BONDED MOTORS, INC.
UNDERWRITING AGREEMENT
__________, 1998
▇▇▇ ▇▇▇▇▇▇ & COMPANY
COMMONWEALTH ASSOCIATES
As Representatives of the
Several Underwriters
c/o ▇▇▇ ▇▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Bonded Motors, Inc., a California corporation (the "Company") and the
persons named in Schedule I hereto (the "Selling Shareholders"), propose to
issue and sell to the several Underwriters named in Schedule II hereto (the
"Underwriters") an aggregate of 2,500,000 shares (the "Firm Shares") of the
Company's Common Stock, no par value (the "Common Stock"). The Company also
proposes to grant to the Underwriters an option to purchase up to 300,000
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 referred to below as the "Shares." ▇▇▇ ▇▇▇▇▇▇ & Company and
Commonwealth Associates are acting as representatives of the several
Underwriters and in that capacity are referred to in this Agreement as the
"Representatives."
The Company and the Selling Shareholders hereby confirms their 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) The Company meets the requirements for use of Form SB-2 under the
Securities Act of 1933, as amended (the "Securities Act"), and a registration
statement (Registration No. 333-______) on Form SB-2 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 information as
is required or permitted by Rules 434, 430A and 424(b) of the Rules and
Regulations or (B) if the
1
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 Representatives 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 Representatives 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; 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" will 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 Act. Any reference
in this Agreement to the "date" of a Prospectus that includes a Term Sheet means
the date of such Term Sheet.
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(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,
to the best knowledge of the Company, threatened or 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, to the best
knowledge of the Company, threatened or 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) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has full power (corporate and other) 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). The Company is in possession of and
operating in compliance in all material respects with all authorizations,
licenses, certificates, consents, orders and permits from federal, state, local
and other governmental or regulatory authorities that are material to the
conduct of its business, all of which are valid and in full force and effect.
The Company does not have any "subsidiaries" (defined below) or own any equity
securities of any other Entity (defined below). As used in this Agreement, the
word "subsidiary" means any corporation, partnership, limited liability company
or other entity (each an "Entity") of which the Company directly or indirectly
owns 50% or more of the equity or that the Company directly or indirectly
controls.
(d) When any Preliminary Prospectus was filed with the Commission it
(i) contained all statements required to be contained therein and complied in
all material respects with the requirements of the Securities Act, the Rules and
Regulations, the Securities Exchange Act of 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 material 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 other
3
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 material 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 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 any Underwriter through the
Representatives 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 any
material loss or interference with the business of the Company from fire,
explosion, flood, earthquake, riot or other civil disturbance or other calamity,
whether or not covered by insurance, or from any court or governmental action,
order or decree, or any changes in the capital stock or long-term debt of the
Company, or any dividend or distribution of any kind declared, paid or made on
the capital stock of the Company, or any material change, or a development known
to the Company that might cause or result in a material change, in or affecting
the business, properties, condition (financial or otherwise), results of
operations or prospects of the Company, whether or not arising from transactions
in the ordinary course of business, in each case 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), and since such dates,
except in the ordinary course of business, the Company has not 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).
(g) 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, to
the best knowledge of the Company, any other party, is in material breach of or
default under any such contract.
(h) 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 Common Stock therein
conforms with and accurately describes the rights set forth in the instruments
defining the Common Stock. The Shares to be issued and sold by the Company are
duly authorized and will, when issued and delivered 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 by the Company is not subject
to any preemptive or similar rights.
4
(i) 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. 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. Other
than this Agreement, the "Warrant Agreement" (as defined in Section 1(cc) below)
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. There are no preemptive rights applicable to any shares of capital stock
of the Company. There are no restrictions upon the voting or transfer of any of
the Firm Shares or Option Shares pursuant to the Company's Certificate of
Incorporation, bylaws or other governing documents or any agreement to which the
Company is a party or by which it may be bound. Except as is provided in the
Warrant Agreement and for the Shares, 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 (other than the Shares) of or
issued by the Company.
(j) The Company has full right, power and authority to enter into and
perform its obligations under this Agreement and the Warrant Agreement and to
issue, sell and deliver the Shares to be delivered by it. This Agreement and
the Warrant Agreement have each been duly authorized, executed and delivered by
the Company and constitute the valid and binding agreements of the Company, and
each 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
or by general equitable considerations and except insofar as the indemnification
and contribution provisions of Section 9 hereof and Section 3(f) of the Warrant
Agreement may be affected by public policy concerns.
(k) The Company is not, nor with the giving of notice or lapse of time or
both would it be, in violation of or in default under, nor will the execution or
delivery of this Agreement or the Warrant Agreement or the consummation of the
transactions contemplated by this Agreement or the Warrant 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) under
the Articles of Incorporation, bylaws or other governing documents of the
Company or any obligation, agreement, covenant or condition contained in any
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 is a party or by
which any of its 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 and the Warrant
5
Agreement will not violate any law, ordinance, rule or regulation (provided
that no representation or warranty is made hereby with respect to the effect,
if any, of public policy concerns on the indemnification and contribution
provisions of Section 9 hereof and Section 3(f) of the Warrant Agreement), 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
properties, or result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property of the Company. Except for permits
and similar authorizations required under the Securities Act, the Exchange
Act or under state securities or Blue Sky laws 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 or the Warrant Agreement.
(l) The Company owns, or has valid rights to use, all items of real and
personal property which are material to the business of the Company, 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, claims and rights of third parties of any type or
description that might materially interfere with the business, properties,
condition (financial or otherwise), results of operations or prospects of the
Company.
(m) The Company owns or possesses adequate rights to use all material
patents, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, tradenames and copyrights which are necessary for the conduct of its
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, might have a material adverse effect on the
business, properties, condition (financial or otherwise), results of operations
or prospects of the Company.
(n) There is no litigation or governmental proceeding to which the
Company is a party or to which any property of the Company is subject which is
pending or, to the best knowledge of the Company, is threatened or contemplated
against the Company that might have a material effect on, or might result in any
material adverse change in the business, properties, condition (financial or
otherwise), results of operations or prospects of the Company, that might
prevent consummation of the transactions contemplated by this Agreement or the
Warrant 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) and are not so disclosed.
