EXHIBIT 1.1
8,000,000 SHARES
HEADLANDS MORTGAGE COMPANY
COMMON STOCK
UNDERWRITING AGREEMENT
DATED FEBRUARY __, 1998
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
BT ALEX. ▇▇▇▇▇ INCORPORATED
UBS SECURITIES LLC
UNDERWRITING AGREEMENT
February __, 1998
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
BT ALEX. ▇▇▇▇▇ INCORPORATED
UBS SECURITIES LLC
As Representatives of the Several Underwriters
c/o NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
INTRODUCTORY. Headlands Mortgage Company, a California corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of 4,500,000 shares of its Common
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Stock, par value $___ per share (the "Common Stock"); and the stockholders of
the Company named in Schedule B (collectively, the "Selling Shareholders")
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acting individually and through their duly appointed attorney-in-fact (the
"Committee") pursuant to that certain Power of Attorney, dated as of January
___, 1998 (the "Power of Attorney") severally propose to sell to the
Underwriters an aggregate of 3,500,000 shares of Common Stock. The 4,500,000
shares of Common Stock to be sold by the Company and the 3,500,000 shares of
Common Stock to be sold by the Selling Shareholders are collectively called the
"Firm Common Shares." In addition, the Company has granted to the Underwriters
an option to purchase up to an additional 1,200,000 shares (the "Optional Common
Shares") of Common Stock, as provided in Section 2. The Firm Common Shares and,
if and to the extent such option is exercised, the Optional Common Shares are
collectively called the "Common Shares." NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC,
BT Alex.▇▇▇▇▇ Incorporated and UBS Securities LLC have agreed to act as
representatives of the several Underwriters (in such capacity, the
"Representatives") in connection with the offering and sale of the Common
Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-38267), which contains a form of prospectus to be used in connection with
the public offering and sale of the Common Shares. Such registration statement,
as amended, including the financial statements, exhibits and schedules thereto,
in the form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434
under the Securities Act, is called the "Registration Statement." Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement," and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form
first used by the Underwriters to confirm sales of the Common Shares, is called
the "Prospectus." All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, a preliminary prospectus or
the Prospectus, or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("▇▇▇▇▇").
For purposes of this Agreement, "Subsidiary" means, with respect to the
Company, any corporation, partnership, association, limited liability company,
joint venture or other business entity of which more than 50% of the total
voting power of shares of stock or other ownership interest entitled (without
regard to the occurrence of any contingency) to vote in the election of the
person or persons (whether directors, managers, partners, trustees or other
person performing similar functions) having the power to direct or cause the
direction of the management and policies thereof is at the time owned or
controlled, directly or indirectly, by the Company or one or more of the other
Subsidiaries of the Company or a combination thereof, including, without
limitation, Headlands Mortgage Securities Inc.
The Company and each of the Selling Shareholders hereby confirm their
respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS.
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied to the
Commission's satisfaction with all requests of the Commission for additional
or supplemental information. No stop order suspending the effectiveness of
the Registration Statement or any Rule 462(b) Registration Statement is in
effect and no proceedings for such purpose have been instituted or are pending
or, to the best knowledge of the Company, are contemplated or threatened by
the Commission.
Each preliminary prospectus and the Prospectus when filed complied in all
material respects with the Securities Act and, if filed by electronic
transmission pursuant to ▇▇▇▇▇ (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Common
Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times, complied and will comply in all
material respects with the Securities Act and did not and will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Prospectus, as amended or supplemented, as of its date and at
all subsequent times, did not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and
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warranties set forth in the two immediately preceding sentences do not apply
to statements in or omissions from the Registration Statement, any Rule 462(b)
Registration Statement, or any post-effective amendment thereto, or the
Prospectus, or any amendments or supplements thereto, made in reliance upon
and in conformity with information relating to any Underwriter furnished to
the Company in writing by the Representatives expressly for use therein.
There are no contracts or other documents required to be described in the
Prospectus or to be filed as exhibits to the Registration Statement which have
not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives three complete manually signed copies of the
Registration Statement and of each consent and certificate of experts filed as
a part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Representatives
have reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. Neither the Company
nor any Subsidiary has distributed and will not distribute, prior to the later
of the Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Common Shares, any offering material in
connection with the offering and sale of the Common Shares other than a
preliminary prospectus, the Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Common Shares. The Common Shares to be purchased
by the Underwriters from the Company have been duly authorized for issuance
and sale pursuant to this Agreement and, when issued and delivered by the
Company pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, other than the Selling
Shareholders with respect to the Common Shares included in the Registration
Statement, except for such rights as have been duly waived.
(g) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is
given in the Prospectus: (i) there has been no material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings,
business, operations or prospects, whether or not arising from transactions in
the ordinary course of business, of the Company and its Subsidiaries,
considered as one entity (any such change is called a "Material Adverse
Change"); (ii) the Company and its
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Subsidiaries, considered as one entity, have not incurred any material
liability or obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not
in the ordinary course of business; (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except for
dividends paid to the Company or other Subsidiaries, any of its Subsidiaries
on any class of capital stock or repurchase or redemption by the Company or
any of its Subsidiaries of any class of capital stock; and (iv) neither the
Company nor any Subsidiary has sustained any material loss or interference
with its respective businesses or properties from fire, flood, windstorm,
accident or other calamity, whether or not covered by insurance.
(h) Independent Accountants. KPMG Peat Marwick LLP, which has expressed
its opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) and supporting schedules
filed with the Commission as a part of the Registration Statement and included
in the Prospectus, are independent public or certified public accountants as
required by the Securities Act and the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder (collectively, the "Exchange
Act").
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its Subsidiaries as of and at the dates indicated and the results
of their operations and cash flows for the periods specified. The supporting
schedules included in the Registration Statement present fairly the
information required to be stated therein. The pro forma financial statements
included in the Registration Statement and the Prospectus comply in all
material respects with the applicable requirements of Rule 11-02 of Regulation
S-K of the Commission as interpreted by the Commission in this transaction and
the pro forma adjustments have been properly applied to the historical amounts
in compilation of such statements. Such financial statements and supporting
schedules have been prepared in conformity with generally accepted accounting
principles as applied on a consistent basis throughout the periods involved,
except as may be expressly stated in the related notes thereto. No other
financial statements or supporting schedules are required to be included in
the Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Financial Data," "Selected
Consolidated Financial Data" and "Capitalization" fairly present the
information set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement. In addition, the
pro forma consolidated statements of the Company and its Subsidiaries and the
related notes thereto included under the captions "Prospectus Summary --
Summary Financial Data" and "Selected Consolidated Financial Data" and
elsewhere in the Prospectus and in the Registration Statement present fairly
the information contained therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to the pro forma financial
statements and have been properly presented on the bases described therein,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(j) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its Subsidiaries has been duly incorporated and is
validly existing as a
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corporation and in good standing under the laws of the jurisdiction of its
incorporation and has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus and,
in the case of the Company, to enter into and perform its obligations under
this Agreement; and no proceeding has been instituted or threatened in any
jurisdiction seeking to revoke, limit or curtail such power and authority.
Each of the Company and each Subsidiary is duly qualified as a foreign
corporation, partnership or limited liability company, as applicable, to
transact business and is in good standing in the State of California and each
other jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except for
such jurisdictions (other than the State of California) where the failure to
so qualify or to be in good standing would not, individually or in the
aggregate, result in a Material Adverse Change; and no proceeding has been
instituted or threatened in any such jurisdiction seeking to revoke, limit or
curtail such qualification. All of the issued and outstanding capital stock,
partnership interests or membership interests of each Subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable and are
owned by the Company, directly or through Subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or claim. The Company
does not own or control, directly or indirectly, any corporation, association
or other entity other than the Subsidiaries listed in Exhibit 21 to the
Registration Statement.
(k) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" (other than for subsequent issuances, if
any, pursuant to employee benefit plans described in the Prospectus or upon
exercise of outstanding options described in the Prospectus). The Common
Stock (including the Common Shares) conforms in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding shares of Common Stock (including the shares of Common Stock owned
by Selling Shareholders) have been duly authorized and validly issued, are
fully paid and nonassessable and have been issued in compliance with federal
and state securities laws. No further approval or authority of the
shareholders or the Board of Directors is required for the issuance and sale
of the Common Shares as contemplated herein. Neither the issuance of the
Common Shares nor the issuance of the outstanding shares of Common Stock were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There
are no authorized or outstanding options, warrants, preemptive rights, rights
of first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company or any of its Subsidiaries other than those accurately described in
the Prospectus. The issued and outstanding shares of capital stock of each
Subsidiary have been validly issued and are fully paid and nonassessable and
have been issued in compliance with all federal and state securities laws.
