WEDBUSH MORGAN SECURITIES, INC.
THE KEITH COMPANIES, INC.
UNDERWRITING AGREEMENT
July , 1999
WEDBUSH MORGAN SECURITIES, INC.
As Representative of the
Several Underwriters
c/o Wedbush Morgan Securities, Inc.
1000 Wilshire Blvd
Los Angeles, CA 90030-0014
Ladies and Gentlemen:
The Keith Companies, Inc., a California corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the several Underwriters named in Schedule I hereto (each, an "Underwriter"
and collectively, the "Underwriters") an aggregate of 1,750,000 shares (the
"Firm Shares") of the Company's authorized and previously unissued Common Stock,
no par value (the "Common Stock"). The Company also proposes to grant to the
Underwriters an option to purchase up to 262,500 additional shares of Common
Stock (the "Option Shares") for the sole purpose of covering over-allotments, if
any, in connection with the sale of the Firm Shares. The Firm Shares and any
Option Shares purchased pursuant to this Agreement are collectively referred to
below as the "Shares." Wedbush Morgan Securities, Inc. ("Wedbush") is acting
as Representative of the several Underwriters and in that capacity is referred
to in this Agreement as the "Representative."
The Company hereby confirms its agreement with the several Underwriters as
follows:
1. Representations and Warranties of the Company. The Company hereby
represents and warrants to and agrees with each Underwriter as follows:
(a) A registration statement (Registration No. 333-77273 on Form S-1
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the Shares, including such amendments to such registration statement as may have
been required to the date of this Agreement, has been prepared by the Company
under and in conformity with the provisions of the Securities Act and the rules
and regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder and has been filed with the Commission.
After the execution of this Agreement, the Company will file with the Commission
either (i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Securities Act, either (A)
if the Company relies on Rule 434 under the Securities Act, a Term Sheet
(defined below) relating to the Shares, that identifies the Preliminary
Prospectus (defined below) that it supplements and contains such
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information as is required or permitted by Rules 434, 430A and 424(b) of the
Rules and Regulations or (B) if the Company does not rely on Rule 434 under the
Securities Act, a prospectus in the form most recently included in an amendment
to such registration statement (or, if no such amendment has been filed, in such
registration statement), with such changes or insertions as are required by Rule
430A of the Rules and Regulations or permitted by Rule 424(b) of the Rules and
Regulations, and in the case of either (i)(A) or (i)(B) of this sentence, as has
been provided to and approved by the Representative prior to the execution of
this Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the
Securities Act, an amendment to such registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and approved by the
Representative prior to the execution of this Agreement. As used in this
Agreement, the term "Registration Statement" means such registration statement,
as amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto, any information omitted therefrom
pursuant to Rule 430A of the Rules and Regulations and included in the
Prospectus (defined below) and further including all filings or other documents
incorporated therein, as well as any additional registration statement filed in
connection with the offering of the Shares pursuant to Rule 462(b) under the
Securities Act; the term "Preliminary Prospectus" means each prospectus subject
to completion filed with such registration statement or any amendment thereto
(including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective and further including all filings or documents incorporated
therein); and the term "Prospectus" means the following, including any filings
or documents incorporated therein:
(A) if the Company relies on Rule 434 under the Securities Act, the
Term Sheet relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Securities Act, together with the Preliminary Prospectus
identified therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the Securities
Act, the prospectus first filed with the Commission pursuant to Rule 424(b)
under the Securities Act; or
(C) if the Company does not rely on Rule 434 under the Securities Act
and if no prospectus is required to be filed pursuant to Rule 424(b) under the
Securities Act, the prospectus included in the Registration Statement; provided
that if any revised prospectus that is provided to the Underwriters by the
Company for use in connection with the offering of the Shares differs from the
prospectus on file with the Commission at the time the Registration Statement
became or becomes, as the case may be, effective, whether or not the revised
prospectus is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations, the term "Prospectus" shall mean such
revised prospectus (including all filings and documents incorporated therein)
from and after the time it is first provided to the Underwriters for such use.
The term "Term Sheet" as used in this Agreement means any term sheet that
satisfies the requirements of Rule 434 under the Securities
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Act. Any reference in this Agreement to the "date" of a Prospectus that includes
a Term Sheet means the date of such Term Sheet.
(b) No order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of any Preliminary Prospectus or
the Prospectus has been issued and no proceedings for that purpose are pending
or threatened or, to the best knowledge of the Company, contemplated by the
Commission; no stop order suspending the sale of the Shares in any jurisdiction
has been issued and no proceedings for that purpose are pending or threatened
or, to the best knowledge of the Company, contemplated, and any request of the
Commission for additional information (to be included in the Registration
Statement, any Preliminary Prospectus or the Prospectus or otherwise) has been
complied with.
(c) As used in this Agreement, the word "subsidiary" means any
corporation, partnership, limited liability company or other entity of which the
Company directly or indirectly owns 50% or more of the equity or that the
Company directly or indirectly controls. The subsidiaries of the Company (the
"Subsidiaries") and the jurisdiction of incorporation of each Subsidiary are
listed on Exhibit A hereto. The Company has no subsidiaries other than the
Subsidiaries listed on Exhibit A hereto; and except as set forth on Exhibit A,
the Company owns one hundred percent (100%) of the issued and outstanding stock
of each of the Subsidiaries free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest of any type, kind or nature.
Exhibit B hereto lists each entity in which the Company or any Subsidiary holds
an equity interest, whether as shareholder, partner, member, joint venturer or
otherwise. Except as set forth on Exhibit B, neither the Company nor any
Subsidiary has any equity interest in any person. The Company and each of its
Subsidiaries has been duly organized and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its organization, has full
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement and the Prospectus and as is
currently being conducted by it and is duly qualified as a foreign corporation
and in good standing in all jurisdictions in which the character of the property
owned or leased or the nature of the business transacted by it makes
qualification necessary (except where the failure to be so qualified would not
have a material adverse effect on the business, properties, condition (financial
or otherwise), results of operations or prospects of the Company and its
Subsidiaries, taken as a whole (a "Consolidated Material Adverse Effect")). The
Company and each of its Subsidiaries is in possession of and operating in
compliance with all authorizations, licenses, certificates, consents, orders and
permits from federal, state, local and other governmental or regulatory
authorities that are necessary to the conduct of its or their business, all of
which are valid and in full force and effect, except for authorizations,
licenses, certificates, consents, orders and permits which would not have a
Consolidated Material Adverse Effect. Each contractual joint venture in which
the Company or any Subsidiary is involved and, to the Company's best knowledge,
each participant therein is operating in compliance with the terms of its joint
venture agreement except for any non-compliance that would not have a
Consolidated Material Adverse Effect.
(d) When any Preliminary Prospectus was filed with the Commission it
(i) contained all statements required to be contained therein and complied in
all respects with the requirements of the Securities Act, the Rules and
Regulations, the Securities Exchange Act of
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1934, as amended (the "Exchange Act") and the rules and regulations of the
Commission thereunder (the "Exchange Act Rules and Regulations") and (ii) did
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. When the
Registration Statement or any amendment thereto was or is declared effective
(the "Effective Date"), it (i) contained or will contain all statements required
to be contained therein and complied or will comply in all respects with the
requirements of the Securities Act, the Rules and Regulations, the Exchange Act
and the Exchange Act Rules and Regulations and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. When the Prospectus or
any Term Sheet that is a part thereof or any amendment or supplement to the
Prospectus is filed with the Commission pursuant to Rule 424(b) (or, if the
Prospectus or part thereof or such amendment or supplement is not required to be
so filed, when the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was or is declared effective) and
on the Closing Date (defined below) and any date on which Option Shares are to
be purchased, the Prospectus, as amended or supplemented at any such time, (i)
contained or will contain all statements required to be contained therein and
complied or will comply in all respects with the requirements of the Securities
Act, the Rules and Regulations and the Exchange Act Rules and Regulations and
(ii) did not or will not include any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing provisions of this paragraph (d) do not apply to statements or
omissions made in any Preliminary Prospectus, the Registration Statement or any
amendment thereto or the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the Representative
specifically for use therein.
(e) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there has not been (i) any
material loss or interference with the business of the Company or any of its
Subsidiaries (A) from fire, explosion, flood or other calamity, whether or not
covered by insurance, or (B) from any court or governmental action, order or
decree, or (ii) any material changes in the capital stock or, except in the
ordinary course of its business, long-term debt of the Company or any of its
Subsidiaries, or (iii) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company, or (iv) any development known to
the Company that might cause or result in a Consolidated Material Adverse
Effect, whether or not arising from transactions in the ordinary course of
business, in each case of (i)-(iv) above other than as may be set forth in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). Since such dates, except in
the ordinary course of business, neither the Company or any of its Subsidiaries
has entered into any material transaction not described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) that might cause or result in a Consolidated
Material Adverse Effect.
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(f) There is no agreement, contract, license, lease or other document
required to be described in the Registration Statement or the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) or
to be filed as an exhibit to the Registration Statement which is not described
or filed as required. All contracts described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), if any,
are in full force and effect on the date hereof, and neither the Company nor any
of its direct or indirect subsidiaries nor, to the best knowledge of the
Company, any other party, is in breach of or default under any such contract,
which breach or default would have a Consolidated Material Adverse Effect.
(g) The authorized and outstanding capital stock of the Company is
set forth in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), and the description of the capital stock therein
conforms with and accurately describes the rights set forth in the instruments
defining the same. The Shares are duly authorized and will, when issued in
accordance with the terms of this Agreement and against payment therefor, be
validly issued, fully paid and non-assessable, and the issuance of the Shares is
not subject to any preemptive or similar rights.