(o) The Company is not in violation of any law, order, ordinance, rule or
regulation, 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 might have a material
adverse effect on the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company.
6
(p) The Company has not taken and shall not take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to 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 and, to the best
knowledge of the Company, no 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.
(q) KPMG Peat Marwick LLP, whose report appears in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) is, and during the periods covered by its
report in the Registration Statement was, independent accountants as required by
the Securities Act and the Rules and Regulations. The financial statements and
schedules 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
condition, results of operations, cash flow and changes in shareholders' equity
of the Company at the dates and for the periods indicated, and the financial
statements and schedules included in the Registration Statement present fairly
the information required to be stated therein. Such financial statements and
schedules have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods presented,
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.
(r) Any PRO FORMA financial or other information and related notes
included in the Registration Statement, each Preliminary Prospectus and the
Prospectus comply (or, if the Prospectus has not been filed with the Commission,
as to the Prospectus, will comply) in all material respects with the
requirements of the Securities Act and the Rules and Regulations and present
fairly the PRO FORMA information shown, as of the dates and for the periods
covered by such PRO FORMA information. Such PRO FORMA information, including
any related notes and schedules, has been prepared on a basis consistent with
the historical financial statements and other historical information, as
applicable, included in the Registration Statement, the Preliminary Prospectus
and the Prospectus (if filed with the Commission), except for the PRO FORMA
adjustments specified therein, and give effect to assumptions made on a
reasonable basis to give effect to historical and, if applicable, proposed
transactions described in the Registration Statement, each Preliminary
Prospectus and the Prospectus (if filed with the Commission).
(s) The books, records and accounts of the Company accurately and fairly
reflect, in reasonable detail, the transactions in and dispositions of the
assets of the Company. The systems
7
of internal accounting controls maintained by the Company 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 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; and (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.
(t) The Company has delivered to the Representatives the written
agreement of each of its officers, directors and its affiliates who own 1.0% or
more of the outstanding Common Stock prior the purchase of the Shares pursuant
to this Agreement (collectively, "Material Holders"), to the effect that, except
for sales to the several Underwriters pursuant to this Agreement by the Selling
Shareholders, each of the Material Holders will not, for a period of 120 days
following the date of this Agreement, without the prior written consent of the
▇▇▇ ▇▇▇▇▇▇ & Company, offer, sell or contract to sell, grant any option to
purchase or otherwise dispose of, or announce the offer of, any Common Stock or
options or convertible securities exercisable or exchangeable for, or
convertible into, Common Stock.
(u) No labor disturbance by the employees of the Company exists, is
imminent or, to the knowledge of the Company, is 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 that might be expected to result in any material change in
the business, properties, condition (financial or otherwise), results of
operations or prospects of the Company. No collective bargaining agreement
exists with any of the Company's employees and, to the best knowledge of the
Company, no such agreement is imminent.
(v) The Company 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 those taxes have become
due and payable. No tax assessment or deficiency has been made or proposed
against the Company nor has the Company received any notice of any proposed tax
assessment or deficiency.
(w) Except as set forth in the Prospectus (or, if the Prospectus not in
existence, the most recent Preliminary Prospectus), there are no outstanding
loans, advances or guaranties of indebtedness by the Company to or for the
benefit of any of (i) its "affiliates," as such term is defined in the Rules and
Regulations, or (ii) any of the members of the families of any of them.
(x) The Company has not, directly or indirectly, at any time: (i) made
any contributions to any candidate for political office, or failed to disclose
fully any such contribution, in violation of law; (ii) made any payment to any
local, state, federal or foreign governmental officer or official, or other
person charged with similar public or quasi-public
8
duties, other than payments required or allowed by all applicable laws; or
(iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended.
(y) The Company has no liability, absolute or contingent, relating to:
(i) public health or safety; (ii) worker health or safety; (iii) product defect
or warranty (except, as to product defect or warranty, as is disclosed in the
Registration Statement and Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus)); or (iv) pollution, damage
to or protection of the environment, including, without limitation, relating to
damage to natural resources, emissions, discharges, releases or threatened
releases of hazardous materials into the environment (including, further without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or otherwise relating to the manufacture, processing, use, treatment,
storage, generation, disposal, transport or handling of any hazardous materials.
As used herein, "hazardous material" includes chemical substances, wastes,
pollutants, contaminants, hazardous or toxic substances, constituents, materials
or wastes, whether solid, gaseous or liquid in nature.
(z) 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.
(aa) The Common Stock is traded on and, subject to official notice of
issuance, the Shares to be issued by the Company have been approved for
inclusion for quotation on the Nasdaq National Market.
(bb) The Company is not now, and intends to conduct its affairs in the
future in such a manner so that it will not become, an investment company within
the meaning of the Investment Company Act of 1940, as amended.
(cc) The "Warrants" (as defined in the Warrant Agreement between the
Company, ▇▇▇ ▇▇▇▇▇▇ & Company and Commonwealth Associates (the "Warrant
Agreement")) to purchase 75,000 shares of the Common Stock have been duly and
validly authorized by all requisite corporate action of the Company and, when
issued and delivered against payment therefor as provided in Section 3(l) below,
will be valid and binding obligations of the Company in accordance with their
terms; the "Warrant Shares" (as defined in the Warrant Agreement) have been duly
and validly authorized for issuance upon exercise of the Warrants and when so
issued against payment therefor as provided in the Warrant Agreement will be
validly issued, fully paid and non-assessable; and no person has any preemptive
rights with respect to the Warrants or the Warrant Shares.
9
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
Selling Shareholder, as to himself only, represents and warrants to and agrees
with each Underwriter as follows:
(a) Such Selling Shareholders now have, and on the Closing Date will have,
valid and marketable title to the Shares to be sold by such Selling
Shareholders, free and clear of any lien, mortgage, pledge, charge, equity,
claim, security interest or other encumbrance, including, without limitation,
any restriction on transfer.
(b) Such Selling Shareholder now have, and on the Closing Date will have,
full legal right, power and authorization, and any approval required by law, to
sell, assign transfer and deliver such Shares in the manner provided in this
Agreement, and upon delivery of and payment for such Shares hereunder, the
several Underwriters will acquire good and marketable title to such Shares free
and clear of any lien, claim, mortgage, pledge, charge, equity, security
interest or other encumbrance of any kind.