The description of the Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted thereunder, set
forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(l) Stock Exchange Listing. The Common Shares have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
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(m) No Current Material Defaults. Neither the Company nor any of its
Subsidiaries is (i) in violation of its charter, by-laws, partnership
agreement, certificate of partnership agreement or other organizational
document or (ii) in default (or, with the giving of notice or lapse of time,
or both, would be in default) ("Default") under any indenture, mortgage, loan
or credit agreement, note, contract, tax indemnity agreement, settlement
agreement, franchise, lease or other instrument to which the Company or any of
its Subsidiaries is a party or by which it or any of them may be bound or to
which any of the property or assets of the Company or any of its Subsidiaries
is subject (each of the instruments or agreements listed in clauses (i) and
(ii), an "Existing Instrument"), including, without limitation, the material
Existing Instruments listed in Schedule C attached hereto, except for such
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Defaults as would not, individually or in the aggregate, result in a Material
Adverse Change.
(n) Authorization and Non-Contravention of Existing Instruments. The
execution, delivery and performance by the Company and each Subsidiary, as
applicable, of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus (i) have been duly authorized by all
necessary corporate, partnership or member action, as applicable, and will not
result in any violation of the provisions of the charter, by-laws, partnership
agreement, partnership certificate or other organizational document, as
applicable, of the Company or any Subsidiary, (ii) will not conflict with or
constitute a breach of, or Default or a Debt Repayment Triggering Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of its
Subsidiaries pursuant to any Existing Instrument, except for such conflicts,
breaches, Defaults, liens, charges or encumbrances as would not, individually
or in the aggregate, result in a Material Adverse Change (iii) will not
require the consent of any other party to an Existing Instrument except for
such consents which have been obtained in writing by the Company or a
Subsidiary, as applicable (the "Written Consents"), and (iv) will not result
in any violation of any law, administrative regulation or administrative or
court decree applicable to the Company or any Subsidiary. As used herein, a
"Debt Repayment Triggering Event" means any event or condition which gives, or
with the giving of notice or lapse of time, or both, would give, the holder of
any note, debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any of
its Subsidiaries.
(o) No Further Authorizations or Approvals Required. No consent, approval,
authorization or other order of, or registration or filing with, any court or
other governmental or regulatory authority or agency, is required for the
execution, delivery and performance by the Company and each Subsidiary, as
applicable, of this Agreement and for consummation of the transactions
contemplated hereby and by the Prospectus, except such as have been obtained
or made and are in full force and effect under the Securities Act, applicable
state securities or blue sky laws and from the National Association of
Securities Dealers, Inc. (the "NASD").
(p) No Material Actions or Proceedings. There are no legal or governmental
actions, suits or proceedings pending or threatened (i) against or affecting
the Company or any of its Subsidiaries, (ii) which has as the subject thereof
any officer or director of, or property owned or leased by, the Company or any
of its Subsidiaries or (iii) relating to environmental
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or discrimination matters, where in any such case (A) there is a reasonable
possibility that such action, suit or proceeding might be determined adversely
to the Company or such Subsidiary and (B) any such action, suit or proceeding,
if so determined adversely, would reasonably be expected to result in a
Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement or the Prospectus. No material
labor dispute with the employees of the Company or any of its Subsidiaries, or
with the employees of any principal supplier of the Company, exists or is
threatened or imminent.
(q) Tax Indemnification Agreement. The Company has entered into a tax
indemnification agreement dated as of October 15, 1997, by and between the
Company and The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Irrevocable Trust, The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Grantor
Trust, ▇▇▇▇▇ ▇. ▇▇▇▇ Living Trust, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇, D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr., ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (the
"Tax Agreement"). The Tax Agreement provides certain indemnification in the
event taxable income of the Company reported for periods prior to the First
Closing Date are subsequently revised. The Tax Agreement has been duly
executed, authorized and delivered, and is valid and enforceable against all
parties in accordance with its terms and no other indemnification agreement
exists respecting the subject matter of the Tax Agreement.
(r) Settlement Agreement. The Company has entered into a settlement
agreement dated as of April 11, 1996, by and between ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇, D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr., ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (the
foregoing collectively referred to as the "▇▇▇▇ Family"), ▇▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Headlands Insurance Agency, Inc., and Marin Conveyancing
Corporation (the "Settlement Agreement"). The Settlement Agreement (i) has
been duly executed, authorized and delivered, and is valid and enforceable
against all parties in accordance with its terms, (ii) resolves each and every
claim among the parties covered thereby and (iii) is in full force and effect.
The ▇▇▇▇ Family has no other claims or rights against the Company outside the
Settlement Agreement and there are no other agreements or accords which
attempt to resolve any dispute among the parties.
(s) Securitizations. The Company and its Subsidiaries have sold interests
in mortgages through securitizations, as further described in the Registration
Statement. All securitizations, whether conducted by the Company, its
Subsidiaries or any other third party on behalf of the Company or any of its
Subsidiaries, including, without limitation, Headlands Home Equity Loan Trust
1997-1, have been conducted and all securities created by such securitizations
have been sold in compliance with all applicable rules and regulations,
including, but not limited to, the Act and the Exchange Act.
(t) National Association of Securities Dealers. None of the beneficial
owners of capital stock of the Company or its Subsidiaries have been admitted
to membership in the National Association of Securities Dealers (the "NASD")
under the provisions of Articles II and III of the By-laws of the NASD. In
addition, none of the beneficial owners of capital stock of the Company or its
Subsidiaries are (i) a sole proprietor, partner, officer, director or branch
manager of any member of the NASD or a person occupying a similar status or
performing similar functions, (ii) a person engaged in the investment banking
or securities business who is directly or indirectly controlling or controlled
by a member of the NASD, (iii) a person
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who is also the beneficial owner of capital stock of a member of the NASD, or
(iv) a person who controls, is controlled by or is under common control with a
member of the NASD.
(u) Intellectual Property Rights. The Company and its Subsidiaries own or
possess all trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights including, without
limitation, rights to the names "Headlands Mortgage Company" and "Headlands
Mortgage Securities Inc." (collectively, "Intellectual Property Rights")
reasonably necessary to conduct their businesses as now conducted; and the
expected expiration of any of such Intellectual Property Rights would not
result in a Material Adverse Change. Neither the Company nor any of its
Subsidiaries has received any notice of infringement or conflict with asserted
Intellectual Property Rights of others.
(v) Compliance with All Applicable Laws. Each of the Company and each
Subsidiary is conducting business in compliance with all applicable state,
federal and foreign laws, rules and regulations, except where the failure to
be in compliance, if the subject of an unfavorable decision, ruling or
finding, would not singly or in the aggregate result in a Material Adverse
Change. The description of the laws and regulations affecting the Company and
the Subsidiaries' investment operations in the Prospectus is a true and
accurate description thereof in all material respects.
(w) All Necessary Permits, etc. The Company and each Subsidiary possess
such valid and current certificates, authorizations, licenses or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct their respective businesses (each of the
certificates, authorizations, licenses or permits, a "Necessary Permit", is
set forth on Schedule D attached hereto) except for such the absence of which
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could not, singly or in the aggregate, result in a Material Adverse Change,
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of, or non-compliance
with, any such certificate, authorization, licenses or permit which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or
finding, could result in a Material Adverse Change.
(x) Title to Properties. The Company and each of its Subsidiaries has good
and marketable title to all the properties and assets reflected as owned in
the financial statements referred to in this Agreement or in the Prospectus,
in each case free and clear of any security interests, mortgages, liens,
encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not
materially interfere with the use made or proposed to be made of such property
by the Company or such Subsidiary. The real property, improvements, equipment
and personal property held under lease by the Company or any Subsidiary are
held under valid and enforceable leases, with such exceptions as are not
material and do not materially interfere with the use made or proposed to be
made of such real property, improvements, equipment or personal property by
the Company or such Subsidiary. Each of the Company and its Subsidiaries owns
or leases all such real and personal property as is reasonably necessary to
its operations as now conducted and as proposed to be conducted.
(y) Tax Law Compliance. The Company and its consolidated Subsidiaries have
filed all necessary federal, state and foreign income and franchise tax
returns or have properly
8
requested extensions thereof and have paid all taxes required to be paid by
any of them and, if due and payable, any related or similar assessment, fine
or penalty levied against any of them except as may be contested in good faith
and for which adequate reserves have been taken in conformity with generally
accepted accounting principles. The Company has made adequate charges,
accruals and reserves in the applicable financial statements referred to in
Section 1(A)(i) above in respect of all federal, state and foreign income and
franchise taxes for all periods as to which the tax liability of the Company
or any of its consolidated Subsidiaries has not been finally determined.
(z) Company Not an "Investment Company". The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Neither the Company nor any
Subsidiary is, and after receipt of payment for the Common Shares will not be,
an "investment company" within the meaning of Investment Company Act.
Moreover, the Company and each Subsidiary will conduct its respective business
in a manner so that it will not become subject to the Investment Company Act.
(aa) Insurance. Each of the Company and its Subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering the Company and its Subsidiaries against business
interruptions and policies covering real and personal property owned or leased
by the Company and its Subsidiaries against theft, damage, destruction, acts
of vandalism and earthquakes. The Company has no reason to believe that it or
any Subsidiary will not be able (i) to renew its existing insurance coverage
as and when such policies expire or (ii) to obtain comparable coverage from
similar institutions as may be necessary or appropriate to conduct its
business as now conducted and at a cost that would not result in a Material
Adverse Change. Neither of the Company nor any Subsidiary has been denied any
insurance coverage which it has sought or for which it has applied.
