Draft of 7/28/95
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2,850,000 SHARES
INTER-TEL, INCORPORATED
COMMON STOCK
UNDERWRITING AGREEMENT
August _____, 1995
MONTGOMERY SECURITIES
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SUTRO & CO. INCORPORATED
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Dear Sirs:
Section 1. INTRODUCTORY. Inter-Tel, Incorporated, an Arizona
corporation (the "Company"), proposes to issue and sell 2,000,000 shares of its
authorized but unissued Common Stock (the "Common Stock") and certain
shareholders of the Company named in Schedule B annexed hereto (the "Selling
Shareholders") propose to sell an aggregate of 850,000 shares of the Company's
issued and outstanding Common Stock to you (sometimes called herein the
"Underwriters"). Said aggregate of 2,850,000 shares are herein called the "Firm
Common Shares." In addition, one of the Selling Shareholders proposes to grant
to the Underwriters an option to purchase up to 427,500 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
you propose to make a public offering of your 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:
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-3 (File No. 33-_____)
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
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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 two signed copies of such registration statement and amendment, together
with two 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. 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, or (ii) a final
prospectus in accordance with Rules 430A and 424(b) of the Rules and
Regulations. As filed, such amendment and form of final prospectus, or such
final prospectus, 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 that
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) a
registration statement, if any, filed pursuant to Rule 462(b) of the Rules and
Regulations relating to the Common Shares. 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 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 or, if 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. The term "Rule 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. Any reference herein to any Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Form S-3 under the Act, as of the
date of such Preliminary Prospectus or Prospectus, as the case may be.
(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 necessary to
make the statements therein, in the light of the circumstances under which they
were made, 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
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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 you specifically for use
in the preparation thereof. The documents incorporated by reference in the
Prospectus, when they were filed with the Commission, conformed in all material
respects to the requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations of the Commission thereunder,
and none of such documents 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.
(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 22.1 to the Annual Report on Form 10-K for the
Company's most recent fiscal year (the "Company Form 10-K"). 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, or one of its wholly-owned subsidiaries,
beneficially 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
or the subsidiary;
(d) As of June 30, 1995, the Company had authorized and
outstanding capital stock as set forth under the heading "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 nonassessable, are
duly listed on The Nasdaq Stock Market, 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,
and conform to the description thereof contained in the Prospectus. 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 or incorporated
by reference 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
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authorized, validly issued, fully paid and nonassessable, and will conform 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 which has not been waived or satisfied
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 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 its respective properties
may be bound or affected, and which is material to the Company and its
subsidiaries, as a whole, 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 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) Ernst & Young LLP, who have expressed their opinion with
respect to the financial statements and schedules included in or incorporated by
reference in the Prospectus and in the Registration Statement, are independent
accountants as required by the Act and the Rules and Regulations.
(h) The financial statements and schedules of the Company, and
the related notes thereto, included in or incorporated by reference in the
Registration Statement and the Prospectus present fairly the financial position
of the Company as of the respective dates of such financial statements and
schedules, and the results of operations and changes in financial position of
the Company for the respective periods covered thereby. Such statements,
schedules 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 "Capitalization" and "Selected Consolidated Financial Data" fairly
present the information set forth therein on the basis stated in the
Registration Statement.
(i) 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, as a whole,
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neither the Company nor any of its subsidiaries is in violation or default of
any provision of its articles of incorporation or bylaws, or other
organizational documents, or 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; and there does not
exist 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 are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations which have not
been described or filed as required. The contracts so described in the
Prospectus are in full force and effect on the date hereof; and 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.
(k) Except as disclosed in the Prospectus, there are no legal
or governmental actions, suits or proceedings 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 actions, suits or proceedings would reasonably be
expected to, individually or in the aggregate, 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 prospects of the Company and its subsidiaries, as a whole; and
no labor disturbance by the employees of the Company or any of its subsidiaries
exists or is imminent which would reasonably be expected to affect adversely
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 hereinabove described (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 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, 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 would reasonably be expected to result in a material reduction in the
future earnings of the Company and its subsidiaries, 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, 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
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capital stock and the Company and its subsidiaries are not in default in the
payment of principal or interest on any outstanding debt obligations; (iv) there
has not been any change in the capital stock (other than upon the sale of the
Common Shares hereunder and upon the exercise of options and warrants described
in the Registration Statement) or indebtedness material to the Company and its
subsidiaries (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, 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, copyrights, licenses, approvals and governmental
authorizations to conduct their businesses as now conducted; the expiration of
any trademarks, trade names, patent 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, as a whole; and the Company has no knowledge
of any material infringement by it or its subsidiaries of trademark, trade name
rights, patent rights, copyrights, 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, copyright, license, trade
secret or other infringement which would reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company and its subsidiaries.