(c) This Agreement has been duly authorized, executed and delivered by or
on behalf of such Selling Shareholders and is the valid and binding agreement of
such Selling Shareholders enforceable against such Selling Shareholder in
accordance with its terms except insofar as enforceability may be affected by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or by general equitable considerations and
except insofar as the indemnification and contribution provisions of Section 9
hereof may be affected by public policy concerns.
(d) Neither the execution and delivery of this Agreement by or on behalf
of such Selling Shareholder nor the consummation of the transactions herein
contemplated by or on behalf of such Selling Shareholder requires any consent,
approval, authorization or order of, or filing or registration with, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may be required under the Securities Act or such as may
be required under state securities or Blue Sky laws governing the purchase and
distribution of the Shares) or conflicts or will conflict with or constitutes or
will constitute a breach of, or default under, or violates or will violate, any
agreement, indenture or other instrument to which such Selling Shareholder is a
party or by which such Selling Shareholder is or may be bound or to which any of
such Selling Shareholder's property or assets is subject, or any statute, law,
rule, regulation, ruling, judgment, injunction, order or decree applicable to
such Selling Shareholder or to any property or assets of such Selling
Shareholder.
(e) The information under the caption "Principal and Selling Shareholders"
in the Prospectus, insofar as it relates to such Selling Shareholder, does not
and will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(f) Such Selling Shareholder does not have any knowledge or any reason to
believe that the Registration Statement or the Prospectus (or any amendment or
supplement thereto) contains any untrue statement of a material fact relating to
such Selling Shareholder or omits to
10
state any material fact relating to such Selling Shareholder required to be
stated therein or necessary to make the statements therein not misleading.
(g) Such Selling Shareholder has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares, except for the lock-up arrangements
described in the Prospectus.
3. PURCHASE, SALE AND DELIVERY OF SHARES.
(a) On the basis of the representations, warranties, covenants and
agreements of the Company and the Selling Shareholders 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 "purchase price per share"), that number
of Firm Shares which bears the same proportion to the aggregate number of Firm
Shares to be issued and sold by the Company as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule II hereto (subject to
adjustment as determined by the Representatives to avoid fractional shares and
as provided in Section 10 of this Agreement) bears to the aggregate number of
Firm Shares to be sold by the Company and the Selling Shareholders.
(b) On the basis of the representations, warranties, covenants and
agreements of the Company and the Selling Shareholders contained in this
Agreement and subject to the terms and conditions set forth in this Agreement,
the Selling Shareholders agree to sell to the several Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase from each
Selling Shareholder, at the purchase price per share, that number of Firm Shares
which bears the same proportion to the number of Firm Shares set forth opposite
the name of such Selling Shareholder in Schedule I hereto as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule II hereto
(subject to adjustment as determined by the Representatives to avoid fractional
shares and as provided in Section 10 of this Agreement) bears to the aggregate
number of Firm Shares to be sold by the Company and the Selling Shareholders.
(c) With respect to Section 3(a) and 3(b) above, if a Pricing Agreement
is used and the purchase price per share has not been agreed upon and the
Pricing Agreement has not been executed and delivered by all parties thereto by
the close of business on the fourth business day following the date of this
Agreement, this Agreement shall terminate forthwith, without liability or other
obligation of any party to the other party, provided that the engagement letter,
dated as of April 14, 1998, between the Company and ▇▇▇ ▇▇▇▇▇▇ & Company will
remain in full force and effect to the extent stated in the next to the last
paragraph of such letter.
(d) 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, severally and not jointly,
all or any portion of the Option Shares at the same purchase price per share as
the Underwriters are to pay for the Firm Shares. This option may be exercised
11
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 on or
before the 45th day after the date of the Prospectus upon written, telecopied
or telegraphic 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. 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 II 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 Representative 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 3(e) and Section 3(f) below.
(e) Delivery of the Firm Shares and the Option Shares (if the option
granted by the Company in Section 3(d) above has been exercised not later than
6:30 a.m., West Coast time, on the date two business days preceding the Closing
Date), and payment therefor, less the nonaccountable expense allowance provided
for in Section 6(a)(ii) of this Agreement, shall be made at the office of ▇▇▇
▇▇▇▇▇▇ & Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, at 6:30 a.m., West Coast time, on __________, 1998, or at such time on
such other day, not later than seven full business days after such date, as
shall be agreed upon in writing by the Company and the Representative, or as
provided in Section 10 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.
(f) If the option granted by the Company in Section 3(d) above is
exercised after 6:30 a.m., Los Angeles time, on the date two business days
preceding the Closing Date, delivery of the Option Shares and payment therefor,
less the applicable portion of the nonaccountable expense allowance provided for
in Section 6(a)(ii) of this Agreement, shall be made at the office of ▇▇▇ ▇▇▇▇▇▇
& Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
at 6:30 a.m., West Coast time, on the date specified by the Representative
(which shall be three or four, or fewer, business days after the exercise of the
option, but not in excess of the period of time specified in the Rules and
Regulations).
(g) Payment of the purchase price for the Shares by the several
Underwriters shall be made by certified or official bank check or checks drawn
in next-day funds, payable to the order of the Company and the Selling
Shareholders. Such payment shall be made upon delivery of certificates for the
Shares to you for the respective accounts of the several Underwriters.
Certificates for the Shares to be delivered to you shall be registered in such
name or names and shall be in such denominations as the Representatives may
request at least two business days before the Closing Date, in the case of Firm
Shares, and at least one business day prior to the purchase of the Option
Shares, in the case of the Option Shares. 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 or, in
12
the case of the Option Shares, by 3:00 p.m., New York time, on the first
business day preceding the date of purchase.
It is understood that the Representatives, individually and not on behalf
of the Underwriters, may (but shall not be obligated to) make payment to the
Company and the Selling Shareholders for Shares to be purchased by any
Underwriter whose check shall not have been received by the Representative on
the Closing Date or any later 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.
(h) It is understood that the several Underwriters propose to offer the
Shares for sale to the public as soon as the Representatives deem 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
Representatives may from time to time thereafter change the public offering
price and other selling terms.
