters are justified in relying on such other counsel. In addition to the
matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads it to
believe that (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications incorporated therein
pursuant to Rule 430A of the Rules and Regulations) and as of the Closing Date
or the Option Closing Date, as the case may be, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
18
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, financial data and
statistical information therein).
In rendering such opinion, such counsel (i) may state that the opinion
is governed by, and shall be interpreted in accordance with, the Legal Opinion
Accord (the "Accord") of the ABA Section of Business Law (1991) and that the
opinions set forth in clause (i) above are qualified by the General
Qualifications (as defined in the Accord), and (ii) shall state that "actual
knowledge" shall for the purposes of the opinion have the meaning set forth in
the Accord, as supplemented by such counsel's inquiry of the Chief Executive
Officer and the Chief Financial Officer of the Company.
(g) The Representatives shall have received from Tonkon, Torp, Galen,
Marmaduke & Booth, counsel for the Underwriters, an opinion dated the Closing
Date or the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (vii) and (viii) of Paragraph (f) of this Section 5
and that the Company is a duly organized and validly existing corporation under
the laws of the State of Washington. In rendering such opinion, counsel for the
Underwriters may rely as to all matters governed by the laws of states other
than the State of Oregon or federal laws on the opinion of counsel referred to
in Paragraph (f) of this Section 5. In addition to the matters set forth above,
such opinion shall also include a statement to the effect that nothing has come
to the attention of such counsel that leads them to believe that (i) the
Registration Statement, or any amendment thereto, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A of the Rules and Regulations) as of
the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein).
(h) The Representatives shall have received at or prior to the Closing
Date from counsel for the Underwriters a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the state
securities or Blue Sky laws of such jurisdictions as the Representatives may
reasonably have designated to the Company.
19
(i) Concurrently with the execution and delivery of this Agreement,
the Accountants shall have furnished to the Representatives a letter or letters,
dated the date of its or their delivery, addressed to the Representatives and in
form and substance satisfactory to the Representatives, confirming that they are
independent accountants with respect to the Company as required by the Act and
the Rules and Regulations and with respect to certain financial and other
statistical and numerical information contained in the Registration Statement.
At the Closing Date and, as to the Option Shares, the Option Closing Date, the
Accountants shall have furnished to the Representatives a letter or letters,
dated the date of its or their delivery, that shall confirm, on the basis of a
review in accordance with the procedures set forth in the letter or letters from
the Accountants, that nothing has come to their attention during the period from
the date of the letter referred to in the prior sentence to a date (specified in
the letter) not more than five days prior to the Closing Date and the Option
Closing Date, as the case may be, that would require any change in their letter
dated the date hereof if it were required to be dated and delivered at the
Closing Date and the Option Closing Date.
(j) Concurrently with the execution and delivery of this Agreement and
at the Closing Date and, as to the Option Shares, the Option Closing Date, there
shall be furnished to the Representatives an accurate certificate of the
Company, dated the date of its delivery, signed by each of the Chief Executive
Officer and the Chief Financial Officer of the Company on behalf of the Company,
in form and substance satisfactory to the Representatives, to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus on behalf of the Company. As
of the date of such certificate, such documents are true and correct
in all material respects and do not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not untrue or misleading. In the case of the
certificate delivered at the Closing Date and the Option Closing Date,
since the Effective Date no event has occurred as a result of which it
is necessary to amend or supplement the Prospectus in order to make
the statements therein not untrue or misleading in any material
respect.
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at
the time such certificate is delivered, true and correct in all
material respects.
(iii) Each of the covenants required to be performed by the
Company herein on or prior to the date of such certificate has been
duly, timely and fully performed, and each condition herein required
to be satisfied or fulfilled on or prior to the date of such
certificate has been duly, timely and fully satisfied or fulfilled.
20
(k) On or prior to the Closing Date, the Representatives shall have
received the executed agreements referred to in Section 4(m).
(l) Prior to the Closing Date, the Shares shall have been duly
authorized for quotation on the Nasdaq SmallCap Market upon notice of issuance.
(m) The Company shall have furnished to the Representatives such
certificates, in addition to those specifically mentioned herein, as the
Representatives may have reasonably requested as to the accuracy and
completeness at the Closing Date and the Option Closing Date of any statement in
the Registration Statement or the Prospectus, as to the accuracy at the Closing
Date and the Option Closing Date of the representations and warranties of the
Company herein, as to the performance by the Company of its obligations
hereunder, or as to the fulfillment of the conditions concurrent and precedent
to the obligations hereunder of the Representatives.