(ab) No Price Stabilization or Manipulation. Neither the Company nor any
Subsidiary has taken and will not take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Common Shares.
(ac) No Broker or Finder Fees. Neither the Company nor any affiliate of
the Company has incurred any liability for a fee, commission or other
compensation on account of the employment or engagement of a broker or finder
in connection with the transactions contemplated by this Agreement.
(ad) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any Subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.
(ae) No Unlawful Contributions or Other Payments. Neither the Company nor
any of its Subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any Subsidiary, has (i) made any
contribution or other payment to any official
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of, or candidate for, any federal, state or foreign office in violation of any
law or of the character required to be disclosed in the Prospectus or (ii)
made any payment to any federal or state government official, or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.
(af) Company's Accounting System. The Company and its Subsidiaries
maintain and will continue to maintain a system of accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(ag) Compliance with Environmental Laws. Except as would not, individually
or in the aggregate, result in a Material Adverse Change (i) neither the
Company nor any of its Subsidiaries is in violation of any federal, state,
local or foreign law or regulation relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products (collectively, "Materials of Environmental Concern"), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environment Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of the
Company or its Subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or
any of its Subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its Subsidiaries is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to which
the Company has received written notice, and no written notice by any person
or entity alleging potential liability for investigatory costs, cleanup costs,
governmental responses costs, natural resources damages, property damages,
personal injuries, attorneys' fees or penalties arising out of, based on or
resulting from the presence, or release into the environment, of any Material
of Environmental Concern at any location owned, leased or operated by the
Company or any of its Subsidiaries, now or in the past (collectively,
"Environmental Claims"), pending or, to the best of the Company's knowledge,
threatened against the Company or any of its Subsidiaries or any person or
entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries has retained or assumed either contractually or by operation of
law; and (iii) to the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that reasonably could
result in a violation of any
10
Environmental Law or form the basis of a potential Environmental Claim against
the Company or any of its Subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its Subsidiaries
has retained or assumed either contractually or by operation of law.
(ah) Periodic Review of Costs of Environmental Compliance. In the ordinary
course of its business, the Company conducts a periodic review of the effect
of Environmental Laws on the business, operations and properties of the
Company and its Subsidiaries, in the course of which it identifies and
evaluates associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of properties
or compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties). On the basis of such review and the amount of its established
reserves, the Company has reasonably concluded that such associated costs and
liabilities would not, individually or in the aggregate, result in a Material
Adverse Change.
(ai) No Material or Undisclosed Environmental Liability. There is no
liability, alleged liability or potential liability (including, without
limitation, liability, alleged liability or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties), of the
Company or of any Subsidiary arising out of, based on or resulting from (a)
the presence or release into the environment of any Material of Environmental
Concern at any location, whether or not owned by the Company or any of the
Subsidiaries or (b) any violation or alleged violation of any Environmental
Law, which liability, alleged liability or potential liability is required to
be disclosed in the Registration Statement, other than as disclosed therein,
or which liability, alleged liability or potential liability, singly or in the
aggregate, would cause a Material Adverse Change.
(aj) No ERISA "Plan Assets." None of the assets of the Company or the
Subsidiaries constitutes, nor will such assets, as of either the First or
Second Closing Date, constitute "plan assets" under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
(ak) ERISA Compliance. The Company and its Subsidiaries and any "employee
benefit plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
Subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance
in all material respects with ERISA. "ERISA Affiliate" means, with respect to
the Company or a Subsidiary, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such Subsidiary is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company, its Subsidiaries or any of their ERISA Affiliates.
No "employee benefit plan" established or maintained by the Company, its
Subsidiaries or any of their ERISA Affiliates, if such "employee benefit plan"
were terminated, would have any "amount of unfunded benefit liabilities" (as
defined under
11
ERISA). Neither the Company, its Subsidiaries nor any of their ERISA
Affiliates has incurred or reasonably expects to incur any liability under (i)
Title IV of ERISA with respect to termination of, or withdrawal from, any
"employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code.
Each "employee benefit plan" established or maintained by the Company, its
Subsidiaries or any of their ERISA Affiliates that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification.
(al) Material Contracts. There are no contracts or other documents
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement by the Securities Act which have not
been described or filed as required. Neither the Company nor any Subsidiary is
subject to a collective bargaining agreement.
Any certificate signed by an officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
Selling Shareholder represents, warrants and covenants to each Underwriter as
follows:
(a) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by or on behalf of such Selling Shareholder and is a
valid and binding agreement of such Selling Shareholder, enforceable in
accordance with its terms, except as rights to indemnification hereunder may
be limited by applicable law and except as the enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(b) The Custody Agreement and Power of Attorney. Each of the (i) Custody
Agreement signed by and on behalf of such Selling Shareholder and The Bank of
New York, as custodian (the "Custodian"), relating to the deposit of the
Common Shares to be sold by such Selling Shareholder (the "Custody Agreement")
and (ii) Power of Attorney appointing certain individuals named therein as
such Selling Shareholder's attorneys-in-fact (each, an "Attorney-in-Fact") to
the extent set forth therein relating to the transactions contemplated hereby
and by the Prospectus (the "Power of Attorney"), of such Selling Shareholder
has been duly authorized, executed and delivered by and on behalf of such
Selling Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
The execution, delivery and performance of this Agreement, the Custody
Agreement, the Power of Attorney, as applicable, and the consummation of the
transactions contemplated hereby and by the foregoing agreements will not
result in a breach or violation by such Selling Shareholder of any of the
terms or provisions of, or constitute a default by such Selling Shareholder
under, any indenture, mortgage, deed of trust, trust (constructive
12
or other), loan agreement, tax indemnity agreement, settlement agreement,
lease, franchise, license or other agreement or instrument to which such
Selling Shareholder is a party or by which such Selling Shareholder or any of
its properties is bound, any statute, or any judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to such
Selling Shareholder or any of its properties, except for such breaches and
violations as would not, individually or in the aggregate, be deemed material.
(c) Title to Common Shares to be Sold; All Authorizations Obtained. Such
Selling Shareholder has, and on the First Closing Date and the Second Closing
Date (as defined below) will have, good and valid title to all of the Common
Shares which may be sold by such Selling Shareholder pursuant to this
Agreement on such date and the legal right and power, and all authorizations
and approvals required by law and under its charter or by-laws, partnership
agreement, trust agreement or other organizational documents to enter into
this Agreement and its Custody Agreement and Power of Attorney, to sell,
transfer and deliver all of the Common Shares which may be sold by such
Selling Shareholder pursuant to this Agreement and to comply with its other
obligations hereunder and thereunder.
(d) Delivery of the Common Shares to be Sold. Delivery of the Common
Shares which are sold by such Selling Shareholder pursuant to this Agreement
will pass good and valid title to such Common Shares, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or other claim.
(e) Non-Contravention; No Further Authorizations or Approvals Required.
The execution and delivery by or on behalf of such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under, and the
consummation of the transaction contemplated under this Agreement, the Custody
Agreement and the Power of Attorney will not contravene or conflict with,
result in a breach of, or constitute a Default under, or require the consent
of any other party to, the charter or by-laws, partnership agreement, trust
agreement or other organizational documents of such Selling Shareholder or any
other agreement or instrument to which such Selling Shareholder is a party or
by which it is bound or under which it is entitled to any right or benefit,
any provision of applicable law or any judgment, order, decree or regulation
applicable to such Selling Shareholder of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over such Selling Shareholder. No consent, approval, authorization or other
order of, or registration or filing with, any court or other governmental
authority or agency, is required for the consummation by such Selling
Shareholder of the transactions contemplated in this Agreement, except such as
have been obtained or made and are in full force and effect under the
Securities Act, applicable state securities or blue sky laws and from the
NASD.
(f) No Registration or Other Similar Rights. Such Selling Shareholder does
not have, or has waived prior to the date hereof (which waiver, if any, has
not been rescinded and is in full force and effect on the date hereof) any
registration or other similar rights to have any equity or debt securities
registered for sale by the Company under the Registration Statement or
included in the offering contemplated by this Agreement, except for such
rights as are described in the Prospectus under "Description of Capital
Stock."
13
(g) No Further Consents, etc. Except for the allocation of the shares to
be sold pursuant to that certain Voting Trust Agreement, dated as of September
15, 1997, as amended as of October 17, 1997 (the "Voting Trust"), no consent,
approval or waiver is required under any instrument or agreement to which such
Selling Shareholder is a party or by which it is bound or under which it is
entitled to any right or benefit, in connection with the offering, sale or
purchase by the Underwriters of any of the Common Shares which may be sold by
such Selling Shareholder under this Agreement or the consummation by such
Selling Shareholder of any of the other transactions contemplated hereby.