(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, 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 or
accrued 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 would reasonably be expected to materially and
adversely affect the business, operations or properties of the Company and its
subsidiaries.
(q) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute
prior to the First Closing Date hereinafter mentioned 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 the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering all 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.
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(t) Neither the Company nor any of its subsidiaries has,
directly or indirectly, 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.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might be
reasonably 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.
Section 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLING SHAREHOLDERS.
(a) Each of the Selling Shareholders, including ALA MOANA-95,
L.L.C., the Sarah M. Mihaylo Trust, the Emily N. Mihaylo Trust and Thomas C.
Parise (collectively, the "Affiliated Selling Shareholders") represents and
warrants to, and agrees with, the several Underwriters that:
(i) Such Selling Shareholder has, and on the First
Closing Date and Second Closing Date hereinafter mentioned will
have, good and valid 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, 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 Power of Attorney and caused to be executed and delivered on its
behalf a Custody Agreement (hereinafter collectively referred to
as the "Shareholders Agreement") and in connection herewith such
Selling Shareholder further represents, warrants and agrees that
such Selling Shareholder has deposited in custody, under the
Shareholders 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 Shareholders 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
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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 Shareholders
Agreement have been duly executed and delivered by or on behalf of
such Selling Shareholder and the form of such Shareholders
Agreement has been delivered to you.
(iii) The performance of this Agreement and the
Shareholders Agreement and the consummation of the transactions
contemplated hereby and by the Shareholders 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 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.
(v) Each Preliminary Prospectus and the Prospectus,
insofar as it has related to such Selling Shareholder, has not
included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were
made; and neither the Registration Statement nor the Prospectus,
nor any amendment or supplement thereto, as it relates to such
Selling Shareholder, will include any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(vi) Such Selling Shareholder is not aware that any of
the representations and warranties of the Company set forth in
Section 2 above is untrue or inaccurate in any material respect.
(b) Each of the Selling Shareholders agrees with the Company
and the Underwriters not to directly or indirectly offer to sell, sell or
contract to sell or otherwise dispose of any shares of Common Stock or
securities convertible into or exchangeable for any shares of Common Stock, or
any right to purchase or acquire Common Stock, for a period of 90 days after the
first date that any of the Common Shares are released by you for sale to the
public, without the prior written consent of all of you, which consent may be
withheld in your sole discretion.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS.
You 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, (ii) on
the inside front cover of the Prospectus with respect to stabilization and (iii)
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. Montgomery Securities represents and warrants that they have been
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authorized by each of the Underwriters to enter into this Agreement on their
behalf and to act for them 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 850,000 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.
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 2,850,000 in 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 2,850,000 in 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.
Delivery of certificates for the Firm Common Shares to be
purchased by the Underwriters and payment therefor shall be made at the offices
of Montgomery Securities, 600 Montgomery Street, San Francisco, California (or
such other place as may be agreed upon by the Company and you) 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) of the Exchange Act, after 4:30 P.M. Washington,
D.C. 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 such other time
and date, not later than one week after such third or fourth, as the case may
be, full business day as may be agreed upon by the Company and the Underwriters)
(the "First Closing Date"), provided, however, that in the event the
Registration Statement is amended or the Prospectus is supplemented between the
date hereof and the First Closing Date, you shall have the right to delay the
First Closing Date to a date (not later than one week after such third or
fourth, as the case may be, full business day) that shall allow you sufficient
time to distribute the Prospectus as amended or supplemented. (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 are not
permitted by law or executive order to be closed.)
Delivery of certificates for the Firm Common Shares shall be
made by or on behalf of the Company and the Selling Shareholders to you with
respect to the Firm Common Shares to be sold by the Company and by the Selling
Shareholders against payment by you of the purchase price therefor by certified
or official bank checks payable in next day funds to the order of 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 York, as may be
designated by you.
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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.