(h) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all applicable federal and
state securities laws and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities that
were not satisfied or waived. All of the issued shares of capital stock or other
equity interests of each Subsidiary have been duly authorized and validly
issued, are fully paid and non-assessable, have been issued in compliance with
all applicable laws, including securities laws, were not issued in violation of
or subject to any preemptive or other rights to subscribe for or purchase such
securities that were not satisfied or waived and are directly or indirectly
owned by the Company, except as otherwise set forth on Exhibit A hereto. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted or exercised thereunder,
set forth in the Prospectus (or, if the Prospectus is not in existence, in the
most recent Preliminary Prospectus), accurately and fairly present the
information required to be shown with respect to such plans, arrangements,
options and rights in all material respects. Other than this Agreement and the
options and warrants to purchase Common Stock described in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus),
there are no options, warrants or other rights outstanding to subscribe for or
purchase any shares of the Company's capital stock from the Company. There are
no preemptive rights applicable to any shares of capital stock of the Company.
There are no options, warrants or other rights outstanding to subscribe for or
purchase any shares of the capital stock or registered capital of any Subsidiary
from such Subsidiary and no Subsidiary is subject to any obligation, commitment,
plan, arrangement or court or administrative orders with respect to the same.
There are no preemptive rights applicable to any shares of capital stock or
registered capital of the Subsidiaries. There are no restrictions upon the
voting or transfer of any of the Firm Shares or Option Shares pursuant to the
Company's articles of incorporation, as amended to date ("Articles of
Incorporation"), Bylaws or other governing documents or any agreement to which
the Company is a party or by which it may be bound other than as described in
the
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Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). Except as set forth in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), there
are no rights for or relating to the registration of any capital stock of the
Company. Neither the filing of the Registration Statement nor the offering or
sale of the Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived, for or relating to the registration of
any securities of the Company.
(i) The Company has full corporate power and authority to enter into
and perform its obligations under this Agreement and to issue, sell and deliver
the Shares. This Agreement has been duly authorized, executed and delivered by
the Company and constitutes the valid and binding agreement of the Company, and
is enforceable against the Company in accordance with its terms except insofar
as enforceability may be affected by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and except
insofar as the indemnification and contribution provisions of Section 7 of this
Agreement may be affected by public policy concerns.
(j) Neither the Company nor any of its Subsidiaries is, nor with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution or delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement result in a
violation of or constitute a breach of or a default (including without
limitation with the giving of notice, the passage of time or otherwise) that
would result in a Consolidated Material Adverse Effect under the Articles of
Incorporation, Bylaws or other charter documents of the Company or any of its
Subsidiaries or any obligation, agreement, covenant or condition contained in
any material bond, debenture, note or other evidence of indebtedness or in any
contract, indenture, mortgage, deed of trust, loan agreement, lease, license,
joint venture or other agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of its or their properties may be
bound or affected. The Company has not incurred any liability, direct or
indirect, for any finders' or similar fees payable on behalf of the Company or
the Underwriters in connection with the transactions contemplated by this
Agreement. The performance by the Company of its obligations under this
Agreement will not violate any law, ordinance, Rule or regulation or any order,
writ, injunction, judgment or decree of any governmental agency or body or of
any court having jurisdiction over the Company or any of its Subsidiaries or any
of its or their properties that would result in a Consolidated Material Adverse
Effect, or result in the creation or imposition of any lien, charge, claim or
encumbrance upon any property or asset of the Company or any of its Subsidiaries
that would result in a Consolidated Material Adverse Effect. Except for permits
and similar authorizations required under the Securities Act, the Exchange Act
or under state securities or blue sky laws of certain jurisdictions and for such
permits and authorizations that have been obtained, no consent, approval,
authorization or order of any court, governmental agency or body, financial
institution or any other person is required in connection with the consummation
of the transactions contemplated by this Agreement (except such additional steps
as may be required by the National Association of Securities Dealers, Inc. (the
"NASD").
(k) Each of the Company and its Subsidiaries has good and marketable
title, or has valid rights to use, all items of real and personal property which
are material to the
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business of the Company and its Subsidiaries, taken as a whole, free and clear,
except as described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), of all
liens, encumbrances and claims that when taken as a whole would result in a
Consolidated Material Adverse Effect and subject to such exceptions that do not
adversely affect the present or prospective business of the Company or its
Subsidiaries.
(l) Each of the Company and its Subsidiaries holds adequate rights to
use all inventions, trade secrets, know-how, trademarks, service marks,
tradenames and copyrights described or referred to in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) which are necessary for the conduct of its or their
business as described in the Registration Statement and the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus); and
the Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, tradenames or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Consolidated Material Adverse Effect.
(m) There is no litigation or governmental proceeding to which the
Company or any of its Subsidiaries is a party or to which any property of the
Company or any of its Subsidiaries is subject which is pending or, to the best
knowledge of the Company, is threatened or contemplated against the Company or
any of its Subsidiaries that might have a Consolidated Material Adverse Effect,
that might prevent consummation of the transactions contemplated by this
Agreement or that is required to be disclosed in the Registration Statement or
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(n) Except as disclosed in the Prospectus (or, if the Prospectus is
not in existence, in the most recent Preliminary Prospectus), neither the
Company nor any of its Subsidiaries is in violation of any law, order,
ordinance, Rule or Regulation of which it is aware, or any order, writ,
injunction, judgment or decree of any governmental agency or body or of any
court, to which it or its properties (whether owned or leased) may be subject,
which violation would have a Consolidated Material Adverse Effect.
(o) The Company has not taken, directly or indirectly, any action
designed to cause or result in, or which has constituted or will cause or result
in, under the Exchange Act, the Exchange Act Rules and Regulations or otherwise,
the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares. No bid or purchase by the Company
nor any bid or purchase that could be attributed to the Company (as a result of
bids or purchases by an "affiliated purchaser" within the meaning of Regulation
M under the Exchange Act) for or of the Common Stock, any securities of the same
class or series as the Common Stock or any securities convertible into or
exchangeable for or that represent any right to acquire the Common Stock is now
pending or in progress or will have commenced at any time prior to the
completion of the distribution of the Shares.
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(p) KPMG LLP, whose reports appear in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) are, and during the periods covered by their reports in
the Registration Statement were, independent accountants as required by the
Securities Act and the Rules and Regulations. The historical and pro forma
financial statements, together with related notes and schedules, and other
financial information included in the Registration Statement, each Preliminary
Prospectus and the Prospectus present fairly (or, if the Prospectus has not been
filed with the Commission, as to the Prospectus, will present fairly) the
financial position, results of operations, cash flows and changes in
shareholders' equity of the Company and its Subsidiaries, taken as a whole, at
the dates and for the periods indicated, and the historical and pro forma
financial statements, together with related notes, schedules and other financial
information included in the Registration Statement present fairly the
information required to be stated therein in all material respects. Such
financial statements, notes, schedules and other financial information have been
prepared in accordance with U.S. generally accepted accounting principles
applied on a consistent basis throughout the periods presented and all
adjustments necessary for a fair presentation of results for such periods have
been made, except as may be stated therein. The selected and summary financial
and statistical data included in the Registration Statement and the Prospectus
present fairly (or, if the Prospectus has not been filed with the Commission, as
to the Prospectus, will present fairly) the information shown therein and have
been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be
included in the Registration Statement. Except as set forth in such financial
statements or as set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company has no debts,
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature whatsoever, including, without limitation, any tax liabilities or
deferred tax liabilities or any other debts, liabilities or obligations.
(q) The books, records and accounts of the Company and its
Subsidiaries accurately and fairly reflect, in reasonable detail in all material
respects, the transactions in and dispositions of the assets of the Company and
its Subsidiaries. The systems of internal accounting controls maintained by the
Company and its Subsidiaries are sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary (x) to
permit preparation of financial statements in conformity with U.S. generally
accepted accounting principles and (y) to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences; and (v) the Company is able to
properly apply and test for proper application of the percentage completion
method of accounting with respect to its contracts.
(r) The Company has delivered to Wedbush the written agreement of
each of its executive officers, directors, shareholders, warrant and option
holders and holders of rights to purchase the Company's capital stock
(collectively, the "Holders") to the effect that each of the Holders will not,
without the prior written consent of Wedbush, for a period of 180 days
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following the date of this Agreement, directly or indirectly offer, sell, grant
any option to purchase, contract to sell, or otherwise dispose of any shares of
Common Stock, any options or warrants to purchase any shares of Common Stock or
any securities convertible into or exchangeable for shares of Common Stock owned
by the Holder or with respect to which the Holder has the power of disposition,
or announce any offer to do so; provided however, Holders shall not include
those certain shareholders and option holders set forth as "rank and file
employees" on Exhibit C hereto.
(s) No labor disturbance by the employees of the Company or any of
its Subsidiaries exists, or, to the knowledge of the Company, is imminent,
contemplated or threatened; and the Company is not aware of an existing,
imminent or threatened labor disturbance by the employees of any principal
suppliers, manufacturers, contractors or others which such disturbance might be
expected to result in any Consolidated Material Adverse Effect. No collective
bargaining agreement exists with any of the Company's employees or those of its
Subsidiaries and, to the best knowledge of the Company, no such agreement is
imminent.
(t) Each of the Company and its Subsidiaries has filed all federal,
state, local and foreign tax returns which are required to be filed or has
requested extensions thereof and has paid all taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges to the extent
that the same have become due and payable. To the best of the Company's
knowledge, no tax assessment or deficiency has been made or proposed against the
Company or any of its Subsidiaries nor has the Company or any of its
Subsidiaries received any notice of any proposed tax assessment or deficiency.