(h) Tax Indemnification Agreement. The Company has entered into a tax
indemnification agreement dated as of October 15, 1997, by and between the
Company and The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Irrevocable Trust, The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Grantor
Trust, ▇▇▇▇▇ ▇. ▇▇▇▇ Living Trust, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇, D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr., ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (the
"Tax Agreement"). The Tax Agreement provides certain indemnification in the
event taxable income of the Company reported for periods prior to the First
Closing Date are subsequently revised. The Tax Agreement has been duly
executed, authorized and delivered by, and is valid and enforceable against,
such Selling Shareholder in accordance with its terms and no other
indemnification agreement exists respecting the subject matter of the Tax
Agreement.
(i) Settlement Agreement. The Company has entered into a settlement
agreement dated as of April 11, 1996, by and between ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇, D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr., ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (the
foregoing collectively referred to as the "▇▇▇▇ Family"), ▇▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Headlands Insurance Agency, Inc., and Marin Conveyancing
Corporation (the "Settlement Agreement"). The Settlement Agreement (i) has
been duly executed, authorized and delivered by, and is valid and enforceable
against, such Selling Shareholder in accordance with its terms, (ii) resolves
each and every claim among the parties covered thereby and (iii) is in full
force and effect. The ▇▇▇▇ Family has no other claims or rights against the
Company outside the Settlement Agreement and there are no other agreements or
accords which attempt to resolve any dispute among the parties.
(j) National Association of Securities Dealers. Such Selling Shareholder
(i) has not been admitted to membership in the NASD under the provisions of
Articles II and III of the By-laws of the NASD, (ii) is not a sole proprietor,
partner, officer, director or branch manager of any member of the NASD or a
person occupying a similar status or performing similar functions, (iii) is
not a person engaged in the investment banking or securities business who is
directly or indirectly controlling or controlled by a member of the NASD, (iv)
a person who is also the beneficial owner of capital stock of a member of the
NASD, or (v) a person who controls, is controlled by or is under common
control with a member of the NASD.
(k) Disclosure Made by Such Selling Shareholder in the Prospectus. All
information furnished by or on behalf of such Selling Shareholder in writing
expressly for use in the Registration Statement and Prospectus is, and on the
First Closing Date and the Second Closing Date will be, true, correct, and
complete in all material respects, and does not, and on the First Closing Date
and the Second Closing Date will not, contain any untrue statement of a
material fact or omit to state any material fact necessary to make such
information not
14
misleading. Such Selling Shareholder confirms as accurate the number of
shares of Common Stock set forth opposite such Selling Shareholder's name in
the Prospectus under the caption "Principal and Selling Shareholders" (both
prior to and after giving effect to the sale of the Common Shares).
(l) No Price Stabilization or Manipulation. Such Selling Shareholder has
not taken and will not take, directly or indirectly, any action designed to or
that might be reasonably expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Common Shares.
(m) Belief as to Accuracy of Company Representations and Warranties and
Compliance with Law; No Knowledge of Material Misstatements or Omissions.
Such Selling Shareholder has read the Registration Statement, the Preliminary
Prospectus, the Prospectus and this Agreement and based on such reading and
his or her current actual knowledge of the circumstances described therein and
herein, but without having conducted any other investigation or inquiry, such
Selling Shareholder (i) has no reason to believe that the representations and
warranties of the Company contained in Section 1(A) hereof are not true and
correct, (ii) has no knowledge of any material fact, condition or information
not disclosed in the Registration Statement or the Prospectus which has had or
may have a Material Adverse Effect, (iii) has no reason to believe that each
of the Preliminary Prospectus, Prospectus and the Registration Statement did
not conform in all material respects to the requirements of the Securities
Act, and (iv) is not prompted to sell shares of Common Stock by any
information concerning the Company which is not set forth in the Registration
Statement and the Prospectus.
Any certificate signed by or on behalf of any Selling Shareholder and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Shareholder to each
Underwriter as to the matters covered thereby.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
(a) The Firm Common Shares. Upon the terms herein set forth, (i) the
Company agrees to issue and sell to the several Underwriters an aggregate of
4,500,000 Firm Common Shares and (ii) the Selling Shareholders agree to sell to
the several Underwriters an aggregate of 3,500,000 Firm Common Shares, each
Selling Shareholder selling the number of Firm Common Shares set forth opposite
such Selling Shareholder's name on Schedule B. On the basis of the
----------
representations, warranties and agreements herein contained, and upon the terms
but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company and the Selling
Shareholders the respective number of Firm Common Shares set forth opposite
their names on Schedule A. The purchase price per Firm Common Share to be paid
----------
by the several Underwriters to the Company and the Selling Shareholders shall be
$___ per share.
(b) The First Closing Date. Delivery of certificates for the Firm Common
Shares to be purchased by the Underwriters and payment therefor shall be made at
the offices of
15
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ (or such other place as may be agreed to by the Company and the
Representatives) at 9:00 a.m. San Francisco time, on January __, 1998, (the time
and date of such closing are called the "First Closing Date"). The Company and
the Selling Shareholders hereby acknowledge that circumstances under which the
Representatives may provide notice to postpone the First Closing Date as
originally scheduled include, but are in no way limited to, any determination by
the Company, the Selling Shareholders or the Representatives to recirculate to
the public copies of an amended or supplemented Prospectus or a delay as
contemplated by the provisions of Section 10.
(c) The Optional Common Shares; the Second Closing Date. In addition, on
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of 1,200,000 Optional Common Shares from the
Company at the purchase price per share to be paid by the Underwriters for the
Firm Common Shares. The option granted hereunder is for use by the Underwriters
solely in covering any over-allotments in connection with the sale and
distribution of the Firm Common Shares. The option granted hereunder may be
exercised at any time (but not more than once) upon notice by the
Representatives to the Company which notice may be given at any time within 30
days from the date of this Agreement. Such notice shall set forth (i) the
aggregate number of Optional Common Shares as to which the Underwriters are
exercising the option, (ii) the names and denominations in which the
certificates for the Optional Common Shares are to be registered and (iii) the
time, date and place at which such certificates will be delivered (which time
and date may be simultaneous with, but not earlier than, the First Closing Date;
and in such case the term "First Closing Date" shall refer to the time and date
of delivery of certificates for the Firm Common Shares and the Optional Common
Shares). Such time and date of delivery, if subsequent to the First Closing
Date, is called the "Second Closing Date" and shall be determined by the
Representatives and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Optional Common
Shares are to be purchased, each Underwriter agrees, severally and not jointly,
to purchase the number of Optional Common Shares (subject to such adjustments to
eliminate fractional shares as the Representatives may determine) that bears the
same proportion to the total number of Optional Common Shares to be purchased as
the number of Firm Common Shares set forth on Schedule A opposite the name of
----------
such Underwriter bears to the total number of Firm Common Shares. The
Representatives may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
(d) Public Offering of the Common Shares. The Representatives hereby
advise the Company and the Selling Shareholders that the Underwriters intend to
offer for sale to the public, as described in the Prospectus, their respective
portions of the Common Shares as soon after this Agreement has been executed and
the Registration Statement has been declared effective as the Representatives,
in its sole judgment, has determined is advisable and practicable.
(e) Payment for the Common Shares. Payment for the Common Shares to be
sold by the Company shall be made at the First Closing Date (and, if applicable,
at the Second Closing Date) by wire transfer of immediately available funds to
the order of the Company or to such account as the Company may designate.
Payment for the Common Shares to be sold by the
16
Selling Shareholders shall be made at the First Closing Date by wire transfer of
immediately available funds to the order of the Custodian.
It is understood that the Representatives have been authorized, for their
own account and the accounts of the several Underwriters, to accept delivery of
and receipt for, and make payment of the purchase price for, the Firm Common
Shares and any Optional Common Shares the Underwriters have agreed to purchase.
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC, individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by the Representatives by the First Closing Date or
the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any of
its obligations under this Agreement.
Each Selling Shareholder hereby agrees that (i) it will pay all stock
transfer taxes, stamp duties and other similar taxes, if any, payable upon the
sale or delivery of the Common Shares to be sold by such Selling Shareholder to
the several Underwriters, or otherwise in connection with the performance of
such Selling Shareholder's obligations hereunder and (ii) the Custodian is
authorized to deduct for such payment any such amounts from the proceeds to such
Selling Shareholder hereunder and to hold such amounts for the account of such
Selling Shareholder with the Custodian under the Custody Agreement.
(f) Delivery of the Common Shares.
(i) The Company and the Selling Shareholders shall deliver, or cause
to be delivered, to the Representatives for the accounts of the several
Underwriters certificates for the Firm Common Shares to be sold by them at the
First Closing Date, against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price therefor. The
Company shall also deliver, or cause to be delivered, to the Representatives for
the accounts of the several Underwriters, certificates for the Optional Common
Shares the Underwriters have agreed to purchase from it at the First Closing
Date or the Second Closing Date, as the case may be, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. The certificates for the Common Shares shall be in
definitive form and registered in such names and denominations as the
Representatives shall have requested at least two full business days prior to
the First Closing Date (or the Second Closing Date, as the case may be) and
shall be made available for inspection on the business day preceding the First
Closing Date (or the Second Closing Date, as the case may be) at a location in
New York City as the Representatives may designate.