In addition, on the basis of the representations, warranties
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Selling Shareholder set forth in Schedule B hereto hereby grants
an option to the several Underwriters to purchase, severally and not jointly, up
to an aggregate of 427,500 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 Company and 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," if at any time other than the First Closing Date shall be three 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 the 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
2,850,000 (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 the
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 the Selling Shareholders. If the option is cancelled or
expires unexercised in whole or in part, the Company will deregister under the
Act the number of Option Shares as to which the option has not been exercised.
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 your
judgment is advisable and at the public offering price set forth on the cover
page of and on the terms set forth in the Prospectus.
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
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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 of which you
have not been furnished with a copy a reasonable time prior to such filing or 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 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.
(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) 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 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
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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 you: (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 90 days after the first date that any
of the Common Shares are released by you for sale to the public, without the
prior written consent of all of you, which consent may be withheld in your sole
discretion, the Company will not, directly or indirectly (other than pursuant to
outstanding stock options and warrants disclosed in the Prospectus), issue,
offer, sell, grant options to purchase (other than the grant of options pursuant
to stock option plans existing on the date hereof) or otherwise dispose of any
of the Company's equity securities or any other securities convertible into or
exchangeable for its Common Stock or other equity security.
(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), and will comply with such Blue Sky laws
and will continue such qualifications, registrations and exemptions in effect
for a period of five years after the date hereof.
You 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 in such proportions as they may
agree upon among themselves 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
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and expenses of the registrar and transfer agent of the Common Stock and of the
Agent, (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 counsel (including fees and expenses relating
to the representation of the Selling Shareholders by the Company'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, any Agreement Among
Underwriters, any Selected Dealers Agreement, any Underwriters' Questionnaire,
any Underwriters' Power of Attorney and the Blue Sky memoranda, (vi) all filing
fees, 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 state Blue Sky or Canadian securities laws, (vii) the filing fee
of the National Association of Securities Dealers, Inc., and (viii) all other
fees, costs and expenses referred to in Item 14 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, including the fees
and disbursements of their counsel (excluding those relating to qualification,
registration or exemption under the state Blue Sky or Canadian securities laws
and the Blue Sky memoranda referred to above). 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 (other than fees and expenses of the Company's
counsel); and (ii) 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 10:00 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
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additional information in the Registration Statement, or otherwise, shall have
been complied with to your satisfaction.
(b) You shall be satisfied that since the respective dates as
of which information is given in the Registration Statement and Prospectus, (i)
there shall not have been any change in the capital stock (other than pursuant
to the exercise of outstanding options and warrants 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 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 would reasonably be expected to result in a material reduction in the
future earnings of the Company and its subsidiaries, (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), business, results of operations or
prospects of the Company and its subsidiaries, (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 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 which makes it
impractical or inadvisable in your judgment to proceed with the public offering
or purchase the Common Shares as contemplated hereby.
(c) There shall have been furnished to you on each Closing
Date, in form and substance satisfactory to you, except as otherwise expressly
provided below:
(i) An opinion of Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, counsel for the Company and the Selling
Shareholders, addressed to you and dated the First Closing Date, or the
Second Closing Date, as the case may be, to the effect that:
(1) Each of the Company and its Material 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 (as used herein, "Material Subsidiary"
means any subsidiary of the Company deemed to be such by you and
the Company and any corporation (i) of which more than 50% of the
voting stock is owned or controlled by the Company or by one or
more of its subsidiaries and (ii) to such counsel's knowledge
either (x) the total assets of which represent 5% or more of the
total assets of the Company and its subsidiaries consolidated as
of the end of the Company's most recent fiscal quarter or (y) the
net sales of which represent 5% or more of the net sales of the
Company and its subsidiaries consolidated for the six months ended
June 30, 1995 or (z) the Company's and its other subsidiaries'
equity in the income from continuing operations before income
taxes, extraordinary items and cumulative effect of a change in
accounting principle of such corporation exceeds 5% of such income
of the Company and its subsidiaries consolidated for the six
months ended June 30, 1995);
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(2) The authorized, issued and outstanding capital stock
of the Company is as set forth under the caption "Capitalization"
in the Prospectus; all necessary corporate proceedings have been
taken in order to authorize validly such authorized Common Stock;
all outstanding shares of Common Stock (including the Firm Common
Shares and any Optional Common Shares to be sold by the Selling
Shareholders) have been duly and validly issued, are fully paid