(u) Except as set forth in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), there are no
outstanding contracts, loans, advances or guaranties of indebtedness by the
Company or any of its Subsidiaries to or for the benefit of any of (i) its
"affiliates," as such term is defined in the Rules and Regulations, (ii) except
for immaterial advances in the ordinary course of business, any of the officers
or directors of any of its Subsidiaries, or (iii) any of the members of the
families of any of them, in each case, required to be set forth in the
Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus), under the Securities Act or Rules and Regulations.
(v) The Company and its Subsidiaries are in compliance with the
requirements of Section 13(b)(2) of the Exchange Act and, except as disclosed in
the Prospectus, to the best knowledge and belief of the Company, neither the
Company nor any of it Subsidiaries, nor any employee or agent of the Company or
a Subsidiary, has made any payment of funds of the Company or a Subsidiary or
received or retained any funds in violation of any law, rule or regulation.
(w) Neither the Company nor any of its Subsidiaries has any
liability, absolute or contingent, relating to: (i) public health or safety;
(ii) worker health or safety; or (iii) product defect or warranty (all except as
would not reasonably be expected to have a Consolidated Material Adverse Effect
or as are disclosed in the Registration Statement and Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)).
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(x) The Company has not distributed and will not distribute prior to
the Closing Date or on or prior to any date on which the Option Shares are to be
purchased, as the case may be, any prospectus or other offering material in
connection with the offering and sale of the Shares other than the Preliminary
Prospectus(es), the Prospectus, the Registration Statement and any other
material which may be permitted by the Securities Act and the Rules and
Regulations.
(y) Subject to official notice of issuance, the Shares have been
approved for inclusion for listing on the Nasdaq National Market.
(z) The Company is not now an investment company within the meaning
of the Investment Company Act of 1940, as amended (the "1940 Act"). The Company
has been advised concerning the 1940 Act, and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it has not and will not become an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the 1940 Act and such rules and regulations.
(aa) The Company and each of its Subsidiaries is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) for which the Company or any of its Subsidiaries would have
any liability has occurred; neither the Company nor any of its Subsidiaries has
incurred or expects to incur liability under (1) Title IV of ERISA with respect
to termination of, or withdrawal from, any "pension plan" or (2) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company or any of its Subsidiaries would have any liability that
is intended to be qualified under Section 401(a) of the Code is so qualified in
all material respects and nothing has occurred, whether by action or by failure
to act, which would cause the loss of such qualification.
(bb) Except as set forth in the Prospectus (or if the Prospectus is
not in existence, the most recent Preliminary Prospectus), there has not been
any storage, disposal, generation, manufacture, refinement, transportation,
handling, arranging for disposal or treatment of toxic wastes, hazardous wastes,
medical wastes, solid wastes or hazardous substances (collectively,
"Environmental Activities") by the Company or any of its Subsidiaries (or any of
their predecessors in interest) at any location; there have not been any
Environmental Activities by any person or entity at, upon or from any of the
property now or previously owned or leased by the Company or its Subsidiaries
either (i) in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit (collectively, "Environmental Laws") or (ii)
which would require remedial action under any Environmental Laws; the Company
has, at all relevant times, been in compliance with all Environmental Laws;
there has been no material spill, discharge, leak, emission, injection, escape,
dumping or release of any kind from or onto such property or into the
environment surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by the Company
or any of its Subsidiaries or, to the best knowledge of the Company, due to or
caused by any other
10
person or entity; the Company has no knowledge (1) of any of the foregoing
matters with respect to any projects with respect to which the Company or any of
its Subsidiaries provided any services or (2) that the Company or any of its
Subsidiaries is or may be a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar state laws; there are no toxic wastes, medical wastes,
solid wastes, hazardous wastes or hazardous substances presently located at, on
or under any of the property now or previously owned or leased by the Company or
its Subsidiaries, except for such substances that are naturally occurring at
such locations; and the terms "hazardous wastes," "toxic wastes," "medical
wastes," "solid wastes" and "hazardous substances" shall have the meanings
specified in any Environmental Laws.
(cc) The Company and each of its Subsidiaries are insured against
such losses and risks and in such amounts as are customary in the businesses in
which they are engaged; neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for; and neither the Company
nor any such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not cause a Consolidated Material Adverse
Effect.
(dd) Each certificate signed by any officer of the Company, as
amended in writing from time to time, and delivered to the Representative's or
Underwriters' counsel shall be deemed to be a representation and warranty by the
Company to each Underwriter as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Shares
(a) On the basis of the representations, warranties, covenants and
agreements of the Company and the Underwriters contained in this Agreement and
subject to the terms and conditions set forth in this Agreement, the Company
agrees to sell to the several Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
$________ per share, the respective number of Firm Shares set forth opposite the
name of such Underwriter on Schedule I to this Agreement (subject to adjustment
as provided in Section 8 of this Agreement).
(b) On the basis of the several (and not joint) covenants and
agreements of the Underwriters contained in this Agreement and subject to the
terms and conditions set forth in this Agreement, the Company grants an option
to the several Underwriters to purchase from the Company all or any portion of
the Option Shares at the same price per share as the Underwriters are to pay for
the Firm Shares. This option may be exercised only to cover over-allotments in
the sale of the Firm Shares by the Underwriters and may be exercised in whole or
in part at any time (but not more than once) on or before the 45th day after the
date of the Prospectus first filed pursuant to Rule 424(b) under the Securities
Act upon written or telecopied notice by the Representative to the Company
setting forth the aggregate number of Option Shares as to which the several
Underwriters are exercising the option and the settlement date; notwithstanding
the foregoing, if the 45th day after the date of the Prospectus first filed
pursuant to Rule 424(b) under
11
the Securities Act is not a business day, then the time period for delivery
of the notice of the exercise of the over-allotment option shall
automatically be extended until the first business day following the 45th
day after the date of the Prospectus. The Option Shares shall be purchased
severally, and not jointly, by each Underwriter, if purchased at all, in
the same proportion that the number of Firm Shares set forth opposite the
name of the Underwriter in Schedule I to this Agreement bears to the total
number of Firm Shares to be purchased by the Underwriters under Section
2(a) above, subject to such adjustments as the in its absolute discretion
shall make to eliminate any fractional shares. Delivery of certificates for
the Option Shares, and payment therefor, shall be made as provided in
Section 2(c) and Section 2(d) below. Nothing contained in this Section 2
shall relieve any defaulting Underwriter of its liability, if any, to the
Company or to the remaining Underwriters for damages occasioned by its
default hereunder.
(c) Delivery of the Firm Shares and payment therefor, shall be made
at the office of Rutan & Tucker, LLP, 611 Anton Blvd., 14th Floor, Costa
Mesa, CA 92626 (or at such other location as is agreed by the parties), at
6:30 a.m., Costa Mesa time, on the fourth business day after the date of
this Agreement, or at such time on such other day, not later than seven
full business days after such fourth business day, as shall be agreed upon
in writing by the Company and the Representative, or as provided in Section
8 of this Agreement. The date and hour of delivery and payment for the Firm
Shares are referred to in this Agreement as the "Closing Date." As used in
this Agreement, "business day" means a day on which the Nasdaq National
Market is open for trading and on which banks in New York and California
are open for business and not permitted by law or executive order to be
closed.
(d) Delivery of the Option Shares and payment therefor, shall be made
at the office of Rutan & Tucker, LLP, 611 Anton Blvd., 14th Floor, Costa
Mesa, CA 92626 (or at such other location as is agreed by the parties), at
6:30 a.m., Costa Mesa time, on the date specified by the Representative
(which shall be three business days after the exercise of the option, but
not in excess of the period of time specified in the Rules and
Regulations).
(e) Payment of the purchase price for the Firm Shares by the several
Underwriters shall be made at the election of the Representative by (i)
certified or official bank check or checks drawn in next-day funds, payable
to the order of the Company, or (ii) wire transfer of immediately available
funds to such account of the Company as the Company shall advise the
Representative in writing at least three business days prior to the Closing
Date. Such payment shall be made upon delivery of certificates for the Firm
Shares to the Representative for the respective accounts of the several
Underwriters. Certificates for the Firm Shares to be delivered to the
Representative shall be registered in such name or names and shall be in
such denominations as the Representative may request at least two business
days before the Closing Date. Such certificates will be made available to
the Underwriters for inspection, checking and packaging at the offices of
[______________________________], not less than one full business day prior
to the Closing Date. It is understood that the Representative, individually
and not on behalf of the Underwriters, may (but shall not be obligated to)
make payment to the Company for Firm Shares to be purchased by any
Underwriter whose check shall not have been received by the Representative
on the Closing Date for the account of such Underwriter. Any such payment
shall not relieve such Underwriter from any of its obligations hereunder.
12
(f) Payment of the purchase price for the Option Shares by the
several Underwriters shall be made at the election of the Representative by (i)
certified or official bank check or checks drawn in next-day funds, payable to
the order of the Company, or (ii) wire transfer of immediately available funds
to an account specified by the Company in writing at least three business days
prior to the date on which any such Option Shares are purchased. Such payment
shall be made upon delivery of certificates for the Option Shares to the
Representative for the respective accounts of the several Underwriters.
Certificates for the Option Shares to be delivered to the Representative shall
be registered in such name or names and shall be in such denominations as the
Representative may request at least two business days before the date on which
any Option Shares are purchased by the Underwriters pursuant to this Agreement.