(ii) Notwithstanding the terms of the preceding Section 2(f)(i) or
elsewhere in this Agreement that contemplate physical certificates for the
Common Shares, upon the Company's request but only with the consent of the
Representatives the Shares may be issued without certificates and constructive
delivery of such uncertificated Common Shares to the Underwriters may be
accomplished through The Depository Trust Company by the Company causing the
transfer agent and registrar of the Common Shares, on the applicable Closing
Date, to issue one or more Depository Trust Company Book Entry Positions,
representing in the aggregate the number of Common Shares to be delivered to the
Representatives on such Closing Date, to such
17
account or accounts as shall be specified by the Representatives in an
instruction letter or other communication to the Company or such transfer agent.
(g) Time of the Essence. Time shall be of the essence, and delivery at the
time and place specified in this Agreement is a further condition to the
obligations of the Underwriters.
(h) Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m.
on the second business day following the date the Common Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
SECTION 3. ADDITIONAL COVENANTS.
A. COVENANTS OF THE COMPANY. The Company further covenants and agrees with
each Underwriter as follows:
(a) Representatives' Review of Proposed Amendments and Supplements. During
such period beginning on the date hereof and ending on the later of the First
Closing Date or such date, as in the opinion of counsel for the Underwriters,
the Prospectus is no longer required by law to be delivered in connection with
sales by an Underwriter or dealer (the "Prospectus Delivery Period"), prior to
amending or supplementing the Registration Statement (including any
registration statement filed under Rule 462(b) under the Securities Act) or
the Prospectus, the Company shall furnish to the Representatives for review a
copy of each such proposed amendment or supplement, and the Company shall not
file any such proposed amendment or supplement to which the Representatives
reasonably object.
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representatives in writing (i) of the
receipt of any comments of, or requests for additional or supplemental
information from, the Commission, (ii) of the time and date of any filing of
any post-effective amendment to the Registration Statement or any amendment or
supplement to any preliminary prospectus or the Prospectus, (iii) of the time
and date that any post-effective amendment to the Registration Statement
becomes effective and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any post-
effective amendment thereto or of any order preventing or suspending the use
of any preliminary prospectus or the Prospectus, or of any proceedings to
remove, suspend or terminate from listing or quotation the Common Stock from
any securities exchange upon which the Common Stock is listed for trading or
included or designated for quotation, or of the threatening or initiation of
any proceedings for any of such purposes. If the Commission shall enter any
such stop order at any time, the Company will use its best efforts to obtain
the lifting of such order at the earliest possible moment. Additionally, the
Company agrees that it shall comply with the provisions of Rules 424(b), 430A
and 434, as applicable, under the Securities Act and will use its reasonable
efforts to confirm that any filings made by the Company under such Rule 424(b)
were received in a timely manner by the Commission.
18
(c) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if in the opinion of the Representatives or counsel for the Underwriters it
is otherwise necessary to amend or supplement the Prospectus to comply with
law, the Company agrees promptly to prepare (subject to Section 3(A)(a)
hereof), file with the Commission and furnish at its own expense to the
Underwriters and to dealers, amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented will not,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Representatives may request.
(e) Press Releases. If at any time during the ninety (90) day period after
the Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company or its Subsidiaries shall occur as a
result of which in the Representatives' opinion the market price of the Units
has been or is likely materially to be affected (regardless of whether such
rumor, publication or event necessitates a supplement or amendment to the
Prospectus), the Company will promptly prepare, consult with the
Representatives concerning the content of, and disseminate a press release or
other public statement, reasonably satisfactory to the Representatives,
responding to or commenting on such rumor, publication or event.
(f) Blue Sky Compliance. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register the
Common Shares for sale under (or obtain exemptions from the application of)
the Blue Sky or state securities laws of those jurisdictions designated by the
Representatives, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required for
the distribution of the Common Shares. The Company shall not be required to
qualify as a foreign corporation or to take any action that would subject it
to general service of process in any such jurisdiction where it is not
presently qualified or where it would be subject to taxation as a foreign
corporation. The Company will advise the Representatives promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best
efforts to obtain the withdrawal thereof at the earliest possible moment.
(g) Use of Proceeds. The Company and its Subsidiaries shall apply the net
proceeds from the sale of the Common Shares sold by it in the manner described
under the caption "Use of Proceeds" in the Prospectus. In addition, the
Company will not use the proceeds of
19
the sale of the Common Shares in such a manner as to require the Company or
any Subsidiary to be registered under the Investment Company Act.
(h) Continuing Inclusion on the Nasdaq National Market. The Company will
use its reasonable best efforts to initiate and continue the inclusion of the
Common Shares on the Nasdaq National Market and will continue to comply with
all of the rules and regulations thereof applicable to the Company and the
listing of the Common Shares.
(i) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Common Stock.
(j) Earnings Statement. As soon as practicable, the Company shall make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve (12) month
period ending on the final day of the Company's first quarter that ends at
least one year after "the effective date of the Registration Statement" (as
defined in Rule 158(c) under the Securities Act) that satisfies the provisions
of Section 11(a) of the Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Exchange Act. Additionally, the Company shall file with the Commission all
reports on Form SR as may be required under Rule 463 under the Securities Act.
(l) Agreement Not To Offer or Sell Additional Securities. During the
period of 180 days following the date of the Prospectus, the Company will not,
without the prior written consent of NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
(which consent may be withheld at the sole discretion of NationsBanc
▇▇▇▇▇▇▇▇▇▇ Securities LLC), directly or indirectly, sell, offer, contract or
grant any option to sell, pledge, transfer or establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Exchange
Act, or otherwise dispose of or transfer, or announce the offering of, or file
any registration statement under the Securities Act in respect of, any shares
of Common Stock, options or warrants to acquire shares of the Common Stock or
securities exchangeable or exercisable for or convertible into shares of
Common Stock (other than as contemplated by this Agreement with respect to the
Common Shares); provided, however, that the Company may issue shares of its
Common Stock or options to purchase its Common Stock, or Common Stock upon
exercise of options, pursuant to any stock option, stock bonus or other stock
plan or arrangement described in the Prospectus, but only if the holders of
such shares, options, or shares issued upon exercise of such options, agree in
writing not to sell, offer, dispose of or otherwise transfer any such shares
or options during such three hundred sixty-five (365) day period without the
prior written consent of NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC (which consent
may be withheld at the sole discretion of the NationsBanc ▇▇▇▇▇▇▇▇▇▇
Securities LLC).
(m) Future Reports to the Representatives. During the period of five years
hereafter the Company will furnish, upon request, to the NationsBanc
▇▇▇▇▇▇▇▇▇▇ Securities LLC at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and to
20
O'Melveny & ▇▇▇▇▇ LLP at the address set forth in Section 13: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of
such fiscal year and statements of income, shareholders' equity and cash flows
for the year then ended and the opinion thereon of the Company's independent
public or certified public accountants; (ii) as soon as practicable after the
filing thereof, copies of each proxy statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report
filed by the Company with the Commission, the NASD or any securities exchange;
and (iii) as soon as available, copies of any report or communication of the
Company mailed generally to holders of its capital stock.
(n) Accounting and Tax Advice. The Company shall engage and retain a
nationally recognized accounting firm as its qualified accountants and such
tax experts at such accounting firm with experience in advising firms similar
to the Company and as are reasonably acceptable to the Representatives for a
period of not less than two years beginning on the First Closing Date.
(o) Commodities Exchange Act. The Company shall not, and shall not permit
any of its Subsidiaries to, invest in futures contracts, options on futures
contracts or options on commodities unless such entities are exempt from the
registration requirements of the Commodity Exchange Act, as amended, or
otherwise comply with the Commodity Exchange Act, as amended.
(p) Investment Advisors Act. The Company shall not, and shall not permit
any of its Subsidiaries to, engage in any activity which would cause or
require such entity to register as an investment advisor under the Investment
Advisors Act of 1940. Without limiting the generality of the foregoing, the
Company shall not, and shall not permit any Subsidiary to: (i) render
investment advice to more than fifteen clients, (ii) hold itself out generally
to the public as an investment advisor, or (iii) act as an investment advisor
to any investment company that is registered under the Investment Company Act.
(q) Tax Agreement; Settlement Agreement. The Company shall perform its
obligations under the Tax Agreement and the Settlement Agreement and shall
enforce its rights under each of the foregoing agreements.
(r) Securitizations. The Company and its Subsidiaries plan to sell
interests in mortgages through securitizations, as further described in the
Registration Statement. All securitizations, including, without limitation,
those conducted by the Company, its Subsidiaries or any other third party on
behalf of the Company or any of its Subsidiaries, will be conducted and all
securities created by such securitizations will be sold in compliance with all
applicable rules and regulations, including, but not limited to, the Act and
the Exchange Act.
(s) Agreements with Management. The Company will, and will cause each
Subsidiary, in good faith to expend reasonable efforts to enforce the terms of
any of any agreements with any director,officer or shareholder of the Company.