and nonassessable, and, to such counsel's knowledge, were not
issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase any securities; without
limiting the foregoing, to such counsel's knowledge, 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 capital
stock of the Material Subsidiaries have been duly and validly
authorized and issued and 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 Arizona 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 be duly authorized and validly issued, fully paid and
nonassessable, and, to such counsel's knowledge, will not have
been issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities;
(5) Except as disclosed in or specifically contemplated
by the Prospectus, to such counsel's knowledge, there are no
outstanding options, warrants or other rights requiring the
issuance of, and no commitments to issue, any shares of capital
stock of the Company or any security convertible into or
exchangeable for capital stock of the Company;
(6) (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 schedules 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 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 or to
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the Company's Annual Report on Form 10-K which are not disclosed
or filed, as required;
(d) To such counsel's knowledge, there are no legal or
governmental actions, suits or proceedings pending or threatened
against the Company or its subsidiaries which are required to be
described in the Prospectus which are not described as required;
(e) The documents incorporated by reference in the
Prospectus (except for any financial statements and schedules
included in such documents as to which such counsel need express
no opinion), when they were filed with the Commission, complied as
to form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission
thereunder;
(7) The Company has the requisite corporate 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
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 performance by the Company of
its obligations set forth in 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;
(8) The execution and delivery of this Agreement and the
performance by the Company of its obligations set forth in this
Agreement will not 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 which is material to
the Company and its subsidiaries, as a whole, or violate any of
the provisions of the articles of incorporation 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;
(9) The Company is not in violation of its articles of
incorporation or bylaws, none of the Material Subsidiaries is in
violation of its articles of incorporation or, to such counsel's
knowledge, bylaws or other organizational documents, and, to such
counsel's knowledge, neither the Company nor any Material
Subsidiary is in
-16-
breach of or default with respect to any provision of any
agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument filed as an exhibit to the
Registration Statement or the Company Form 10-K 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, taken as a whole;
(10) To such counsel's knowledge, no holders of
securities of the Company have rights which have not been waived
or fulfilled 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;
(11) To such counsel's knowledge, this Agreement and the
Shareholders 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, to such counsel's knowledge, the execution and delivery of
this Agreement and the Shareholders Agreement by each Selling
Shareholder and the performance by the Selling Shareholders of
their obligations set forth herein and therein, 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 and which is material to any Selling
Shareholder, 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 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
Shareholders Agreement or the performance by the Selling
Shareholders of their obligations set forth in 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;
(12) To such counsel's knowledge, the Selling
Shareholders have full right, power and authority to enter into
this Agreement and the Shareholders 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 valid
title 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; and
(13) To such counsel's knowledge, this Agreement and the
Shareholders Agreement are valid and binding agreements of each of
the Selling Shareholders 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
-17-
to indemnities or contributions for liabilities under the Act, as
to which no opinion need be expressed.
In rendering such opinion, such counsel may rely as to the
matters set forth in paragraphs (11), (12) and (13), on opinions of
other counsel retained by the Selling Shareholders, as to matters of
local or regulatory law, on opinions of local or regulatory 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 delivered to
counsel for the Underwriters. Such counsel shall also include a
statement to the effect that nothing has come to such counsel's
attention that would lead such counsel to believe that either at the
effective date of the Registration Statement or at the applicable
Closing Date the Registration Statement or the Prospectus, or any such
amendment or supplement (other than the financial statements and
schedules and other financial or statistical data set forth therein, as
to which such counsel need express no belief), contains any untrue
statement of a material fact or omits 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 Pillsbury Madison & Sutro,
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.
(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 effect that:
(1) The representations and warranties of the Company set
forth in Section 2 of this Agreement are true 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;
to the best of his knowledge, the Registration Statement and the
Prospectus and any amendments or supplements thereto
-18-
contain all statements required to be stated therein regarding the
Company and its subsidiaries; and 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, in the light of the
circumstances under which they were made, 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 which would be
reasonably likely to result in a material adverse change in the
condition (financial or otherwise), business, properties, results
of operations or management of the Company and its subsidiaries,
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, 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 would reasonably be expected to result in a material
reduction in the future earnings of the Company or incurred any
material liability or obligation, direct, contingent or indirect,
made any change in its capital stock (except pursuant to exercise
of stock options and warrants as disclosed in the Prospectus),
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 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; and
(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, windstorm, accident or other calamity
(whether or not insured).