Such certificates will be made available to the Underwriters for inspection,
checking and packaging at the offices of [______________________________], not
less than one full business day prior to the Closing Date. It is understood that
the Representative, individually and not on behalf of the Underwriters, may (but
shall not be obligated to) make payment to the Company for Option Shares to be
purchased by any Underwriter whose check shall not have been received by the
Representative on any date on which Option Shares are purchased for the account
of such Underwriter. Any such payment shall not relieve such Underwriter from
any of its obligations hereunder.
(g) It is understood that the several Underwriters propose to offer
the Shares for sale to the public as soon as the Representative deems it
advisable to do so. The Firm Shares are to be initially offered to the public at
the public offering price set forth (or to be set forth) in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling terms.
(h) The information set forth under the caption "Underwriting" in any
Preliminary Prospectus, the Registration Statement and the Prospectus filed
pursuant to Rule 424(b) constitute the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement.
3. Further Agreements of the Company. The Company covenants and agrees
with the several Underwriters as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the time of execution
of this Agreement, to become effective as promptly as possible. If the
Registration Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Prospectus is otherwise required under Rule 424(b), the Company
will file the Prospectus, properly completed (and in form and substance
reasonably satisfactory to the Underwriters) pursuant to Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representative of such timely filing. The Company will not file the Prospectus,
any amended Prospectus, any amendment (including post-effective amendments) to
the Registration Statement or any supplement to the Prospectus without (i)
advising the Representative of and, a reasonable time prior to the proposed
filing of such amendment or supplement, furnishing the Representative with
copies thereof and (ii) obtaining the prior consent of the Representative to
such filing. If, in the judgment of the
13
Company, it becomes necessary to amend or supplement the Prospectus, the
Company will prepare and file with the Commission any amendment to the
Registration Statement or supplement to the Prospectus that may be
necessary or advisable in connection with the distribution of the Shares by
the Underwriters and use its best efforts to cause the same to become
effective as promptly as possible.
(b) The Company will promptly advise the Representative (i) when the
Registration Statement becomes effective, (ii) when any post-effective
amendment thereof becomes effective, (iii) of any request by the Commission
for any amendment of or supplement to the Registration Statement or the
Prospectus or for any additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding
for that purpose and (v) of the receipt by the Company of any notification
with respect to the suspension of the registration, qualification or
exemption from registration or qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of
any such stop order or suspension and, if issued, to obtain as soon as
possible the withdrawal thereof.
(c) The Company will (i) on or before the Closing Date, deliver to
the Representative and to Underwriters' counsel a signed copy of the
Registration Statement as originally filed and of each amendment thereto
filed prior to the time the Registration Statement becomes effective and,
promptly upon the filing thereof, a signed copy of each post-effective
amendment, if any, to the Registration Statement (together with, in each
case, all exhibits thereto unless and to the extent previously furnished to
the Representative) and all documents filed by the Company with the
Commission under the Exchange Act and deemed to be incorporated by
reference into any Preliminary Prospectus or the Prospectus and will also
deliver to the Representative, for distribution to the several
Underwriters, a sufficient number of additional conformed copies of each of
the foregoing (excluding exhibits) so that one copy of each may be
distributed to each Underwriter, (ii) as promptly as possible deliver to
the Representative and send to the several Underwriters, at such office or
offices as the Representative may designate, as many copies of the
Prospectus as the Representative may reasonably request and (iii)
thereafter from time to time during the period in which a prospectus is
required by law to be delivered by an Underwriter, likewise send to the
Underwriters as many additional copies of the Prospectus and as many copies
of any supplement to the Prospectus and of any amended Prospectus, filed by
the Company with the Commission, as the Representative may reasonably
request for the purposes contemplated by the Securities Act.
(d) If, in the judgment of the Company, at any time during the period
in which a prospectus is required by law to be delivered by an Underwriter
any event shall occur as a result of which it is necessary to supplement or
amend the Prospectus in order to make the Prospectus not misleading or so
that the Prospectus will not omit to state a material fact necessary to be
stated therein, in each case at the time the Prospectus is delivered to a
purchaser of the Shares, or if it shall be necessary to amend or to
supplement the Prospectus to comply with the Securities Act or the Rules
and Regulations, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus or an amended Prospectus so that
the
14
Prospectus as so supplemented or amended will not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein not misleading and so that it then
will otherwise comply with the Securities Act and the Rules and
Regulations. If, after the public offering of the Shares by the
Underwriters commences and during such period, the Underwriters propose to
vary the terms of offering thereof by reason of changes in general market
conditions or otherwise, the Representative will advise the Company in
writing of the proposed variation and if, in the opinion either of counsel
for the Company or counsel for the Underwriters, such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the
Prospectus or an amended Prospectus setting forth such variation. The
Company authorizes the Underwriters and all dealers to whom any of the
Shares may be sold by the Underwriters to use the Prospectus, as from time
to time so amended or supplemented, in connection with the sale of the
Shares in accordance with the applicable provisions of the Securities Act
and the Rules and Regulations for such period.
(e) The Company will cooperate with the Representative's and
Underwriters' counsel in the qualification or registration of the Shares
for offer and sale under the securities or blue sky laws of such
jurisdictions as the Representative may designate and, if applicable, in
connection with exemptions from such qualification or registration and,
during the period in which a Prospectus is required by law to be delivered
by an Underwriter or a dealer, in keeping such qualifications,
registrations and exemptions in effect; provided, however, that the Company
shall not be obligated to file any general consent to service of process or
to qualify to do business as a foreign corporation in any jurisdiction in
which it is not so qualified. The Company will, from time to time, prepare
and file such statements, reports and other documents as are or may be
required to continue such qualifications, registrations and exemptions in
effect for so long a period as the Representative may reasonably request
for the distribution of the Shares.
(f) During a period of five years commencing with the date of this
Agreement, the Company will promptly furnish to the Representative and to
each Underwriter who may so request in writing copies of (i) all periodic
and special reports furnished by it to shareholders of the Company, (ii)
all information, documents and reports filed by it with the Commission, the
Nasdaq National Market, any securities exchange or the NASD, (iii) all
material press releases and material news items or articles in respect of
the Company, its products or affairs released or prepared by the Company
(other than promotional and marketing materials disseminated solely to
customers and potential customers of the Company in the ordinary course of
business) and (iv) any additional information concerning the Company or its
business which the Representative may reasonably request.
(g) As soon as practicable, but not later than the 45th day following
the end of the fiscal quarter first ending after the first anniversary of
the Effective Date, the Company will make generally available to its
securities holders and furnish to the Representative an earnings statement
or statements in accordance with Section 11(a) of the Securities Act and
Rule 158 thereunder.
15
(h) The Company agrees that, without Wedbush's prior written consent,
the Company will not, and to the extent it has any ability to control the
actions of Holders, will not allow the Holders to, in each case directly or
indirectly, offer, sell, grant any option to purchase, contract to sell, or
otherwise sell or dispose of any shares of Common Stock, or any securities
convertible into or exchangeable for shares of Common Stock for a period of 180
days following the date of this Agreement, excluding only (i) the sale of the
Shares to be sold to the Underwriters pursuant to this Agreement and (ii) the
grant by the Company of options to purchase Common Stock (provided that none of
such options are or become exercisable during such 180-day period) or the
issuance by the Company of shares of Common Stock upon the exercise in
accordance with options previously granted under the Company's presently
authorized stock option plans as described in the Prospectus or in documents
incorporated therein, or upon the exercise in accordance with their terms of
previously granted warrants which are described in the Prospectus or in
documents incorporated therein.
(i) The Company will establish and maintain all financial control and
financial reporting systems customary for well-established public companies,
including but not limited to adequate management information and reporting
systems, and will employ and maintain, with adequate staffing levels at
headquarters and at each significant Subsidiary or significant functional
division, and at each level of responsibility, an employee staff of well trained
and highly qualified financial professionals.
(j) The Company will apply the net proceeds from the offering received
by it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(k) The Company will, and at all times for a period of at least five
years after the date of this Agreement, unless such securities are then listed
on a national securities exchange, use its best efforts to cause the Common
Stock (including the Shares) to be included for listing on the Nasdaq National
Market, and the Company will comply with all registration, filing, reporting and
other requirements within its control of the Exchange Act and the Nasdaq
National Market which may from time to time be applicable to the Company.
(l) The Company will use commercially reasonable efforts to maintain
insurance of the types and in the amounts which it deems adequate for its
business consistent with insurance coverage maintained by companies of similar
size and engaged in similar businesses including, but not limited to, general
liability insurance covering all real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against.
(m) The Company will issue no press release prior to the purchase by
the Underwriters of all of the Option Shares or within 45 days after the Closing
Date, whichever is earlier, without prior consultation with Wedbush with respect
to the contents thereof.
(n) Within 90 days of the Closing Date, the Company will furnish the
Representative with four bound volumes which shall be standard for an
underwriting transaction of the type contemplated by this Agreement.
16
(o) The Company will comply in all material respects with the
provisions of the undertakings contained in the Registration Statement.
(p) The Company has not and will not, without the prior written
consent of the Representative, seek any exemption from the requirements for
inclusion on the Nasdaq National Market.
(q) The Company will take all steps necessary to comply with the
requirements of the NASD in connection with the issuance and sale of the Shares.