21
(t) SEC Compliance Program and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Compliance Policy. The
Company shall adopt and implement (i) a compliance program, reasonably
acceptable to counsel for the Underwriters, to ensure compliance with the
reporting requirements under the Exchange Act and the securities laws
generally and (ii) an ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ compliance policy, reasonably acceptable
to counsel for the Underwriters, to govern their employees' and directors'
trading in securities of the Company and all Company affiliates in accordance
with federal law and all applicable state and Canadian blue sky laws.
B. COVENANTS OF THE SELLING SHAREHOLDERS. Each Selling Shareholder
further covenants and agrees with each Underwriter:
(a) Agreement Not to Offer or Sell Additional Securities. Such Selling
Shareholder will not, without the prior written consent of NationsBanc
▇▇▇▇▇▇▇▇▇▇ Securities LLC (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-
1(h) under the Exchange Act, or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined in
Rule 13d-3 under Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through
the close of trading on the date 180 days after the date of the Prospectus.
(b) Delivery of Forms W-8 and W-9. To deliver to the Representatives prior
to the First Closing Date a properly completed and executed United States
Treasury Department Form W-8 (if the Selling Shareholder is a non-United
States person) or Form W-9 (if the Selling Shareholder is a United States
Person).
(c) Tax Agreement; Settlement Agreement. Each Selling Shareholder shall
perform its obligations under the Tax Agreement and the Settlement Agreement
and shall enforce its rights under each of the foregoing agreements.
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC, on behalf of the several Underwriters,
may, in its sole discretion, waive in writing the performance by the Company or
any Selling Shareholder of any one or more of the foregoing covenants or extend
the time for their performance.
SECTION 4. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated herein are consummated or this Agreement becomes effective or is
terminated, the Company and the Selling Shareholders, jointly and severally,
agree to pay in such proportions as they may agree upon among themselves all
costs, fees and expenses incurred in connection with the performance of their
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Common Shares (including all printing and engraving costs),
(ii) all fees and expenses of the registrar and transfer agent of the Common
Stock, (iii) all necessary issue, transfer and other stamp taxes in connection
with the issuance and sale of the Common Shares to the Underwriters, (iv) all
fees
22
and expenses of the Company's counsel, independent public or certified pubic
accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), each preliminary prospectus and the
Prospectus, and all amendments and supplements thereto, and this Agreement, (vi)
all filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Common Shares for offer and sale under the Blue Sky laws, and, if requested by
the Representatives, preparing and printing a "Blue Sky Survey" or memorandum,
and any supplements thereto, advising the Underwriters of such qualifications,
registrations and exemptions, (vii) the filing fees incident to, and the
reasonable fees and expenses of counsel for the Underwriters in connection with,
the NASD's review and approval of the Underwriters' participation in the
offering and distribution of the Common Shares, (viii) the fees and expenses
associated with including the Common Shares on the Nasdaq National Market, and
(ix) all other fees, costs and expenses referred to in Item 14 of Part II of the
Registration Statement. Except as provided in this Section 4, Section 6,
Section 8 and Section 9 hereof, the Underwriters shall pay their own expenses,
including the fees and disbursements of their counsel.
The Selling Shareholders further agree with each Underwriter to pay
(directly or by reimbursement) all fees and expenses incident to the performance
of their obligations under this Agreement which are not otherwise specifically
provided for herein, including but not limited to (i) fees and expenses of
counsel and other advisors for such Selling Shareholders (ii) fees and expenses
of the Custodian and (iii) expenses and taxes incident to the sale and delivery
of the Common Shares to be sold by such Selling Shareholders to the Underwriters
hereunder (which taxes, if any, may be deducted by the Custodian under the
provisions of Section 2 of this Agreement).
This Section 4 shall not affect or modify any separate, valid agreement
relating to the allocation of payment of expenses between the Company, on the
one hand, and the Selling Shareholders, on the other hand.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company and
the Selling Shareholders set forth in Sections 1(A) and 1(B) hereof as of the
date hereof and as of the First Closing Date as though then made and, with
respect to the Optional Common Shares, as of the Second Closing Date as though
then made, to the timely performance by the Company and the Selling Shareholders
of their respective covenants and other obligations hereunder, and to each of
the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Representatives
shall have received from KPMG Peat Marwick LLP, independent public or
certified public accountants for the Company, a letter dated the date hereof
addressed to the Underwriters, in form and substance satisfactory to the
Representatives, containing statements and information of the type ordinarily
included in accountant's "comfort letters" to underwriters, delivered
according
23
to Statement of Auditing Standards No. 72 (or any successor bulletin), with
respect to the audited and unaudited financial statements and certain
financial information contained in the Registration Statement and the
Prospectus (and the Representatives shall have received an additional three
(3) conformed copies of such accountants' letter for each of the several
Underwriters).
(b) Compliance with Registration Requirements; No Stop Order; No Objection
from NASD. For the period from and after effectiveness of this Agreement and
prior to the First Closing Date and, with respect to the Optional Common
Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities Act)
in the manner and within the time period required by Rule 424(b) under the
Securities Act; or the Company shall have filed a post-effective amendment
to the Registration Statement containing the information required by such
Rule 430A, and such post-effective amendment shall have become effective;
(ii) no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment to the Registration Statement, shall be in effect and no
proceedings for such purpose shall have been instituted or threatened by
the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For the period
from and after the date of this Agreement and prior to the First Closing Date
and, with respect to the Optional Common Shares, the Second Closing Date:
(i) in the judgment of the Representatives there shall not have
occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any securities of the Company or
any of its Subsidiaries by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under
the Securities Act.
(d) Opinion of Counsel for the Company. On each of the First Closing Date
and the Second Closing Date the Representatives shall have received the
favorable opinion of ▇▇▇▇▇ & ▇▇▇▇▇, a professional corporation, counsel for
the Company, dated as of such Closing Date, which opinion shall be in the form
attached hereto as Exhibit A (and the Representatives shall have received an
---------
additional three (3) conformed copies of such counsel's legal opinion for each
of the several Underwriters).
24
(e) Opinion of Counsel for the Underwriters. On each of the First Closing
Date and the Second Closing Date, the Representatives shall have received the
favorable opinion of O'Melveny & ▇▇▇▇▇ LLP, counsel for the Underwriters,
dated as of such Closing Date, with respect to such matters as the
Representatives shall have reasonably requested.
(f) Officers' Certificate. On each of the First Closing Date and the
Second Closing Date, the Representatives shall have received a written
certificate executed by the Chief Executive Officer of the Company and the
Chief Financial Officer of the Company, dated as of such Closing Date,
certifying as to such matters as the Representatives shall have requested,
including, without limitation, the matters set forth in subsections (b)(ii)
and (c)(ii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement and prior
to such Closing Date, there has not occurred any Material Adverse Change;
(ii) the representations, warranties and covenants of the Company set
forth in Section 1(A) of this Agreement are true and correct with the same
force and effect as though expressly made on and as of such Closing Date;
and
(iii) the Company and its Subsidiaries have complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date under this Agreement.
(g) Bring-down Comfort Letter. On each of the First Closing Date and the
Second Closing Date, the Representatives shall have received from KPMG Peat
Marwick LLP, independent public or certified public accountants for the
Company, a letter dated the Closing Date, in form and substance satisfactory
to the Representatives, to the effect that they reaffirm the statements made
in the letter furnished by them pursuant to subsection (a) of this Section 5,
except that the specified date referred to therein for the carrying out of
procedures shall be no more than three (3) business days prior to the First
Closing Date or Second Closing Date, as the case may be (and the
Representatives shall have received an additional three (3) conformed copies
of such accountants' letter for each of the several Underwriters).
(h) Opinion of Counsel for the Selling Shareholders. On each of the First
Closing Date and the Second Closing Date, the Representatives shall have
received the favorable opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for
the Selling Shareholders, dated as of such Closing Date, the form of which is
attached as Exhibit B (and the Representatives shall have received an
---------
additional three (3) conformed copies of such counsel's legal opinion for each
of the several Underwriters).
(i) Selling Shareholders' Certificate. On each of the First Closing Date
and the Second Closing Date, the Representatives shall have received a written
certificate executed by the Attorney-in-Fact of each Selling Shareholder,
dated as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of such Selling
Shareholder set forth in Sections 1(A) and 1(B) of this Agreement are true
and correct with the same
25
force and effect as though expressly made by such Selling Shareholder on
and as of such Closing Date; and
(ii) such Selling Shareholder has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to such Closing Date.
(j) Selling Shareholders' Documents. On the date hereof, the Company and
the Selling Shareholders shall have furnished for review by the
Representatives copies of the Powers of Attorney and Custody Agreements
executed by and on behalf of each of the Selling Shareholders and such further
information, certificates and documents as the Representatives may reasonably
request.