(i) The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), the legends
respecting stabilization and passive market making transactions set forth on the
inside front cover page and the statements set forth in the third paragraph and
in the final two paragraphs under the caption "Underwriting" in any Preliminary
Prospectus and in the final form of 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.
4. 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
Representatives 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 Representatives of and, a reasonable time prior to the
proposed filing of such amendment or supplement, furnishing the Representatives
with copies thereof and (ii) obtaining the prior consent of the Representatives
to such filing. The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, 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 Representatives (i) when the
Registration Statement becomes effective, (ii) when any post-effective amendment
thereof becomes effective,
13
(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 you
and your 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 each of you and your counsel) 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, if any, and will also deliver
to you, 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 each of you and send to the several Underwriters, at such
office or offices as you may designate, as many copies of the Prospectus as you
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 or a
dealer, 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 you may
reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required by
law to be delivered by an Underwriter or a dealer any event occurs 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 is 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
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 and during such period, the
Underwriters propose to vary the terms of offering thereof by reason of changes
in general market conditions or otherwise, you 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
14
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 and for the period when a prospectus is required
to be delivered, in connection with the sale of the Shares in accordance with
the applicable provisions of the Securities Act and the Rules and Regulations.
(e) The Company will cooperate with you and your counsel in the
qualification or registration of the Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as you 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 you 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 you and to each Underwriter who
may so request in writing copies of (i) all periodic and special reports
furnished by it to its shareholders, (ii) all information, documents and reports
filed by it with the Commission, the Nasdaq National Market, any securities
exchange or the National Association of Securities Dealers, Inc., (iii) all
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
Representatives or either of them 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.
(h) The Company agrees that, without the prior written consent of ▇▇▇
▇▇▇▇▇▇ & Company, the Company will not, directly or indirectly, sell, offer,
contract to sell, grant any option to purchase or otherwise dispose of any
shares of Common Stock, or any securities convertible into, exchangeable for or
exercisable for Common Stock, or any rights to purchase or acquire Common Stock,
for a period of 120 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 of options to purchase Common Stock, exercisable
after that 120-day period, or the issuance of shares of Common Stock upon the
exercise of options granted under the Company's presently authorized employee
plans that are described in the Prospectus
15
or, if applicable, in documents incorporated therein, in accordance with the
provisions of such plans as so authorized.
(i) 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.
(j) 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, cause the Common Stock (including the Shares)
to be included for quotation on the Nasdaq National Market, and the Company will
comply with all registration, filing, reporting and other requirements of the
Exchange Act and the Nasdaq National Market which may from time to time be
applicable to the Company.
(k) The Company will use its best 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.
(l) In accordance with the Warrant Agreement, which the Company has
executed and delivered, the Company agrees, upon its receipt of the purchase
price therefor (as specified in the Warrant Agreement), to deliver to you
(individually and not as the Representatives of the Underwriters) on the Closing
Date and simultaneously with completion of the purchase and sale of the Firm
Shares, in such amounts as you supplementally advise the Company in writing,
Warrants (in the form attached as Exhibit A to the Warrant Agreement)
representing the right to purchase 75,000 shares of Common Stock at a price
equal to 120% of the offering price per share to the public as set forth or to
be set forth on the Cover Page of the Prospectus or in the Term Sheet.
5. FURTHER AGREEMENTS OF THE SELLING SHAREHOLDERS. Each of the Selling
Shareholders covenants and agrees with the several Underwriters as follows:
(a) Such Selling Shareholder will cooperate to the extent necessary to
cause the Registration Statement or any post-effective amendment thereto to
become effective at the earliest possible time.
(b) Such Selling Shareholder will pay all Federal, state, foreign and
other taxes, if any on the transfer or sale of the Shares being sold by the
Selling Shareholder to the Underwriters.
(c) Such Selling Shareholder will do or perform all things required to be
done or performed by the Selling Shareholder prior to the Closing Date to
satisfy all conditions precedent to the delivery of the Shares pursuant to this
Agreement.
(d) Such Selling Shareholder has executed or will execute an agreement
referred to in Section 1(f) and will not, in each case directly or indirectly,
sell, offer, contract to sell, grant any
16
option to purchase or otherwise dispose of any shares of Common Stock, or any
securities convertible into, exchangeable for or exercisable for Common
Stock, or any rights to purchase or acquire Common Stock, for a period of 120
days following the date of this Agreement.
(e) Such Selling Shareholder will not take, directly or indirectly, any
action designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Shares.
(f) Such Selling Shareholder will advise you promptly, and if requested
by you, will confirm such advice in writing, within the period of time referred
to in Section 7(f) hereof, of any change in information relating to such Selling
Shareholder or any new information relating to such Selling Shareholder which is
stated in the Prospectus or any amendment or supplement thereto which comes to
the attention of such Selling Shareholder that suggests that any statement made
in the Registration Statement or the Prospectus relating to such Selling
Shareholder (as then amended or supplemented, if amended or supplemented) is or
may be untrue in any material respect or that the Registration Statement or
Prospectus (as then amended or supplemented, if amended or supplemented) omits
or may omit to state a material fact or a fact necessary to be stated therein in
order to make the statements therein relating to such Selling Shareholder not
misleading in any material respect, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented, if amended or supplemented) in
order to comply with the Securities Act or any other law.
6. FEES AND EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses 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 Warrant Agreement, the
Preliminary Blue Sky Survey and any Supplemental Blue Sky Survey or Memorandum,
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 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
brokerage and transaction levies with respect to the purchase and, if
applicable, the sale of the Shares (x) incident to the sale and delivery of the
shares by the Company and the Selling Shareholders to the several Underwriters
and (y) incident to the sale and delivery of the Shares by the Underwriters to
the initial purchasers thereof; the cost of printing all stock certificates; the
Transfer Agents' and Registrars' fees; the fees and disbursements of counsel for
the Company; all fees and other charges of the Company's independent public
accountants; the cost of furnishing to the several Underwriters copies of the
17
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 the cost of qualifying or registering the
Shares (or obtaining exemptions from qualification or registration) under the
laws of such jurisdictions as you may designate (including filing fees in
connection with such NASD filings and filing fees and fees and disbursements
and costs/charges of Underwriters' counsel in connection with such state
securities or Blue Sky qualifications, registrations and exemptions); all
fees and expenses in connection with qualification of the Shares for
inclusion for quotation on the Nasdaq National Market; advertising and
roadshow expenses; and all other expenses incurred by the Company in
connection with the performance of its obligations hereunder.