4. Fees and Expenses.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses
incurred by it in connection with: the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus, any drafts of each of them and any
amendments or supplements to any of them; the duplication or, if applicable,
printing (including all drafts thereof) of this Agreement, the Agreement Among
Underwriters, any Selected Dealer Agreements, the Blue Sky Survey, the
Underwriters' Questionnaire and the Power of Attorney and the duplication and
printing (including of drafts thereof) of any other underwriting documents and
material (including but not limited to marketing memoranda and other marketing
material) in connection with the offering, purchase, sale and delivery of the
Shares; the issuance, transfer and delivery of the Shares under this Agreement
to the several Underwriters, including all expenses, taxes, duties, fees and
commissions on the purchase and sale of the Shares and Nasdaq National Market
fees with respect to the purchase and, if applicable, the sale of the Shares
incident to the sale and delivery of the Shares by the Company to the
Underwriters; the cost of printing all stock certificates; the Transfer Agent's
and Registrar's fees; the Custodian's fees; the fees and disbursements of
counsel for the Company; all fees and other charges of the Company's independent
public accountants and any other experts named in the Prospectus; the cost of
furnishing to the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus(es) and the Prospectus,
the agreements and other documents and instruments referred to above and any
amendments or supplements to any of the foregoing; NASD filing fees and
reasonable fees and disbursements of Underwriters' counsel incurred in
connection with the review by the NASD of the terms of the Offering of the
Shares; the cost of qualifying or registering the Shares (or obtaining
exemptions from qualification or registration) under the laws of such
jurisdictions as the Representative may designate (including filing fees in
connection with such state securities or blue sky qualifications, registrations
and exemptions) and preparing the preliminary and any final Blue Sky Memorandum
(including reasonable fees and disbursements of Underwriters' counsel in
connection therewith); all fees and expenses in connection with qualification of
the Shares for inclusion for listing on the Nasdaq National Market; the
Company's share of roadshow expenses; and all other expenses incurred by the
Company in connection with the performance of its obligations hereunder. Except
as provided in this Section 4, the Underwriters, including the Representative,
shall bear all of their own
17
expenses (including legal fees and costs/charges of their own counsel,
syndication, advertising, stabilization and travel and other out-of-pocket
expenses), except for state securities, blue sky fees and expenses and the NASD
fees and expenses, which fees and expenses the Company will pay directly or to
counsel for the Underwriters, Cooley Godward LLP. In addition, the Company will
pay the Representative on the Closing Date and, if applicable, on the date on
which Option Shares are purchased, a non-accountable expense allowance of one
percent (1%) of the gross proceeds (prior to deducting underwriting discounts
and commissions) of the offering of the Shares.
(ii) In addition to its obligations under Section 7(a) of this
Agreement, the Company 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 loss, claim, damage or liability described in Section 7(a) of
this Agreement, it will reimburse or advance to or for the benefit of the
Underwriters, and each of them, on a monthly basis (or more often, if requested)
for all legal and 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 obligation to reimburse or advance for the
benefit of the Underwriters for such expenses or the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any portion, or all, of any such interim
reimbursement payments or advances are so held to have been improper, the
Underwriters receiving the same shall promptly return such amounts to the
Company together with interest, compounded daily, at the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) announced
from time to time by Bank of America NT&SA, San Francisco, California (the
"Prime Rate"), but not in excess of the maximum rate permitted by applicable
law. Any such interim reimbursement payments or advances that are not made to or
for the Underwriters within 30 days of a request for reimbursement or for an
advance shall bear interest at the Prime Rate, but not in excess of the maximum
rate permitted by applicable law, from the date of such request until the date
paid.
(b) In addition to their obligations under Section 7(c) of this
Agreement, the Underwriters severally and in proportion to their obligation to
purchase Firm Shares as set forth on Schedule I hereto, agree that, as an
interim measure during the pendency of any claim, action, investigation, inquiry
or other proceeding arising out of or based upon any loss, claim, damage or
liability described in Section 7(c) of this Agreement, they will reimburse or
advance to (for the benefit of the Company on a monthly basis (or more often, if
requested) for all legal and other expenses incurred by the Company 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 or enforceability of the
Underwriters' obligation to reimburse or advance for the benefit of the Company
for such expenses and the possibility that such payments or advances might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any portion, or all, of any such interim reimbursement payments or
advances are so held to have been improper, the Company shall promptly return
such amounts to the Underwriters together with interest, compounded daily, at
the Prime Rate, but not in excess of the maximum rate permitted by applicable
law. Any such interim reimbursement payments or advances that are not made to
the Company within 30 days of a request for reimbursement or for
18
an advance shall bear interest at the Prime Rate, but not in excess of the
maximum rate permitted by applicable law, from the date of such request until
the date paid.
(c) Any controversy arising out of the operation of the interim
reimbursement and advance arrangements set forth in Sections 4(a)(ii) and 4(b)
above, including the amounts of any requested reimbursement payments or advance,
the method of determining such amounts and the basis on which such amounts shall
be apportioned among the indemnifying parties, shall be settled by arbitration
conducted under the provisions of the Code of Arbitration Procedure of the NASD.
Any such arbitration must be commenced by service of a written demand for
arbitration or a written notice of intention to arbitrate, therein electing the
arbitration tribunal. If the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the party
responding to the demand or notice is authorized to do so. Any such arbitration
will be limited to the interpretation and obligations of the parties under the
interim reimbursement and advance provisions contained in Sections 4(a)(ii) and
4(b) above and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for or contribute to expenses that is created by the
provisions of Section 7 of this Agreement.
(d) If the sale of the Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 5 of this Agreement is not satisfied, or because of any termination
pursuant to Section 9(b) of this Agreement, or because of any refusal, inability
or failure on the part of the Company to perform any material covenant or
agreement set forth in this Agreement or to comply with any material provision
of this Agreement other than by reason of a default by any of the Underwriters,
the Company agrees to reimburse the Representative upon demand for, or pay
directly, all reasonable out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by the Representative in
connection with investigating, preparing to market or marketing the Shares or
otherwise in connection with this Agreement or the offering of the Shares.
5. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase and pay for the Shares shall be subject, to the
reasonable satisfaction of the Representative, to the accuracy as of the date of
execution of this Agreement, the Closing Date and the date on which the Option
Shares are to be purchased, as the case may be, of the representations and
warranties of the Company set forth in this Agreement, to the accuracy of the
statements of the Company and its officers made in any certificate delivered
pursuant to this Agreement, to the performance by the Company of all of its
obligations to be performed under this Agreement at or prior to the Closing Date
or any later date on which Option Shares are to be purchased, as the case may
be, to the satisfaction of all conditions to be satisfied or performed by the
Company at or prior to that date and to the following additional conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 462(b) under
the Act, such post-effective amendment shall become effective and the Company
shall have provided evidence satisfactory to the Representative of such filing
and effectiveness) not later than 5:00 p.m., New York time, on the date of this
Agreement or at such later date and time as the Representative may approve in
writing and, at the Closing Date or, with respect to the Option Shares, the date
on
19
which such Option Shares are to be purchased; no stop order suspending the
effectiveness of the Registration Statement or any qualification, registration
or exemption from qualification or registration for the sale of the Shares in
any jurisdiction shall have been issued and no proceedings for that purpose
shall have been instituted or threatened; and any request for additional
information on the part of the Commission shall have been complied with to the
reasonable satisfaction of the Representative's and Underwriters' counsel.
(b) The Representative shall have received from Cooley Godward LLP,
counsel for the Underwriters, an opinion, dated as of the Closing Date or, if
applicable, the date on which the Option Shares are to be purchased, and the
Company shall have furnished such counsel with all documents which they may
reasonably request for the purpose of enabling them to pass upon such matters.
(c) The Representative shall have received on the Closing Date and on
any later date on which Option Shares are purchased, as the case may be, the
opinion of Rutan & Tucker LLP, counsel for the Company, covering the matters set
forth on Annex A and on Annex B, addressed to the Underwriters and dated as of
the Closing Date or such later date, with reproduced copies or signed
counterparts thereof for each of the Underwriters, and in form and substance
reasonably satisfactory to the Representative.
(d) The Representative shall be satisfied that there has not been any
material change in the market for securities in general or in political,
financial or economic conditions as to render it impracticable in the
Representative's sole judgment to make a public offering of the Shares, or a
material adverse change in market levels for securities in general or financial
or economic conditions which render it inadvisable to proceed.
(e) The Representative shall have received on the Closing Date and on
any later date on which Option Shares are purchased a certificate, dated as of
the Closing Date or such later date, as the case may be, and signed by the Chief
Executive Officer and the Chief Financial Officer of the Company, on behalf of
the Company, stating that:
(i) the representations and warranties of the Company set forth
in Section 1 of this Agreement are true and correct with the same force and
effect as if expressly made at and as of the Closing Date or such later date on
which the Option Shares are purchased, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date or such later date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or are threatened under the Securities Act; and
(iii) (A) the respective signers of the certificate have
carefully examined the Registration Statement in the form in which it originally
became effective and the Prospectus and any supplements or amendments to any of
them and, as of the Effective Date, the statements made in the Registration
Statement and the Prospectus were true and correct in all material respects and
neither the Registration Statement nor the Prospectus omitted to state any
20
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, (B) since the Effective Date, no event has
occurred that should have been set forth in an amendment to the Registration
Statement or a supplement or amendment to the Prospectus that has not been set
forth in such an amendment or supplement, (C) since the respective dates as of
which information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any Consolidated Material Adverse Effect or any development involving a
prospective Consolidated Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, neither the Company nor any of its
Subsidiaries has entered into any material transaction not referred to in the
Registration Statement in the form in which it originally became effective and
the Prospectus contained therein, (D) there are not any pending or known
threatened legal proceedings to which the Company or any of its Subsidiaries is
a party or of which property of the Company or any of its Subsidiaries is the
subject which are material and which are not disclosed in the Registration
Statement and the Prospectus, (E) there are not any license agreements,
contracts, leases or other documents that are required to be filed or
incorporated by reference as exhibits to the Registration Statement that have
not been filed or incorporated by reference as required, and (F) the Shares
shall have been designated national market system securities, duly authorized
for listing on the Nasdaq National Market upon official notice of issuance.