6. Indemnification.
(a) The Company will indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person,
if any, who controls each Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, liabilities, expenses and damages (including any and all investigative,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted) to
which they, or any of them, may become subject under the Act, the Exchange Act
or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on any untrue statement or alleged untrue statement of
a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any amendment or supplement to the Registration
Statement or the Prospectus, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading in light of the circumstances in which they
were made, provided, however, that the Company will not be liable to the extent
that such loss, claim, liability, expense or damage arises from the sale of the
Shares in the public offering to any person by an Underwriter and is based on an
untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives on behalf of any
Underwriter expressly for inclusion in the Registration Statement, the
Preliminary Prospectus or the Prospectus, and provided further, however, that
the Company will not be liable to any Underwriter, the directors, officers,
employees or agents of such Underwriter or any person controlling such
Underwriter with respect to any loss, claim, liability, expense, charge or
damage arising out of or based on any untrue statement or omission or alleged
untrue statement or omission or alleged omission to state a material fact in the
Preliminary Prospectus that is corrected in the Prospectus if the person
asserting any such loss, claim, liability, charge or damage purchased Shares
from such Underwriter but was not
21
sent or given a copy of the Prospectus at or prior to the written confirmation
of the sale of such Shares to such person. This indemnity agreement will be in
addition to any liability that the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, each director of the Company and
each officer of the Company who signs the Registration Statement to the same
extent as the foregoing indemnity from the Company to each Underwriter, but only
insofar as losses, claims, liabilities, expenses or damages arise out of or are
based on any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to any
Underwriter furnished in writing to the Company by the Representatives on behalf
of such Underwriter expressly for use in the Registration Statement, the
Preliminary Prospectus or the Prospectus. The Company acknowledges that the
statements set forth in the last paragraph of the outside front cover page of
the Prospectus and under the heading "Underwriting" in the Preliminary
Prospectus and the Prospectus constitute the only information relating to any
Underwriter furnished in writing to the Company by the Representatives on behalf
of the Underwriters expressly for inclusion in the Registration Statement, the
Preliminary Prospectus or the Prospectus. This indemnity will be in addition to
any liability that each Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party under this Section 6, notify each such indemnifying party
of the commencement of such action, enclosing a copy of all papers served, but
the omission so to notify any such indemnifying party will not relieve it from
any liability that it may have to any indemnified party under the foregoing
provisions of this Section unless, and only to the extent that, such omission
results in the loss of substantive rights or defenses by the indemnifying party.
If such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering written notice
to the indemnified party promptly after notice of the commencement of the action
from the indemnified party, jointly with any other indemnifying party similarly
notified, to assume the defense of the action, with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own counsel
in any such action, but the expenses and other charges of such counsel will be
at the expense of such indemnified party unless (i) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(ii) the indemnified party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other indemnified parties
that are different from or in
22
addition to those available to the indemnifying party, (iii) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (iv) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time. All such fees, disbursements and
other charges will be reimbursed by the indemnifying party promptly as they are
incurred. Any indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company, or the Underwriters, the
Company, and the Underwriters, will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) to which the Company or
one or more of the Underwriters may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by the Company and the
Underwriters. The relative benefits received by the Company and the Underwriters
shall be deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the outside front cover page of the
Prospectus. If, but only if, the allocation provided by the foregoing sentence
is not permitted by applicable law, the allocation of contribution shall be made
in such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the Company
and the Underwriters, with respect to the statements or omissions that resulted
in such loss, claim, liability, expenses or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to
such Offering. Such relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Representatives on behalf of the Underwriters, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 6(d) were to be determined by pro rata
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allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 6(d)
shall be deemed to include, for purposes of this Section 6(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts received by it and
(ii) no person found guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) will be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute as provided in this Section 6(d) are several in
proportion to their respective underwriting obligations and not joint. For
purposes of this Section 6(d), any person who controls a party to this Agreement
within the meaning of the Act will have the same rights to contribution as that
party, and each director and officer of the Company who signed the Registration
Statement will have the same rights to contribution as the Company, subject in
each case to the provisions hereof. Any party entitled to contribution, promptly
after receipt of notice of commencement of any action against any such party in
respect of which a claim for contribution may be made under this Section 6(d),
will notify any such party or parties from whom contribution may be sought, but
the omission to so notify will not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have under
this Section 6(d). No party will be liable for contribution with respect to any
action or claim settled without its consent (which consent will not be
unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the Underwriters or the Company,
(ii) acceptance of any of the Shares and payment therefor or (iii) any
termination of this Agreement.