(ii) In addition to its obligations under Section 6(a)(i) above, the
Company agrees to pay the Representative a non-accountable expense allowance
equal to 0.75% of the public offering price of the Shares. Such allowance shall
be paid to the Representatives as provided in Sections 3(e) and 3(t) of this
Agreement.
(iii) In addition to its obligations under Section 9(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 9(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 must 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
will 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 9(b) of this
Agreement, the Selling Shareholders severally and in proportion to their
obligation to sell 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 9(b) of this Agreement, they 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
18
absence of a judicial determination as to the propriety or enforceability of
the Selling Shareholders' obligation to reimburse or advance for the benefit
of the Underwriters 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
Underwriters receiving the same must 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 or for the
Underwriters within 30 days of a request for reimbursement or for an advance
will 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) In addition to their obligations under Section 9(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 9(c) of this Agreement, they will reimburse or
advance to or for the benefit of the Company or any Selling Shareholder on a
monthly basis (or more often, if requested) for all legal and other expenses
incurred by the Company or any Selling Shareholder 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 or any Selling Shareholder 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 and the Selling Shareholders, as the
case may be, must 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 or the Selling Shareholders within 30
days of a request for reimbursement or for an advance will 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.
(d) Any controversy arising out of the operation of the interim
reimbursement and advance arrangements set forth in Sections 6(a)(iii), 6(b) and
6(c) 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 Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. If the party demanding
arbitration does not make a designation of an arbitration tribunal in the 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
19
6(a)(iii), 6(b) and 6(c) 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 9 of this Agreement.
(e) 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 7 of this Agreement is not satisfied, or because of any termination
pursuant to Section 11(b) of this Agreement, or because of any refusal,
inability or failure on the part of the Company or any Selling Shareholder to
perform any covenant or agreement set forth in this Agreement or to comply with
any provision of this Agreement other than by reason of a default by any of the
Underwriters, the Company agrees to reimburse the several Underwriters upon
demand for all out-of-pocket expenses (including fees and disbursements of
counsel) that have been incurred by any or all of them in connection with
investigating, preparing to market or marketing the Shares or otherwise in
connection with this Agreement.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase and pay for the Shares is subject, in the sole
discretion of the Representatives, 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 and of the Selling Shareholders set forth in this Agreement, to the
accuracy of the statements of the Selling Shareholders and of Company and its
officers made in any certificate delivered pursuant to this Agreement, to the
performance by the Company and by the Selling Shareholders of all of their
respective 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 and by the Selling Shareholders at or prior to the
applicable date and to the following additional conditions:
(a) The Registration Statement must have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under
the Securities Act, such post-effective amendment shall become effective and
the Company shall have provided evidence satisfactory to the Representatives
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 you may approve
in writing and, at the Closing Date or, with respect to the Option Shares,
the date on 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 Representatives
and their counsel.
(b) You must have received from ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for
the Underwriters, an opinion, dated the Closing Date, with respect to the
issuance and sale of the Shares and such other related matters as the
Representatives may reasonably require, and the
20
Company and the Selling Shareholders shall have furnished such counsel with
all documents which they may request for the purpose of enabling them to pass
upon such matters.
(c) You must 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 Petillon &
▇▇▇▇▇▇, counsel for the Company, addressed to the Underwriters and dated the
Closing Date or such later date, with reproduced copies or signed counterparts
thereof for each of the Underwriters, covering the matters set forth in Annex A
to this Agreement and in form and substance satisfactory to you.
(d) You must have received on the Closing Date the opinion of Petillon &
▇▇▇▇▇▇, counsel for the Selling Shareholders, addressed to the Underwriters and
dated the Closing Date or such later date, with reproduced copies or signed
counterparts thereof for each of the Underwriters, covering the matters set
forth in Annex B to this Agreement and in form and substance satisfactory to
you.
(e) You must 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 your sole judgment to make a public
offering of the Shares, or a material adverse change in market levels for
securities in general (or those of companies in particular) or financial or
economic conditions which render it inadvisable to proceed.
(f) You shall have received on the Closing Date and on any later date on
which Option Shares are purchased a certificate, dated 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 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, 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 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
21
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 material change or any development
involving a prospective material change in or affecting the
business, properties, condition (financial or otherwise),
results of operations or prospects of the Company, whether
or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary
course of business, the Company has not 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 is a party or of which property of the
Company is the subject which are material and which are not
disclosed in the Registration Statement and the Prospectus
and (E) there are not any license agreements, contracts,
leases or other documents that are required to be filed as
exhibits to the Registration Statement that have not been
filed as required.
(g) You must have received on the Closing Date and on any later date on
which Option Shares are purchased a certificate from each Selling Shareholder,
dated the Closing Date and signed by or on behalf such Selling Shareholder,
stating that the representations and warranties of the Selling Shareholder set
forth in Section 2 of this Agreement are true and correct with the same force
and effect as if expressly made at and as of the Closing Date and the Selling
Shareholder has complied with all the agreements and satisfied all the
conditions on his part to be performed or satisfied at or prior to the Closing
Date.
(h) You must have received from KPMG Peat Marwick LLP a letter or
letters, addressed to the Underwriters and dated 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 published Rules and Regulations thereunder and, based upon
the procedures described in their letter, referred to below, delivered to you
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 not 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 which, in your 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
22
Preliminary Prospectus). In addition, you shall have received from KPMG Peat
Marwick LLP, on or prior to the Closing Date, a letter addressed to the
Company and made available to you 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 financial statements as of December 31, 1997 or in delivering their
Original Letter, did not disclose any weaknesses in internal controls that
they considered to be a material weaknesses.
(i) Prior to the Closing Date, the Shares must have been designated
national market system securities, duly authorized for quotation on the Nasdaq
National Market upon official notice of issuance.
(j) On or prior to the Closing Date, you must have received from all
Material Holders executed agreements covering the matters described in
Section 1(t) of this Agreement.