(f) The Representative shall have received from KPMG LLP a letter or
letters, addressed to the Underwriters and dated as of the Closing Date and any
later date on which Option Shares are purchased, confirming that they are
independent accountants with respect to the Company within the meaning of the
Securities Act and the applicable Rules and Regulations thereunder and, based
upon the procedures described in their letter, referred to below, delivered to
the Representative concurrently with the execution of this Agreement (the
"Original Letter"), but carried out to a date not more than five business days
prior to the Closing Date or such later date on which Option Shares are
purchased, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing Date
or such later date, as the case may be, and (ii) setting forth any revisions and
additions to the statements and conclusions set forth in the Original Letter
that are necessary to reflect any changes in the facts described in the Original
Letter since the date of the Original Letter or to reflect the availability of
more recent financial statements, data or information. Such letters shall
disclose any change, or any development involving a prospective change, in or
affecting the business, properties or condition (financial or otherwise),
results of operations or prospects of the Company or any of its Subsidiaries
which, in the Representative's sole judgment, makes it impractical or
inadvisable to proceed with the public offering of the Shares or the purchase of
the Option Shares as contemplated by the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus). In addition, the
Representative shall have received from KPMG LLP, on or prior to the Closing
Date, a letter addressed to the Company and made available to the Representative
for the use of the Underwriters stating that their review of the Company's
system of internal controls, to the extent they deemed necessary in establishing
the scope of their examination of the Company's consolidated financial
statements as of December 31, 1998, or in delivering their Original Letter, did
not disclose any weaknesses in internal controls that they considered to be a
material weaknesses.
21
(g) Prior to the Closing Date, the Shares shall have been designated
national market system securities, duly authorized for listing on the Nasdaq
National Market upon official notice of issuance.
(h) On or prior to the Closing Date, the Representative shall have
received from all Holders executed agreements covering the matters described in
Section 1(r) of this Agreement.
(i) The Company shall have furnished to the Representative such
further certificates and documents as the Representative shall reasonably
request (including certificates of officers of the Company), as to the accuracy
of the representations and warranties of the Company set forth in this
Agreement, the performance by the Company of its obligations under this
Agreement and the other conditions concurrent and precedent to the obligations
of the Underwriters under this Agreement. Counsel to the Representative shall
provide a written memorandum to the Company identifying closing documents which
such counsel deems necessary for the Underwriters' review, not less than two
business days before the Closing Date.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement will be in compliance with the provisions of this
Agreement only if they are reasonably satisfactory to the Representative. The
Company will furnish the Representative with such number of conformed copies of
such opinions, certificates, letters and documents as the Representative shall
reasonably request.
If any of the conditions specified in this Section 5 shall not have been
fulfilled when and as provided in this Agreement, time being of the essence, or
if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be reasonably satisfactory in form and substance to the
Representative's and Underwriters' counsel, this Agreement and all obligations
of the Underwriters hereunder may be canceled by the Representative at, or at
any time prior to, the Closing Date or (with respect to the Option Shares) prior
to the date upon which the Option Shares are to be purchased, as the case may
be. Notice of such cancellation shall be given to the Company in writing or by
telephone or telecopy confirmed in writing. Any such termination shall be
without liability of the Company to the Underwriters (except as provided in
Section 4 or Section 7 of this Agreement) and without liability of the
Underwriters to the Company (except to the extent provided in Section 7 of this
Agreement).
6. Conditions of the Obligations of the Company. The obligations of the
Company to sell and deliver the Shares required to be delivered as and when
specified in this Agreement shall be subject to the condition that, at the
Closing Date or with respect to the Option Shares the date upon which the Option
Shares are to be purchased by the Underwriters pursuant to this Agreement, no
stop order suspending the effectiveness of the Registration Statement shall be
in effect and no proceedings therefor shall be pending or threatened by the
Commission.
22
7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person (including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Exchange Act or other federal or state statute, law or
regulation, at common law or otherwise, and the Company agrees to reimburse each
such Underwriter and controlling person for any legal or other expenses
(including, except as otherwise provided below, settlement expenses and fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding that may be brought against, the respective indemnified parties, in
each case insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon, in whole or in part, (i) any
breach of any representation, warranty, covenant or agreement of the Company in
this Agreement, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement in the form originally
filed or in any amendment thereto (including the Prospectus as part thereof) or
any post-effective amendment thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading or (iii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading or (iv) any untrue statement or alleged
untrue statement of a material fact contained in any application or other
document, or any amendment or supplement thereto, executed by the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify or register the Shares under the securities
or Blue Sky laws thereof or to obtain an exemption from such qualification or
registration or filed with the Commission or any securities association, the
Nasdaq National Market, or any securities exchange, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided, however, that (1) the indemnity
agreements of the Company contained in this Section 7(a) shall not apply to any
such losses, claims, damages, liabilities or expenses if such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of any Underwriter through the
Representative specifically for use in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any such amendment thereof or
supplement thereto and (2) the indemnity agreement contained in this Section
7(a) with respect to any Preliminary Prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Shares that are the subject
thereof (or to the benefit of any person controlling such Underwriter) if the
Company can demonstrate that at or prior to the written confirmation of the sale
of such Shares a copy of the Prospectus (or the Prospectus as amended
23
or supplemented) was not sent or delivered to such person and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented), unless the failure is the result of noncompliance by the Company
with Section 3 of this Agreement. The indemnity agreements of the Company
contained in this Section 7(a) and the representations and warranties of the
Company contained in Section 1 of this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Shares. This indemnity agreement shall be in addition to any liabilities which
the Company may have pursuant to this Agreement or otherwise.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, each of its officers who signs the Registration
Statement, each of its directors, each other Underwriter and each person
(including each partner or officer thereof) who controls the Company or any such
other Underwriter within the meaning of Section 15 of the Securities Act from
and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or other federal or state statute,
law or regulation or at common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, settlement expenses and fees and disbursements of counsel) incurred by
the respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding that may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any breach of
any representation, warranty, covenant or agreement of the indemnifying
Underwriter in this Agreement, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (including
the Prospectus as part thereof) or any post-effective amendment thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (iii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case under clauses (ii) and (iii) above, as the case may
be, only if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of such indemnifying Underwriter through the Representative specifically for use
in the Registration Statement, in any Preliminary Prospectus or the Prospectus
or any such amendment thereof or supplement thereto. The Company acknowledges
and agrees that the matters described in Section 2(h) of this Agreement
constitute the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in the Registration Statement, any
Preliminary Prospectus or the Prospectus. The indemnity agreement of each
Underwriter contained in this Section 7(c) shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Shares.
This indemnity agreement shall be in addition to any liabilities which each
Underwriter may have pursuant to
24
this Agreement or otherwise. Notwithstanding anything to the contrary in this
Section 7, no Underwriter shall be required to make any payments in respect of
any claim arising under this Section 7(b) in excess of the underwriting discount
applicable to the Shares purchased by that Underwriter.
(c) Each person or entity indemnified under the provisions of Sections
7(a) and 7(b) above agrees that, upon the service of a summons or other initial
legal process upon it in any action or suit instituted against it or upon its
receipt of written notification of the commencement of any investigation or
inquiry of, or proceeding against, it in respect of which indemnity may be
sought on account of any indemnity agreement contained in such Sections, it
will, if a claim in respect thereunder is to be made against the indemnifying
party or parties under this Section 7, give written notice (the "Notice") of
such service or notification to the party or parties from whom indemnification
may be sought hereunder within ten (10) calendar days after receipt by them of
written notice of the commencement of any actions against them. No
indemnification provided for in Sections 7(a) and 7(b) above shall be available
to any person who fails to so give the Notice if the party to whom such Notice
was not given was unaware of the action, suit, investigation, inquiry or
proceeding to which the Notice would have related, but only to the extent such
party was materially prejudiced by the failure to receive the Notice, and except
as set forth in the preceding clause, the omission so to notify such
indemnifying party or parties shall not relieve such indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of Sections 7(a), 7(b) and 7(c).