7. Termination. The obligations of the several Underwriters under this
Agreement may be terminated at any time on or prior to the Closing Date (or,
with respect to the Option Shares, on or prior to the Option Closing Date) by
notice to the Company from the Representatives, without liability on the part of
any Underwriter to the Company if, prior to delivery and payment for the Shares,
as the case may be, (a) trading in any of the equity securities of the Company
shall have been suspended by the Commission or by the Nasdaq SmallCap Market (b)
trading in securities generally on the New York Stock Exchange shall have been
suspended or limited or minimum or maximum prices shall have been generally
established on such exchange, or additional material governmental restrictions,
not in force on the date of this Agreement, shall have been imposed upon trading
in securities generally by such exchange or by order of the Commission or any
court or other governmental authority, (c) a general banking moratorium shall
have been declared by either federal or New York State authorities or (d) in the
reasonable opinion of the Representatives, there is
24
any material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States or
any outbreak or material escalation of hostilities or other calamity or crisis
shall have occurred, the effect of which is such as to make it, in the
reasonable judgment of the Representatives, impracticable to market the Shares.
8. Substitution of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Firm Shares that it or they have
agreed to purchase hereunder, and the aggregate number of Firm Shares that such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Shares, the other
Underwriters shall be obligated, severally, to purchase the Firm Shares that
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase in the proportions that the number of Firm Shares that they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of Firm Shares that all such nondefaulting Underwriters have so agreed to
purchase, or in such other proportions as the Representatives may specify;
provided, however, that in no event shall the maximum number of Firm Shares that
any Underwriter has become obligated to purchase pursuant to Section 1 be
increased pursuant to this Section 8 by more than one-ninth of such number of
Firm Shares without the prior written consent of such Underwriter. If any
Underwriter or Underwriters shall fail or refuse to purchase any Firm Shares and
the aggregate number of Firm Shares that such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase exceeds one-tenth of the
aggregate number of the Firm Shares and arrangements satisfactory to the
Representatives and the Company for the purchase of such Firm Shares are not
made within 48 hours after such default, this Agreement will terminate without
liability on the part of any nondefaulting Underwriter or the Company for the
purchase or sale of any Shares under this Agreement. In any such case either the
Representatives or the Company shall have the right to postpone the Closing but
in no event for longer than seven days, in order that the required changes, if
any, in the Registration Statement and the Prospectus or in any other documents
or arrangements may be effected. Any action taken pursuant to this Section 8
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
9. Miscellaneous. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, 900 S.W.
Washington Street, Suite 1100, Vancouver, Washington 98660, Attention: Chief
Financial Officer, with a copy to Stuart Chestler, Stoel Rives LLP, 900 S.W.
Fifth Avenue, Suite 2300, Portland, Oregon 97204 or (b) if to the Underwriters,
to the Representatives at the offices of Black & Company, Inc., One S.W.
Columbia, Suite 1200, Portland, Oregon 97258, Attention: Corporate Finance
Department, with a copy to Thomas P. Palmer, Tonkon, Torp, Galen, Marmaduke &
Booth, 888 S.W. Fifth Avenue, Suite 1600, Portland, Oregon 97204. Any such
notice shall be effective only upon receipt. Any notice may be made by telex,
telephone or facsimile, but if so made shall be subsequently confirmed in
writing.
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This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company and of the controlling persons, directors and
officers referred to in Section 6, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall not
include a purchaser, as such purchaser, of Shares from any of the several
Underwriters.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Oregon applicable to contracts made and to be performed
entirely within such state.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company and the Underwriters each hereby waive any right they may
have to a trial by jury in respect of any claim based upon or arising out of
this Agreement or the transactions contemplated hereby.
26
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.
Very truly yours,
GENTLE DENTAL SERVICE CORPORATION
By:
-------------------------------------
President and Chief Executive Officer
Confirmed as of the date first above mentioned:
BLACK & COMPANY, INC.
WEDBUSH MORGAN SECURITIES
Acting severally on their behalf and as the
Representatives of the several
Underwriters named in Schedule I hereto
By: BLACK & COMPANY, INC.
By:
---------------------------------
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SCHEDULE I
UNDERWRITERS
Number of
Firm Shares To
Underwriter Be Purchased
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Black & Company, Inc...........................................
Wedbush Morgan Securities......................................
Total 1,500,000
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