(k) On or prior to the Closing Date, the Company must have entered into
the Warrant Agreement, substantially in the form filed as Exhibit 4.1 to the
Registration Statement; and on the Closing Date, concurrently with the purchase
and sale of the Firm Shares, the Company must have issued, sold and delivered
the Warrants to the Representatives.
(l) The Company and each Selling Shareholder must have furnished to you
such further certificates and documents as you reasonably request (including
certificates of officers of the Company), as to the accuracy of the
representations and warranties of the Company or either Selling Shareholder set
forth in this Agreement, the performance by the Company or either Selling
Shareholder of their respective obligations under this Agreement and the other
conditions concurrent and precedent to the obligations of the Underwriters under
this Agreement.
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 Representatives. The
Company and each Selling Shareholder must furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
reasonably request.
If any of the conditions specified in this Section 7 have not been
fulfilled in all material respects 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 are not in all material respects reasonably
satisfactory in form and substance to the Representatives and their counsel,
this Agreement and all obligations of the Underwriters hereunder may be canceled
by the Representatives 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 must be given
to the Company and the Selling Shareholders in writing or by telephone, telecopy
or telegraph confirmed in writing. Any such termination shall be without
liability of the Company or the Selling Shareholders to the Underwriters (except
as provided in Section 6 or Section 9 of this Agreement) and without liability
of the Underwriters to the Company or the Selling Shareholders (except to the
extent provided in Section 9 of this Agreement).
23
8. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligations of the
Company and the Selling Shareholders to sell and deliver the Shares required
to be delivered as and when specified in this Agreement are 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, no stop order
suspending the effectiveness of the Registration Statement is in effect and
no proceedings therefor are pending or threatened by the Commission.
9. 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, specifically including but not
limited to losses, claims, damages or liabilities (or actions in respect
thereof) related to negligence on the part of any Underwriter, 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 and costs/charges 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 in the Prospectus) 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, (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 has 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 9(a) will not apply to any such losses,
claims, damages, liabilities or expenses if such statement or omission was
made in
24
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through the Representatives
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 9(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 or
supplemented) (excluding the documents incorporated therein by reference, if
any) 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
4 of this Agreement. The indemnity agreements of the Company contained in
this Section 9(a) and the representations and warranties of the Company
contained in Section 1 of this Agreement will remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and will survive the delivery of and payment for the
Shares. This indemnity agreement is in addition to any liabilities which the
Company may otherwise have.
(b) Each Selling Shareholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter and each person (including each
partner or officer thereof) who controls such 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 to reimburse each of them for any legal or other
expenses (including, except as otherwise provided below, settlement expenses
and fees and disbursements and costs/charges 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 Selling Shareholder in this Agreement, (ii) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement (including in the Prospectus) 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 has 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 by or
on behalf of such indemnifying Selling Shareholder specifically for use in
the Registration Statement, any Preliminary Prospectus or the Prospectus or
any such amendment
25
thereof or supplement thereto. The indemnity agreement of each Selling
Shareholder contained in this Section 9(b) will remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and will survive the delivery of and payment for the
Shares. This indemnity agreement shall be in addition to any liabilities
which each Selling Shareholder may otherwise have.
(c) 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 Selling Shareholder, 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 provided below, settlement expenses and fees
and disbursements and costs/charges 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) 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 has 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 by or on behalf of
such indemnifying Underwriter through the Representatives specifically for
use in the Registration Statement, any Preliminary Prospectus or the
Prospectus or any such amendment thereof or supplement thereto. The Company
and the Selling Shareholders acknowledge and agree that the matters described
in Section 3(i) 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 9(c) will
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and will survive the delivery
of and payment for the Shares. This indemnity agreement shall be in addition
to any liabilities which each Underwriter may otherwise have.
(d) Each person or entity indemnified under the provisions of Sections
9(a), 9(b) and 9(c) above agrees that, upon the service of a summons or other
initial legal process upon it in
26
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 9, promptly give written notice (the "Notice") of such
service or notification to the party or parties from whom indemnification may
be sought hereunder. No indemnification provided for in Sections 9(a), 9(b)
or 9(c) above will 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 the omission so to notify such
indemnifying party or parties will 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 9(a), 9(b) and
9(c). Any indemnifying party will 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
will 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 the defense will 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 the defense of the indemnified parties at the
expense of the indemnifying parties and (ii) PROVIDED, FURTHER, that the
indemnifying party will 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, 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
party or parties, the indemnifying party or parties will not be liable under
Sections 9(a) through 9(d) for any legal 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 PROVIDED, HOWEVER the preceding sentence and (B) the
indemnifying party or parties will 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
27
parties will 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.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section
9 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 9 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
9(a), 9(b) or 9(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, the Selling Shareholders and the
Underwriters will 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 Selling Shareholders 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 9(e) 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 considerations referred to in the first paragraph of this Section
9(e). 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 9(e) will 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 9(e). Notwithstanding the
provisions of this Section 9(e), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to
the Shares purchased by that Underwriter. For purposes of this Section 9(e),
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 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
28
misrepresentation. The Underwriters' obligations to contribute in this
Section 9(e) 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 9(d) above).
(f) Neither the Company nor any Selling Shareholder may, 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), 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) No Underwriter may, without the consent of the Company or
indemnified Selling Shareholder, as the case may be, 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 the Company or such
Selling Shareholder 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 the Company, each
of its officers who signed the Registration Statement, each of its directors
and each person who controls the Company within the meaning of Section 15 of
the Securities Act, or such Selling Shareholder, from all liability arising
out of such claim, action, suit or proceeding.
(g) 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 6(a)(iii), 6(b) and 6(c) and this
Section 9 of this Agreement and that they are fully informed regarding all
such provisions. They further acknowledge that the provisions of Sections
6(a)(iii), 6(b) and 6(c) and this Section 9 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 Exchange Act Rules and Regulations. 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 6(a)(iii),
6(b) and 6(c) and this Section 9 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
29
Sections 6(a)(iii), 6(b) or 6(c) or this Section 9 and further agree not to
attempt to assert any such defense.