Any indemnifying party shall be entitled at its own expense to participate in
the defense of any action, suit or proceeding against, or investigation or
inquiry of, an indemnified party. Any indemnifying party shall be entitled, if
it so elects within a reasonable time after receipt of the Notice by giving
written notice (the "Notice of Defense") to the indemnified party, to assume
(alone or in conjunction with any other indemnifying party or parties) the
entire defense of such action, suit, investigation, inquiry or proceeding, in
which event such defense shall be conducted, at the expense of the indemnifying
party or parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; provided, however,
that (i) if the indemnified party or parties reasonably determine that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses or
rights available to such indemnified party or parties different from or in
addition to those available to the indemnifying party or parties, then separate
counsel for and selected by the indemnified party or parties shall be entitled
to conduct, at the expense of the indemnifying parties, the defense of the
indemnified parties to the extent determined by such counsel to be necessary to
protect the interests of the indemnified party or parties, and (ii) provided,
further, that the indemnifying party shall not be liable for the fees and
expenses of more than one separate counsel, reasonably approved by the
indemnifying party, for all of the indemnified parties, plus, if applicable, one
local counsel in each jurisdiction. In addition, in any event, the indemnified
party or parties shall be entitled to have counsel selected by such indemnified
party or parties participate in, but not conduct, the defense. If, within a
reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and, unless separate counsel is to be chosen by the
indemnified party or parties as provided above, the counsel chosen by the
indemnifying party or parties is reasonably satisfactory to the indemnified
25
party or parties, the indemnifying party or parties will not be liable under
Sections 7(a), 7(b) and 7(c) for any legal or other expenses subsequently
incurred by the indemnified party or parties in connection with the defense of
the action, suit, investigation, inquiry or proceeding, except that (A) the
indemnifying party or parties shall bear and pay the legal and other expenses
incurred in connection with the conduct of the defense as referred to in clause
(i) of the proviso to the preceding sentence and (B) the indemnifying party or
parties shall bear and pay such other expenses as it or they have authorized to
be incurred by the indemnified party or parties. If, within a reasonable time
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 7
but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right to appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in Section 7(a), 7(b) and
7(c) above (i) in such proportion as is appropriate to reflect the relative
benefits received by each indemnifying party from the offering of the 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
each party in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same respective
proportions as the total proceeds from the offering of the Shares, net of the
underwriting discounts, received by the Company and the total underwriting
discount retained by the Underwriters bear to the aggregate public offering
price of the Shares. Relative fault 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 relates to
information supplied by a party and the party's relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 7(d) were to be determined 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 into account the equitable
considerations referred to in the first sentence of this Section 7(d) and to the
considerations referred to in the third sentence of the first paragraph of this
Section 7(d). The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities, or actions in respect thereof, referred to in
the first sentence of this Section 7(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating, preparing to defend or defending against any action or claim
which is the subject of this Section 7(d). Notwithstanding the provisions of
this Section 7(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to
26
the Shares purchased by that Underwriter. For purposes of this Section 7(d),
each person who controls an Underwriter within the meaning of the Securities Act
shall have the same rights to contribution as such Underwriter, and each person
who controls the Company within the meaning of the Securities Act, each officer
of the Company who signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the immediately preceding and immediately following sentences. No
person guilty of fraudulent misrepresentation (within the meaning of Section
1l(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute in this Section 7(d) are several in proportion to
their respective underwriting obligations and not joint.
Each party or other entity entitled to contribution agrees that upon the
service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in Section 7(c) above). This Section 7(d) shall not be
operative as to any Underwriter to the extent that the Company is entitled to
receive or has received indemnity under this Section 7.
(e) The Company shall not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning of
Section 15 of the Securities Act is a party to such claim, action, suit or
proceeding), which consent shall not be unreasonably withheld, unless such
settlement, compromise or consent includes an unconditional release of each such
Underwriter and each such controlling person from all liability arising out of
such claim, action, suit or proceeding.
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of Sections 4(a)(ii), 4(b) and 4(c) and this Section
7 of this Agreement and that they are fully informed regarding all such
provisions. They further acknowledge that the provisions of Sections 4(a)(ii),
4(b) and 4(c) and this Section 7 of this Agreement fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement, each Preliminary Prospectus and the Prospectus as required by the
Securities Act, the Rules and Regulations, the Exchange Act and the rules and
regulations of the Commission under the Exchange Act. The parties are advised
that federal or state policy, as interpreted by the courts in certain
jurisdictions, may be contrary to certain provisions of Sections 4(a)(ii), 4(b)
and 8(c) and this Section 7 of this Agreement and, to the extent permitted by
law, the parties hereto hereby expressly waive and relinquish any right or
ability to assert such public policy as a defense to a claim under
27
Sections 4(a)(ii), 4(b) or 4(c) or this Section 7 of this Agreement and further
agree not to attempt to assert any such defense.
8. Substitution of Underwriters. If for any reason one or more of the
Underwriters fails or refuses (otherwise than for a reason sufficient to justify
the termination of this Agreement under the provisions of Section 5 or Section 9
of this Agreement) to purchase and pay for the number of Firm Shares agreed to
be purchased by such Underwriter or Underwriters, the Company shall immediately
give notice thereof to the Representative and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by the Representative of
such notice to purchase, or procure one or more other Underwriters to purchase,
in such proportions as may be agreed upon among the Representative and such
purchasing Underwriter or Underwriters and upon the terms set forth herein, all
or any part of the Firm Shares that such defaulting Underwriter or Underwriters
agreed to purchase. If the non-defaulting Underwriters fail to make such
arrangements with respect to all such Shares, the number of Firm Shares that
each non-defaulting Underwriter is otherwise obligated to purchase under this
Agreement shall be automatically increased on a pro rata basis to absorb the
remaining Shares that the defaulting Underwriter or Underwriters agreed to
purchase, provided, however, that the non-defaulting Underwriters shall not be
obligated to purchase the Shares that the defaulting Underwriter or Underwriters
agreed to purchase if the aggregate number of such Shares exceeds 10% of the
total number of Firm Shares that all Underwriters agreed to purchase under this
Agreement. If the total number of Firm Shares that the defaulting Underwriter or
Underwriters agreed to purchase shall not be purchased or absorbed in accordance
with the two preceding sentences, the Company shall have the right, within 24
hours next succeeding the first 24-hour period above referred to, to make
arrangements with other underwriters or purchasers satisfactory to the
Representative for purchase of such Shares on the terms set forth in this
Agreement. In any such case, either the Representative or the Company shall have
the right to postpone the Closing Date determined as provided in Section 2(c) of
this Agreement for not more than seven business days after the date originally
fixed as the Closing Date pursuant to said Section 2(c) in order that any
necessary changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made.
If neither the non-defaulting Underwriters nor the Company makes
arrangements within the time periods provided in the first three sentences of
the first paragraph of this Section 8 for the purchase of all the Firm Shares
that the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter (except
as provided in Section 4 or Section 7 of this Agreement) and without any
liability on the part of any non-defaulting Underwriter to the Company (except
to the extent provided in Section 7 of this Agreement). Nothing in this Section
8, and no action taken hereunder, shall relieve any defaulting Underwriter from
liability, if any, to the Company, or any non-defaulting Underwriter for damages
occasioned by its default under this Agreement. The term "Underwriter" in this
Agreement shall include any persons substituted for an Underwriter under this
Section 8.
28
9. Effective Date of Agreement and Termination.
(a) If the Registration Statement has not been declared effective
prior to the date of this Agreement, this Agreement shall become effective at
such time, after notification of the effectiveness of the Registration Statement
has been released by the Commission, as the Representative and the Company shall
agree upon the public offering price and the purchase price of the Shares. If
the public offering price and the purchase price of the Shares shall not have
been determined prior to 5:00 p.m., New York time, on the fifth full business
day after the Registration Statement has become effective, this Agreement shall
thereupon terminate without liability on the part of the Company to the
Underwriters (except as provided in Section 4 or Section 7 of this Agreement) or
the Underwriters to the Company (except as set forth in Section 7 of this
Agreement). By giving notice before the time this Agreement becomes effective,
the Representative may prevent this Agreement from becoming effective without
liability of any party to the other party, except that the Company shall remain
obligated to pay costs and expenses to the extent provided in Section 4 and
Section 7 of this Agreement. If the Registration Statement has been declared
effective prior to the date of this Agreement, this Agreement shall become
effective upon execution and delivery by the Representative, the Company and the
Attorneys.
(b) This Agreement may be terminated by the Representative in its
absolute discretion by giving written notice to the Company at any time on or
prior to the Closing Date or, with respect to the purchase of the Option Shares,
on or prior to any later date on which the Option Shares are to be purchased, as
the case may be, if prior to such time any of the following has occurred or, in
the Representative's reasonable opinion, is likely to occur: (i) after the
respective dates as of which information is given in the Registration Statement
and the Prospectus, any Consolidated Material Adverse Effect or development
involving a prospective Consolidated Material Adverse Effect in or affecting
particularly the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company and its direct and indirect
subsidiaries, taken as a whole, whether or not arising in the ordinary course of
business, occurs which would, in the Representative's reasonable judgment, make
the offering or the delivery of the Shares impracticable or inadvisable; or (ii)
if there shall have been the engagement in hostilities or an escalation of major
hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, or any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions, if the effect of such outbreak, calamity,
crisis or change in economic or political conditions on the financial markets of
the United States would, in the Representative's reasonable judgment, make the
offering or delivery of the Shares impracticable or inadvisable; or (iii) if
there shall have been suspension of trading in securities generally or a
material adverse decline in value of securities generally on the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National Market or over-the-
counter market has been suspended, or minimum prices for trading have been
fixed, or maximum ranges for prices for securities have been required, by either
of such exchanges, by the NASD or by the Commission; or (iv) if there shall have
been the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of, or commencement of any proceeding
or investigation by, any court, legislative body, agency or other governmental
authority which in
29
the Representative's reasonable judgment has or may have a Consolidated Material
Adverse Effect; or (v) if there shall have been the declaration of a banking
moratorium by federal, New York or California state authorities; or (vi) if
there shall have been the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
Representative's reasonable judgment has a material adverse effect on the
securities markets in the United States; or (vii) existing international
monetary conditions shall have undergone a material adverse change which, in
your reasonable judgment, makes the offering or delivery of the Shares
impracticable or inadvisable. If this Agreement shall be terminated pursuant to
this Section 9, there shall be no liability of the Company to the Underwriters
(except pursuant to Section 4 and Section 7 of this Agreement) and no liability
of the Underwriters to the Company (except to the extent provided in Section 7
of this Agreement).
10. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing and, if to the Underwriters, shall be mailed,
telecopied or delivered to Wedbush Morgan Securities, Inc., 1000 Wilshire Blvd.,
Los Angeles, California 90017 (telecopier: (213/688-6642)); and if to the
Company, shall be mailed, telecopied or delivered to it at 2955 Red Hill Avenue,
Costa Mesa, CA 92626 (telecopier: (714/668-7026)) Attention: President, with a
copy to Rutan & Tucker LLP, 611 Anton Blvd., Fourteenth Floor, Costa Mesa,
California 92626 Attention: James S. Weisz, Esq. (telecopier: (714/546-9035)).
All notices given by telecopy shall be promptly confirmed by letter.
11. Persons Entitled to the Benefit of this Agreement. This Agreement
shall inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 4 and Section 7 of this Agreement, the
several parties (in addition to the Company and the several Underwriters)
indemnified under the provisions of Section 4 and Section 7, and their
respective personal Representatives, successors and assigns. Nothing in this
Agreement is intended or shall be construed to give to any other person, firm or
corporation any legal or equitable remedy or claim under or in respect of this
Agreement or any provision contained herein. The term "successors and assigns"
as herein used shall not include any purchaser, as such purchaser, of any of the
Shares from the several Underwriters.
12. General. Notwithstanding any provision of this Agreement to the
contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties, covenants and
agreements in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its respective directors or officers, and (c) delivery and
payment for the Shares under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of Sections
3(f) through 3(q), inclusive, of this Agreement shall be of no further force or
effect.
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which together shall constitute one and
the same instrument, and may be delivered by facsimile transmission.
30
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS, AND NOT THE LAWS PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF THE
STATE OF CALIFORNIA.
13. Authority of the Representative. In connection with this Agreement,
the Representative will act for and on behalf of the several Underwriters, and
any action taken under this Agreement by the Representative, as Representative
of the several Underwriters, will be binding on all the Underwriters.
31
14. Jurisdiction. The parties agree that any litigation arising out of or
in any way related to this Agreement will be adjudicated in a state or district
court sitting in the City of Los Angeles, California, and the parties hereby
consent to the jurisdiction of such court. The parties hereby waive any right to
object to such jurisdiction, including, without limitation, any objection based
on a claim of improper venue or forum non conveniens.
If the foregoing correctly sets forth your understanding, please so
indicate by signing in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among the Company and the several
Underwriters.
Very truly yours,
THE KEITH COMPANIES, INC.
By: ___________________________
Aram H. Keith
Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date
first above written.
On their own behalf and on behalf of each of the several Underwriters named
in Schedule I hereto.
WEDBUSH MORGAN SECURITIES, INC.
As Representative of the
Several Underwriters
By: Wedbush Morgan Securities, Inc.
By: ________________________________
Michael G. Gardner
Managing Director
On its behalf and on behalf of each of the
several Underwriters named in Schedule I hereto
32
SCHEDULE I
UNDERWRITERS
Number of Firm Shares
Underwriters to be Purchased
- -------------------------------------------------------- ---------------------
Wedbush Morgan Securities, Inc.......................... _____________________
[__].................................................... _____________________
E*OFFERING Corp......................................... _____________________
[__].................................................... _____________________
[__].................................................... _____________________
Total 1,750,000
_____________________
I-1
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF COUNSEL FOR THE COMPANY
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of California.
(ii) The Company has the corporate power to own, lease and operate its
properties and to conduct its business as described in the Prospectus;
(iii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except for jurisdictions where the failure so to qualify would
not have a Consolidated Material Adverse Effect;
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization" as of the
date stated therein and conforms as of the date stated therein as to legal
matters in all material respects to the description thereof set forth in the
Prospectus under the caption "Description of Capital Stock"; the issued and
outstanding shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable, and have not been issued in
violation of any preemptive right or other rights to subscribe for or purchase
securities contained in the Company's charter documents or any Material
Agreement; and except as reflected on Exhibit A to the Underwriting Agreement,
to the knowledge of such counsel, there are no outstanding options, warrants or
other rights to acquire from the Company any equity securities of the Company;
(v) The Shares have been duly authorized and, when duly countersigned
by the Company's transfer agent and registrar, upon issuance and delivery
against payment therefor in accordance with the terms of the Underwriting
Agreement, will be validly issued, fully paid and nonassessable, and will not
have been issued in violation of any preemptive right or other rights to
subscribe for or purchase securities contained in the Company's charter
documents or any Material Agreement and will have been duly approved for listing
on the Nasdaq National Market;
(vi) The Company has corporate power to enter into the Underwriting
Agreement and to sell, issue and deliver the Shares to the Underwriters.
(vii) The Underwriting Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming its due authorization, execution and
delivery by the Representative is the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
insofar as the indemnification and contribution provisions of the Agreement may
be limited by public policy concerns and except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles;
A-1
(viii) The Company's counsel has been informed by the staff of the
Securities and Exchange Commission that the Registration Statement has become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement has been issued and to the knowledge
of such counsel no proceedings for that purpose have been instituted or are
pending or overtly threatened under the Securities Act;
(ix) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements, related notes and
schedules, and financial and statistical data derived therefrom or included
therein, as to which such counsel need express no opinion), as of the effective
date of the Registration Statement, appeared on their face to be appropriately
responsive to the Securities Act and the Rules and Regulations with respect to
registration statements on Form S-1;
(x) The forms of certificates evidencing the Common Stock incorporated
by reference as an exhibit to the Registration Statement are in due and proper
form under California law;
(xi) The information in the Prospectus under the captions "Description of
Capital Stock" and "Shares Eligible for Future Sale," to the extent such
information constitutes matters of law or legal conclusions, has been reviewed
by such counsel and is correct in all material respects;
(xii) The description in the Registration Statement and the Prospectus
under the captions "Management," "Certain Transactions," "Description of Capital
Stock," "Shares Eligible for Future Sale" and "Risk Factors" and any statements
referring to agreements, contracts, licenses, leases or other documents in the
Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, are accurate in all material respects and
fairly present in all material respects the information required to be presented
by the Securities Act and the Rules and Regulations;
(xiii) To the knowledge of such counsel, there are no agreements,
contracts, licenses, leases or documents of a character required to be described
or referred to in the Registration Statement or Prospectus or to be filed or
incorporated by reference as an exhibit to the Registration Statement that are
not described or referred to therein or filed or incorporated by reference as
required;
(xiv) The execution and delivery of the Underwriting Agreement do not,
and the Company's performance of the Underwriting Agreement and the consummation
of the transactions contemplated thereby will not, conflict with, violate or
result in the material breach of or a material default (including without
limitation with the giving of notice, the passage of time or otherwise) under
any of the terms and provisions of the Company's Articles of Incorporation or
Bylaws or any agreement or instrument of the Company or any Subsidiary that is
filed as an exhibit to the Registration Statement, or, to the knowledge of such
counsel, any law, ordinance, rule or regulation or order, writ, injunction,
judgment or decree of any governmental agency or body or of any court or
arbitration tribunal having jurisdiction over the Company or
A-2
any Subsidiary or over any of its or their properties; provided, however, that
no opinion need be rendered concerning state securities or blue sky laws and
regulations;
(xv) No authorization, approval or consent or other order of any
governmental authority or agency is necessary in connection with the
consummation of the transactions contemplated by the Underwriting Agreement,
except such as have been obtained and are in full force and effect under the
Securities Act or as may be required under state securities or blue sky laws in
connection with the purchase and the distribution of the Shares by the
Underwriters and the clearance of such offering with the NASD;
(xvi) To the knowledge of such counsel, there are no legal or governmental
proceedings pending or overtly threatened against the Company or any Subsidiary
of a character which are required to be disclosed in the Registration Statement
or the Prospectus by the Securities Act or the applicable Rules and Regulations;
and
(xvii) To the knowledge of such counsel, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have rights which have not been waived or complied
with respect to the registration of any securities of the Company because of the
filing of the Registration Statement by the Company or the offering contemplated
by the Underwriting Agreement.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company, the
independent public accountants of the Company, the Representative and counsel to
the Underwriters, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed and, although
they have not independently verified the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel that caused them to believe
that, at the time the Registration Statement became effective, the Registration
Statement (except as to financial statements, related notes and schedules, and
financial and statistical data derived therefrom or contained therein, as to
which such counsel need express no opinion) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or at the date
Opinion is given, the Prospectus (except as to financial statements, related
notes and schedules, and financial and statistical data derived therefrom or
contained therein, as to which such counsel need express no opinion) contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
A-3
ANNEX B
FORM OF OPINION FOR EACH SUBSIDIARY OF THE KEITH COMPANIES, INC.
1. [Subsidiary] is a corporation duly organized, validly existing and in
good standing under the laws of the State of _______________.
2. [Subsidiary] has the corporate power to own, lease and operate its
properties and to conduct its business as presently conducted or as described in
the Prospectus.
3. The issued and outstanding shares of [Subsidiary] have been duly
authorized and validly issued, are fully paid and nonassessable and have not
been issued in violation of any preemptive right or other rights to subscribe
for or purchase securities contained in its charter documents or any Material
Agreement. Based solely upon our review of the stock ledger for the subsidiary,
The Keith Companies, Inc. is the record holder of all of the issued and
outstanding equity securities of Subsidiary. To such counsel's knowledge there
are no outstanding options, warrants or other rights to acquire from Subsidiary
any equity securities.
B
Exhibit A
List of Subsidiaries
Subsidiary Jurisdiction
ESI, Engineering Services Incorporated California
John M. Tettemer and Associates, Ltd. California
Keith International, Inc. California
The Keith Companies Hawaii, Inc. Hawaii
Exhibit B
List of Equity Interests
Exhibit C
Rank and File Employees