(k) Lock-Up Agreement from Certain Shareholders of the Company Other Than
Selling Shareholders. On the date hereof, the Company shall have furnished to
the Representatives an agreement in the form of Exhibit C hereto from each
---------
director, officer and each beneficial owner of more than 5% of the outstanding
Common Stock (after giving effect to the sale of the Firm Common Shares to the
Underwriters) (as defined and determined according to Rule 13d-3 under the
Exchange Act, except that a one hundred eighty (180) day period shall be used
rather than the sixty (60) day period set forth therein), and such agreement
shall be in full force and effect on each of the First Closing Date and the
Second Closing Date.
(l) Written Consents. On or before the First Closing Date, the Company
shall have furnished to the Representatives copies of the Written Consents
(referred to in Section 1(n) of this Agreement) under certain Existing
Instruments.
(m) Additional Documents. On or before each of the First Closing Date and
the Second Closing Date, the Representatives and counsel for the Underwriters
shall have received such information, documents and opinions as they may
reasonably require for the purposes of enabling them to pass upon the issuance
and sale of the Common Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
(n) Nasdaq National Market Inclusion. The Common Shares shall have been
approved for inclusion on the Nasdaq National Market, subject only to official
notice of issuance.
(o) Consummation of Charter Amendments. The certificates or articles of
incorporation of each of the Company and each of its Subsidiaries shall have
been amended to enable the Company and each Subsidiary to consummate the
transactions contemplated herein and as set forth in the Prospectus.
(p) Employment Agreements. On or before the First Closing Date, each of
the officers of the Company shall have entered into an Employment Agreement
with the Company, in the form filed as Exhibits 10.6, 10.7, 10.8, and 10.9 to
the Registration Statement.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company and the Selling Shareholders at any
time on or prior to the First Closing Date and, with respect to
26
the Optional Common Shares, at any time prior to the Second Closing Date, which
termination shall be without liability on the part of any party to any other
party, except that Section 4, Section 6, Section 8 and Section 9 shall at all
times be effective and shall survive such termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement is
terminated by the Representatives pursuant to Section 5, Section 7, Section 10
or Section 11 or Section 17, or if the sale to the Underwriters of the Common
Shares on the First Closing Date is not consummated because of any refusal,
inability or failure on the part of the Company or the Selling Shareholders to
perform any agreement herein or to comply with any provision hereof, the Company
agrees to reimburse the Representatives and the other Underwriters (or such
Underwriters as have terminated this Agreement with respect to themselves),
severally, upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by the Representatives and the Underwriters in connection
with the proposed purchase and the offering and sale of the Common Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel expenses, postage, facsimile and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall not
become effective until the later of (i) the execution of this Agreement by the
parties hereto and (ii) notification by the Commission to the Company and the
Representatives of the effectiveness of the Registration Statement under the
Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any party
by notice to each of the other parties hereto, and any such termination shall be
without liability on the part (a) of the Company or the Selling Shareholders to
any Underwriter, except that the Company and the Selling Shareholders shall be
obligated to reimburse the expenses of the Representatives and the Underwriters
pursuant to Sections 4 and 6 hereof, (b) of any Underwriter to the Company or
the Selling Shareholders, or (c) of any party hereto to any other party except
that the provisions of Section 8 and Section 9 shall at all times be effective
and shall survive such termination.
SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Underwriters.
(i) By the Company. The Company agrees to indemnify and hold harmless
each Underwriter, its officers and employees, and each person, if any, who
controls any Underwriter within the meaning of the Securities Act and the
Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the
written consent of the Company), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based (i) upon any
27
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434
under the Securities Act, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; or (iii) in whole or in part
upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the
Company to perform its obligations hereunder or under law; or (v) any act
or failure to act or any alleged act or failure to act by any Underwriter
in connection with, or relating in any manner to, the Common Stock or the
offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based
upon any matter covered by clause (i) or (ii) above, provided that the
Company shall not be liable under this clause (v) to the extent that a
court of competent jurisdiction shall have determined by a final judgment
that such loss, claim, damage, liability or action resulted directly from
any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct; and to
reimburse each Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of
or based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with written
information furnished to the Company and the Selling Shareholders by the
Representatives expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the
benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Common Shares, or any person
controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 2 and a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of
the Common Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. The indemnity agreement set forth in this
Section 8(a)(i) shall be in addition to any liabilities that the Company
may otherwise have.
(ii) By the Selling Shareholders. Each of the Selling Shareholders,
severally and not jointly, agree to indemnify and hold harmless each
Underwriter, its officers and
28
employees, and each person, if any, who controls any Underwriter within the
meaning of the Securities Act and the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as
such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434
under the Securities Act, any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with any information furbished to the Company by the
Selling Shareholder for use therein; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with any information
furnished to the Company by the Selling Shareholder for use therein, or
(iii) in whole or in part upon any inaccuracy in the representations and
warranties of such Selling Shareholder contained herein; or (iv) in whole
or in part upon any failure of such Selling Shareholder to perform such
Selling Shareholder's obligations hereunder or under law; or (v) any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Common Stock or the
offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based
upon any matter covered by clause (i) or (ii) above, provided that such
Selling Shareholder shall not be liable under this clause (v) to the extent
that a court of competent jurisdiction shall have determined by a final
judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be
taken by such Underwriter through its bad faith or willful misconduct; and
to reimburse each Underwriter and each such controlling person for any and
all expenses (including the fees and disbursements of counsel chosen by
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of
or based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with written
information furnished to such Selling Shareholder by the Representatives
expressly for use in the Registration Statement, any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto); and provided,
further, that with respect to any
29
preliminary prospectus, the foregoing indemnity agreement shall not inure
to the benefit of any Underwriter from whom the person asserting any loss,
claim, damage, liability or expense purchased Common Shares, or any person
controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 2 and a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of
the Common Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. The Selling Shareholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to their respective amounts of such liability for which they
each shall be responsible. This indemnity agreement will be in addition to
any liability which the Selling Shareholders may otherwise have.
Notwithstanding anything else herein, in no event shall the liability of
any Selling Shareholder for indemnification under this Section 8(a)(ii) or
for breach of representations or warranties under this Agreement exceed the
proceeds received by such Selling Shareholder from the Underwriters in the
offering.
(b) Indemnification of the Company, its Directors and Officers and the
Selling Shareholders by the Underwriters. Each Underwriter agrees, severally
and not jointly, to indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement, the
Selling Shareholders and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of the Securities Act or the Exchange
Act, against any loss, claim, damage, liability or expense, as incurred, to
which the Company, or any such director, officer, Selling Shareholder or
controlling person may become subject, under the Securities Act, the Exchange
Act, or other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged
untrue statement of a material fact contained in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
preliminary prospectus, the Prospectus (or any amendment or supplement
thereto), in reliance upon and in conformity with written information
furnished to the Company and the Selling Shareholders by the Representatives
expressly for use therein; and to reimburse the Company, or any such director,
officer, Selling Shareholder or controlling person for any legal and other
expense reasonably incurred by the Company, or any such director, officer,
Selling Shareholder or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. Each of the Company and the Selling
Shareholders, hereby acknowledges that the only information that the
Underwriters have furnished to the Company and the Selling Shareholders
expressly for use in the Registration Statement, any preliminary prospectus or
the Prospectus (or any amendment or supplement
30
thereto) are the statements set forth (A) as the last paragraph on the inside
front cover page of the Prospectus concerning stabilization by the
Underwriters and (B) in the table in the first paragraph and as the second
paragraph under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct. The indemnity agreement
set forth in this Section 8(b) shall be in addition to any liabilities that
each Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement thereof, but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section 8 or to
the extent it is not prejudiced as a proximate result of such failure. In
case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in, and, to the
extent that it shall elect, jointly with all other indemnifying parties
similarly notified, by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that a conflict may arise
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of such indemnifying party's
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (together with local counsel),
approved by the indemnifying party (NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC, in
the case of Section 8(b) and Section 9), representing the indemnified parties
who are parties to such action) or (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall be at
the expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified
party against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any
31
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by Section 8(c) hereof, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement, compromise or consent to the entry of judgment
in any pending or threatened action, suit or proceeding in respect of which
any indemnified party is or could have been a party and indemnity was or could
have been sought hereunder by such indemnified party, unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action,
suit or proceeding.