10. 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 7
or Section 11 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 Representatives and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by the Representatives of such notice to purchase, or procure one or
more other Underwriters to purchase, in such proportions as may be agreed
upon among the Representatives 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 will not be
purchased or absorbed in accordance with the two preceding sentences, the
Company and the Selling Shareholders will 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 you for
purchase of such Shares on the terms set forth in this Agreement. In any
such case, either you or the Company shall have the right to postpone the
Closing Date determined as provided in Section 3(e) of this Agreement for not
more than seven business days after the date originally fixed as the Closing
Date pursuant to Section 3(e) 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 10 for the purchase of all the Firm
Shares that the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement will be terminated without further act or deed and
without any liability on the part of the Company or the Selling Shareholders
to any non-defaulting Underwriter (except as provided in Section 6 or Section
9 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 9 of this Agreement). Nothing in this Section 10, 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 10.
30
11. 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 will become effective at
such time, after notification of the effectiveness of the Registration
Statement has been released by the Commission, as you, the Company and the
Selling Shareholders will 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 has not 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 or the Selling Shareholders to the Underwriters
(except as provided in Section 6 or Section 9 of this Agreement) or the
Underwriters to the Company or the Selling Shareholders (except as set forth
in Section 9 of this Agreement). By giving notice before the time this
Agreement becomes effective, you, as Representatives of the several
Underwriters, may prevent this Agreement from becoming effective without
liability of any party to the other party, except that the Company and the
Selling Shareholders shall remain obligated to pay costs and expenses to the
extent provided in Section 6 and Section 9 of this Agreement. If the
Registration Statement has been declared effective prior to the date of this
Agreement, this Agreement will become effective upon execution and delivery
by you, the Company and the Selling Shareholders.
(b) This Agreement may be terminated by you in your absolute
discretion by giving written notice to the Company and the Selling
Shareholders 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 your opinion, is likely to occur:
(i) after the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in or affecting
particularly the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company, whether or not arising in
the ordinary course of business, occurs which would, in your sole judgment,
make the offering or the delivery of the Shares impracticable or inadvisable;
(ii) if there has 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 your sole judgment, make
the offering or delivery of the Shares impracticable or inadvisable; (iii) if
there has been a 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 or the Nasdaq National Market or
limitations on prices (other than limitations on hours or numbers of days of
trading) for securities on either such exchange or system; (iv) if there has
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 your sole judgment materially and adversely
affects or may materially and adversely affect the business, properties,
condition (financial or other otherwise), results of operations or prospects
31
of the Company; (v) if there has been the declaration of a banking moratorium
by federal, New York or California state authorities; (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 your sole
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 change which, in your sole judgment, makes the offering
or delivery of the Shares impracticable or inadvisable. If this Agreement is
terminated pursuant to this Section 11, there will be no liability of the
Company or the Selling Shareholders to the Underwriters (except pursuant to
Section 6 and Section 9 of this Agreement) and no liability of the
Underwriters to the Company or the Selling Shareholders (except to the extent
provided in Section 9 of this Agreement).
12. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing and, if to the Underwriters, shall be mailed,
telecopied or telegraphed or delivered to ▇▇▇ ▇▇▇▇▇▇ & Company, ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Syndicate Manager (telecopier: (▇▇▇) ▇▇▇-▇▇▇▇); and if to the Company or
either Selling Shareholder, shall be mailed, telecopied or delivered to the
Company or to the Selling Shareholders c/o the Company at its office at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (telecopier: (▇▇▇) ▇▇▇-▇▇▇▇)
Attention: President. All notices given by telecopy or telegraph shall be
promptly confirmed by letter.
13. PERSONS ENTITLED TO THE BENEFIT OF THIS AGREEMENT. This Agreement
shall inure to the benefit of the Company, the Selling Shareholders and the
several Underwriters and, with respect to the provisions of Section 6 and
Section 9 of this Agreement, the several parties (in addition to the Company,
the Selling Shareholders and the several Underwriters) indemnified under the
provisions of Section 6 and Section 9, and their respective personal
representatives, successors and assigns. Nothing in this Agreement is
intended or may 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 does not include any purchaser, as such purchaser, of any of the
Shares from the several Underwriters.
14. 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 will 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 their respective directors or officers or any
Selling Shareholder 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 4(f), 4(g), 4(h), 4(i), 4(j) and
4(k) 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 of signature pages.
32
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 NEW YORK.
13. AUTHORITY OF THE REPRESENTATIVES. In connection with this Agreement,
the Representatives will act for and on behalf of the several Underwriters, and
any action taken under this Agreement by the Representatives, as representatives
of the several Underwriters, will be binding on all the Underwriters.
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, the Selling
Shareholders and the several Underwriters.
Very truly yours,
BONDED MOTORS, INC.
By:
---------------------------------------------
Chairman and Chief Executive Officer
By:
---------------------------------------------
Secretary
SELLING SHAREHOLDERS
------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Confirmed as of the date first above mentioned on behalf of themselves and
the other several Underwriters named in Schedule II hereto.
33
▇▇▇ ▇▇▇▇▇▇ & COMPANY
COMMONWEALTH ASSOCIATES
As Representatives of the Several Underwriters
By: ▇▇▇ ▇▇▇▇▇▇ & COMPANY
By:
--------------------------------------
34
SCHEDULE I
SELLING SHAREHOLDERS
Number of
Selling Shareholders Firm Shares
-------------------- -----------
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
----------
Total................................ 500,000
I-1
SCHEDULE II
UNDERWRITERS
Number of
Firm Shares to
Underwriters be Purchased
------------ ------------
▇▇▇ ▇▇▇▇▇▇ & Company..................................
Commonwealth Associates...............................