(iv) 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 from Ernst & Young LLP, 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 satisfactory to you.
(v) 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
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the Selling Shareholders to the effect that the representations and
warranties of such Selling Shareholder in this Agreement are true and
correct, as if made at and as of the First Closing Date or Second
Closing Date, as the case may be, and such Selling Shareholder has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied prior to the First Closing Date
or Second Closing Date, as the case may be.
(vi) On or before the First Closing Date, letters from each
officer of the Company, in form and substance satisfactory to you,
confirming that for a period of 90 days after the first date that any
of the Common Shares are released by you for sale to the public, such
person will not directly or indirectly sell or offer to sell or
otherwise dispose of any shares of Common Stock or any right to acquire
such shares without the prior written consent of all of you, which
consent may be withheld your sole discretion.
All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are satisfactory to you
and to Pillsbury Madison & Sutro, 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 request. Any certificate
signed by any officer of the Company and delivered to you 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 to the
Company and the Selling Shareholders without liability on the part of any
Underwriter or 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 hereof, 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 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 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 your, its and 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.
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Section 11. INDEMNIFICATION.
(a) The Company and each of the Affiliated Selling
Shareholders, jointly and severally, 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), 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 the Selling
Shareholders contained herein or any failure of the Company or the Selling
Shareholders 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 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 Affiliated 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; and provided
further, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, each
Affiliated Selling Shareholder shall not be liable under this paragraph for an
amount in excess of the proceeds received by the Affiliated Selling Shareholder
for the Common Shares sold by such Affiliated Selling Shareholder to the
Underwriters; and provided further, that the indemnity provided in this Section
11(a) with respect to any Preliminary Prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any losses, claims, charges,
liabilities or litigation based upon any untrue statement or alleged untrue
statement of any material fact or omission or alleged omission to state therein
a material fact, if a copy of the Prospectus in which such untrue statement or
alleged untrue statement or omission was corrected has not been sent or given to
such person within the time required by the Act and the Rule and Regulations
thereunder, unless such failure is the result of noncompliance by the Company
with Section 6(e) hereof; and provided further, that no Affiliated Selling
Shareholder shall be liable in any case pursuant to this Section 11 to the
extent any such loss, claim, damage or liability arises out of or is based upon
an 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 information
furnished to the Company in writing by any other Selling Shareholder; and
provided further, that no Affiliated Selling Shareholder shall be required to
provide indemnification or reimbursement hereunder until the Underwriter or
control person seeking indemnification or reimbursement shall have first made a
claim therefor against the Company and such claim has not been paid by the
Company for a period of not less than 45 days. The Company and the Affiliated
Selling Shareholders may agree, as among themselves, as to their respective
amounts of such liability for which they each shall be responsible. In addition
to their other obligations under this Section 11(a), the Company and the
Affiliated Selling Shareholders agree that, as an interim measure during the
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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 the Selling Shareholders herein or failure to perform its obligations
hereunder, all as described in this Section 11(a), they 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 the Affiliated Selling Shareholders' 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 National Trust and Savings Association, 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 or any Selling Shareholder 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, Selling Shareholder or controlling
person) 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
Underwriters' obligations to reimburse the Company (and, to the extent
applicable, each officer, director, Selling Shareholder or controlling person)
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction.
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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, Selling Shareholder or controlling person) 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 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
it from any liability which it may have to any indemnified party for
contribution or otherwise than under the indemnity agreement contained in this
Section or to the extent it is not prejudiced as a proximate result of such
failure. 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 preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by you in the case of paragraph (a), representing the
indemnified parties who are parties to such action) 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 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) of this Section 11 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 expenses referred to
herein (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company, Affiliated 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, Affiliated Selling
Shareholders and the Underwriters in connection with the statements or omissions
or inaccuracies in
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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,
Affiliated Selling Shareholders and the Underwriters shall be deemed to be in
the same proportion, in the case of the Company and the Affiliated Selling
Shareholders as the total price paid to the Company and to the Affiliated
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 the Affiliated
Selling Shareholders and received by the Underwriters as underwriting
commissions. The relative fault of the Company, Affiliated 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, Affiliated 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 paragraph (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 paragraph (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 paragraph (d); provided, however, that
no additional notice shall be required with respect to any action for which
notice has been given under paragraph (c) for purposes of indemnification. The
Company, Affiliated 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 this 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. Notwithstanding
the provisions of this Section 11, no Affiliated Selling Shareholder shall be
required to contribute any amount in excess of the proceeds received by the
Affiliated Selling Shareholder for the Common Shares sold by such Affiliated
Selling Shareholder to the Underwriters. 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 (b), 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 arbitration would be limited to the operation of
the interim reimbursement provisions contained in Sections 11(a) and (b) 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
(b) hereof.
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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 Underwriters of all such shares in accordance with
the terms hereof. If any Underwriter or Underwriters default in your or 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 nondefaulting entities shall
be obligated severally, in proportion to their respective commitments hereunder,
to purchase the Common Shares which such defaulting entities 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 you
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 nondefaulting 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 nondefaulting entities or by another party or parties,
you 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 you or a defaulting
Underwriter from liability for its default.
Section 13. EFFECTIVE DATE. This Agreement shall become
effective immediately as to Sections 7, 9, 11, 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 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
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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 and the Selling Shareholders (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 over the counter
market by the NASD, or trading in securities generally shall have been suspended
on either such Exchange or in the over the counter market by the NASD, or a
general banking moratorium shall have been established by federal, New York or
California authorities, (ii) if an outbreak or escalation 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 your judgment, to affect
adversely the marketability of the Common Shares, (iii) if any adverse event
shall have occurred or shall exist which makes untrue or incorrect in any
material respect any statement or information contained in the Registration
Statement or 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
your judgment, may materially and adversely affect the Company's business or
earnings and makes it impractical or inadvisable to offer or sell the Common
Shares. Any termination pursuant to this subsection (b) shall be 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).
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 rights 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
-26-
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 Underwriters shall be mailed, delivered or
telegraphed and confirmed to you at 600 Montgomery Street, San Francisco,
California 94111, Attention: David A. Baylor, Esq., with a copy to Pillsbury
Madison & Sutro, 235 Montgomery Street, San Francisco, California 94104,
Attention: Stanton D. Wong, Esq.; and if sent to the Company or the Selling
Shareholders shall be mailed, delivered or telegraphed and confirmed to the
Company at 7300 West Boston Street, Chandler, Arizona 85226, Attention: Mr.
Steven G. Mihaylo, with a copy to Wilson, Sonsini, Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304,
Attention: Jeffrey D. Saper, Esq. 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.
Section 19. REPRESENTATION OF UNDERWRITERS. Except as
otherwise expressly provided herein, any action under or in respect of this
Agreement taken by you jointly or by Montgomery Securities will be binding upon
all the Underwriters.
Section 20. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, 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 shall 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, Selling Shareholders and you.
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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 Attorneysin-fact will be binding on all Selling Shareholders.
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,
INTER-TEL INCORPORATED
By _____________________________
Its _________________________
SELLING SHAREHOLDERS
By _____________________________
(Attorney-in-fact)
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as
of the date first above written.
MONTGOMERY SECURITIES
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SUTRO & CO. INCORPORATED
By MONTGOMERY SECURITIES
By ______________________
Managing Director
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SCHEDULE A
Number of Firm
Common Shares
Name of Underwriter To Be Purchased
- ------------------- ---------------
Montgomery Securities ........................................
Donaldson, Lufkin & Jenrette
Securities Corporation .....................................
Sutro & Co. Incorporated......................................
TOTAL ................................................... 2,850,000
=========
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SCHEDULE B
Number of Firm
Common Shares to
be Sold by Selling
Name of Selling Shareholder Shareholders
- --------------------------- ------------------
ALA MOANA-95, L.L.C....................................... 610,000
Sarah M. Mihaylo Trust.................................... 100,000
Emily N. Mihaylo Trust.................................... 100,000
Ray Ryan.................................................. 23,745
Thomas C. Parise.......................................... 10,310
Keith Benfield............................................ 5,945
-------
Total ............................................... 850,000
=======
Number of Optional
Common Shares to
be Sold by Selling
Name of Selling Shareholder Shareholder
- --------------------------- ------------------
ALA MOANA-95, L.L.C....................................... 427,500
` -------
Total ............................................... 427,500
=======
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