Total............................................. 2,000,000
---------
---------
II-1
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF COUNSEL FOR THE COMPANY
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws 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 the
United States, if any, in which the ownership or leasing of its
properties or the conduct of its business requires such
qualification, except where the failure so to qualify would not
have a material adverse effect on the business, properties,
condition (financial or otherwise), results of operations or
prospects of the Company;
(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 dates stated therein; the issued and
outstanding shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and
nonassessable and, to the best knowledge of such counsel, have not
been issued in violation of any preemptive right or other rights
to subscribe for or purchase securities or in violation of any
applicable federal or state securities laws;
(v) The Shares will, upon issuance and delivery against payment
therefor in accordance with the terms of the Agreement, be duly
authorized, validly issued, fully paid and nonassessable and, to
the best knowledge of such counsel, will not have been issued in
violation of any preemptive right or other rights to subscribe for
or purchase securities;
(vi) The Company has corporate power and authority to enter into the
Agreement and to issue, sell and deliver to the Underwriters the
Shares to be sold by it;
(vii) The 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 you and the Selling Shareholders, 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 insofar 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 Registration Statement has become effective under the
Securities Act and, to the best knowledge of such counsel, 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 threatened under the Securities Act;
(ix) The Registration Statement and the Prospectus, and each amendment
or supplement thereto (other than the financial statements
included therein, as to which such counsel need express no
opinion), as of the effective date of the Registration Statement,
complied as to form in all material respects with the requirements
of the Securities Act and the applicable Rules and Regulations;
(x) The terms and provisions of the capital stock of the Company
conform in all material respects to the description thereof
contained in the Registration Statement and Prospectus, and the
information in the Prospectus under the caption "Description of
Capital Stock," to the extent it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is
correct and the forms of certificates evidencing the Common Stock
comply with California law;
(xi) The description in the Registration Statement and the Prospectus
of the Articles of Incorporation and bylaws of the Company and of
statutes and contracts 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;
(xii) To the best 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 as an exhibit to the Registration
Statement that are not described or referred to therein and filed
as required;
(xiii) The performance of the Agreement and the Warrant Agreement and the
consummation of the transactions contemplated by each of them will
not violate or result in the breach of or a default (including
without limitation with the giving of notice, the passage of time
or otherwise) of any of the terms and provisions of the Company's
Articles of Incorporation or bylaws or any contract, indenture,
mortgage, deed of trust, loan agreement, lease, license, joint
venture or, without limitation, other agreement or instrument
known to such counsel to which the Company is a party or by which
any of its properties are bound or (other than performance of the
Company's indemnification and contribution obligations under the
Agreement, concerning which no opinion need be expressed), any
law, ordinance, rule or regulation or, to the best knowledge of
such counsel, any order, writ, injunction, judgment or decree of
any governmental agency or body or of any
A-2
court having jurisdiction over the Company or over any of its
properties; provided, however, that no opinion need be rendered
concerning state securities or Blue Sky laws;
(xiv) No authorization, approval or consent of any governmental
authority or agency is necessary in connection with the
consummation of the transactions contemplated by the Agreement or
the Warrant Agreement, except such as have been obtained under the
Securities Act, are necessary under the Securities Act in
connection with the registration of the Warrant Shares 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 or the registration and sale of the Warrant Shares;
(xv) To the best knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company
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, other than those described
therein;
(xvi) To the best knowledge of such counsel, the Company is not
presently in breach of, or in default under, any bond, debenture,
note or other evidence of indebtedness or any contract, indenture,
mortgage, deed of trust, loan agreement, lease, license or,
without limitation, other agreement or instrument to which the
Company is a party or by which any of its properties are bound
which is material to the business, properties, condition
(financial or otherwise), prospects or results of operations or
prospects of the Company;
(xvii) To the best knowledge of such counsel, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock
or, except as is provided in the Warrant Agreement, other
securities of the Company have unexercised registration rights
with respect to any securities of the Company that have not been
waived with respect to the Offering being made pursuant to the
Registration Statement;
(xviii) The Warrant 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 due
authorization, execution and delivery by ▇▇▇ ▇▇▇▇▇▇ & Company and
Commonwealth Associates, 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 Warrant 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-3
(xix) The Warrants have been duly and validly authorized and constitute
valid and binding obligations of the Company enforceable in
accordance with their terms (except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by general
equitable principles); the Warrant Shares have been duly and
validly authorized for issuance upon exercise of the Warrants
against payment therefor as provided in the Warrant Agreement
(including, as provided in the Warrant Agreement, by surrender of
Warrants) and, when so issued, will be validly issued, fully paid
and nonassessable; and to the best knowledge of such counsel, no
shareholder has any preemptive rights or other rights to subscribe
for or purchase with respect to the Warrants or the Warrant
Shares;
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 Representatives 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 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 Closing Date
or any later date on which the Option Shares are to be purchased, as the case
may be, the Prospectus 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.
Counsel rendering the foregoing opinion may rely as to questions of law
not involving the laws of the United States or the State of California on
opinions of local counsel (provided that such counsel states that they believe
they and the Underwriters are justified in relying thereon) and, as to questions
of fact, upon representations or certificates of officers of the Company and
government officials, in which case their opinion is explicitly to state that
they are so relying thereon and that they have no knowledge of any material
misstatement or inaccuracy in such opinions, representations or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to Underwriters'
counsel.
A-4
ANNEX B
MATTERS TO BE COVERED IN THE OPINION OF COUNSEL FOR EACH SELLING SHAREHOLDERS
(i) The Agreement has been duly executed and delivered by or on behalf
of the Selling Shareholders and is the valid and binding agreement
of the Selling Shareholders enforceable against the Selling
Shareholders 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 insofar as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles;
(ii) The Selling Shareholders each have full legal right, power and
authority to enter into the Agreement and sell, transfer and
deliver to the Underwriters the Shares to be sold by him, and upon
delivery of the Shares pursuant to this Agreement and payment
therefor as contemplated herein and assuming that the Underwriters
are bona fide purchasers, the Underwriters will be the owners of
the Shares free and clear of any claims, liens, encumbrances or
rights of third parties of any type or description;
(iii) The performance of the Agreement and the consummation of the
transactions contemplated herein will not violate or result in the
breach of or a default (including without limitation with the
giving of notice, the passage of time or otherwise) of any of the
terms and provisions of any contract, indenture, mortgage, deed of
trust, loan agreement, lease, license, joint venture or, without
limitation, other agreement or instrument known to such counsel to
which either Selling Shareholder is a party or by which either
Selling Shareholder or any of his properties are bound, or any
law, ordinance, rule or regulation or, to the best knowledge of
such counsel, any order, writ, injunction, judgment or decree of
any governmental agency or body or of any court having
jurisdiction over either Selling Shareholder or over any of his
properties;
(iv) No authorization, approval or consent of any governmental
authority or agency is necessary or required to be obtained by the
Selling Shareholder in connection with the consummation of the
transactions contemplated by the Agreement, except such as have
been obtained 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;
B-1
CA981180.024