SECTION 9. CONTRIBUTION. If the indemnification provided for in Section 8
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Shareholders, on the
one hand, and the Underwriters, on the other hand, from the offering of the
Common Shares pursuant to this Agreement or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Shareholders,
on the one hand, and the Underwriters, on the other hand, in connection with the
statements or omissions or inaccuracies in the representations and warranties
herein which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Shareholders, on the one hand, and the
Underwriters, on the other hand, in connection with the offering of the Common
Shares pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Common Shares
pursuant to this Agreement (before deducting expenses) received by the Company
and the Selling Shareholders, and the total underwriting discount received by
the Underwriters, in each case as set forth on the front cover page of the
Prospectus bear to the aggregate initial public offering price of the Common
Shares as set forth on such cover. The relative fault of the Company and the
Selling Shareholders, on the one hand, and the Underwriters, on the other hand,
shall be determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company or the
Selling Shareholders, on the one hand, or the Underwriters, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations
32
set forth in Section 8(c), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim. The provisions set forth in Section 8(c) with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this Section 9; provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
Section 8(c) for purposes of indemnification.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
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 account of the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
Schedule A. For purposes of this Section 9, each officer and employee of an
----------
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the Securities Act and the Exchange
Act shall have the same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Common
Shares that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Common Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on Schedule A
----------
bears to the aggregate number of Firm Common Shares set forth opposite the names
of all such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the Underwriters shall fail or refuse to purchase Common Shares and the
aggregate number of Common Shares with respect to which such default occurs
exceeds 10% of the aggregate number of Common Shares to be purchased on such
date, and arrangements satisfactory to the Representatives and the Company for
the purchase of such Common Shares are not made within 48 hours after such
default, this Agreement shall terminate without liability of any party to any
other party except that the
33
provisions of Section 4, Section 6, Section 8 and Section 9 shall at all times
be effective and shall survive such termination. In any such case either the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, but in no event for
longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date this Agreement maybe terminated by the Representatives by notice given to
the Company and the Selling Shareholders if at any time (i) trading or quotation
in any of the Company's securities shall have been suspended or limited by the
Commission or by the Nasdaq Stock Market, or trading in securities generally on
either the Nasdaq Stock Market or the New York Stock Exchange shall have been
suspended or limited, or minimum or maximum prices shall have been generally
established on any of such stock exchanges by the Commission or the NASD; (ii) a
general banking moratorium shall have been declared by any of federal, New York,
Delaware or California authorities; (iii) there shall have occurred any outbreak
or escalation of national or international hostilities or any crisis or
calamity, or any change in the United States or international financial markets,
or any substantial change or development involving a prospective substantial
change in United States' or international political, financial or economic
conditions, as in the judgment of the Representatives is material and adverse
and makes it impracticable to market the Common Shares in the manner and on the
terms described in the Prospectus or to enforce contracts for the sale of
securities; (iv) in the judgment of the Representatives there shall have
occurred any Material Adverse Change; or (v) the Company or its Subsidiaries
shall have sustained a loss by strike, fire, flood, earthquake, accident or
other calamity of such character as in the judgment of the Representatives may
interfere materially with the conduct of the business and operations of such
entity regardless of whether or not such loss shall have been insured. Any
termination pursuant to this Section 11 shall be without liability on the part
of (a) the Company or the Selling Shareholders to any Underwriter, except that
the Company and the Selling Shareholders shall be obligated to reimburse the
expenses of the Representatives and the Underwriters pursuant to Sections 4 and
6 hereof, (b) any Underwriter to the Company or the Selling Shareholders, or (c)
of any party hereto to any other party except that the provisions of Section 8
and Section 9 shall at all times be effective and shall survive such
termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Shareholders, as
the case may be, and will
34
survive delivery of and payment for the Common Shares sold hereunder and any
termination of this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
O'Melveny & ▇▇▇▇▇ LLP
Embarcadero Center West
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company
Headlands Mortgage Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
35
If to the Selling Shareholders:
▇▇▇▇▇ ▇. ▇▇▇▇,
as Voting Trustee
c/o Headlands Mortgage Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
Attention: D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr.
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile:
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and
36
to the benefit of the employees, officers and directors and controlling persons
referred to in Section 8 and Section 9, and in each case their respective
successors, and personal representatives, and no other person will have any
right or obligation hereunder. The term "successors" shall not include any
purchaser of the Common Shares as such from any of the Underwriters merely by
reason of such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 16.
(a) Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby
("Related Proceedings") may be instituted in the federal courts of the United
States of America located in the City and County of New York or the courts of
the State of New York in each case located in the City and County of New York
(collectively, the "Specified Courts"), and each party irrevocably submits to
the exclusive jurisdiction (except for proceedings instituted in regard to the
enforcement of a judgment of any such court (a "Related Judgment"), as to which
such jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
37
SECTION 17. FAILURE OF ONE OR MORE OF THE SELLING SHAREHOLDERS TO SELL AND
DELIVER COMMON SHARES. If one or more of the Selling Shareholders shall fail to
sell and deliver to the Underwriters the Common Shares to be sold and delivered
by such Selling Shareholders at the First Closing Date pursuant to this
Agreement, then the Underwriters may at their option, by written notice from the
Representatives to the Company and the Selling Shareholders, either (i)
terminate this Agreement without any liability on the part of any Underwriter
or, except as provided in Sections 4, 6, 8 and 9 hereof, the Company or the
Selling Shareholders, or (ii) purchase the shares which the Company and other
Selling Shareholders have agreed to sell and deliver in accordance with the
terms hereof. If one or more of the Selling Shareholders shall fail to sell and
deliver to the Underwriters the Common Shares to be sold and delivered by such
Selling Shareholders pursuant to this Agreement at the First Closing Date or the
Second Closing Date, then the Underwriters shall have the right, by written
notice from the Representatives to the Company and the Selling Shareholders, to
postpone the First Closing Date or the Second Closing Date, as the case may be,
but in no event for longer than seven days in order that the required changes,
if any, to the Registration Statement and the Prospectus or any other documents
or arrangements may be effected.
SECTION 18. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in
two or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement. In this Agreement, unless the context otherwise requires, (i)
singular words shall connote the plural number as well as the singular and vice
versa, and the masculine shall include the feminine and the neuter, and (ii) all
references to particular articles, sections, subsections, clauses or exhibits
are references to articles, sections, subsections, clauses or exhibits of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof, including, without limitation, the indemnification
provisions of Section 8 and the contribution provisions of Section 9, and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the
risks in light of the ability of the parties to investigate the Company, its
affairs and its business in order to assure that adequate disclosure has been
made in the Registration Statement, any preliminary prospectus and the
Prospectus (and any amendments and supplements thereto), as required by the
Securities Act and the Exchange Act.
[signature page follows]
38
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company and the Custodian the enclosed copies
hereof, whereupon this instrument, along with all counterparts hereof, shall
become a binding agreement in accordance with its terms.
Very truly yours,
"COMPANY"
HEADLANDS MORTGAGE COMPANY
By: -------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇,
Chief Executive Officer
"SELLING SHAREHOLDERS"
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
D. ▇▇▇▇▇▇▇ ▇▇▇▇, JR.
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
By: The Committee, acting as attorneys-in-fact
By: -------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇,
Member
By: -------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
Member
"VOTING TRUSTEE"
▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------------------
(as Voting Trustee and, in such capacity and
pursuant to the Voting Trust Agreement, holder of
legal title to the Common Shares to be sold by the
Selling Shareholders)
S-1
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representatives in San Francisco, California as of the date first above
written.
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
BT ALEX.▇▇▇▇▇ INCORPORATED
UBS SECURITIES LLC
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
----------
By: NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
By:
-----------------------------------
S-2
SCHEDULE A
UNDERWRITERS
------------
Number of
Firm
Shares to be
Purchased
-----------------
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC... 000,000
BT Alex. ▇▇▇▇▇ Incorporated............. 000,000
UBS Securities LLC...................... 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
........................................ 000,000
-----------------
Total................................. 8,000,000
=================
SCHEDULE B
SELLING SHAREHOLDERS
--------------------
NUMBER OF
SELLING SHAREHOLDER FIRM
COMMON
SHARES
TO BE SOLD
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr.
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Total: [____]
3,500,000
=========
SCHEDULE C
LIST OF EXISTING INSTRUMENTS
----------------------------
Voting Trust Agreement dated September 15, 1997, as amended
Employment Agreement of ▇▇▇▇▇ ▇. ▇▇▇▇
Employment Agreement of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Employment Agreement of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Employment Agreement of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
1997 Executive and Non-Employee Director Stock Option Plan dated July 22, 1997
Bonus Incentive Compensation Plan
Amended and Restated Mortgage Loan Capital Loan Warehousing, dated as of August
29, 1997, among the Company and the Lenders therein named, as amended
Amended and Restated Servicing Secured Credit Agreement, dated as of August 29,
1997, among the Company and the Lender named therein, as amended
Master Repurchase Agreement dated as of September 11, 1996 among ▇▇▇▇▇▇▇ ▇▇▇▇▇
Mortgage Capital, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Corporation and the Company, as
amended
Tax Indemnification Agreement among the Company and the Company's shareholders
prior to termination of S corporation status
Founders Registration Rights Agreement
SCHEDULE D
LIST OF NECESSARY PERMITS
-------------------------
State or Agency Authority to Conduct Business Mortgage Banking License
=====================================================================================
Alabama Yes Exempt
Alaska No
Arizona Yes Yes
Arkansas Yes
California Yes Yes
Colorado Yes Yes
Connecticut Yes Yes
Delaware Yes Yes
District of Columbia Yes
Florida Yes Yes
Georgia Yes Yes
Hawaii Yes
Idaho Yes Yes
Illinois Yes Yes
Indiana Yes
Iowa Yes
Kansas Yes
Kentucky Yes Exempt
Louisiana No
Maine Yes Yes
Maryland Yes Yes
Massachusetts Yes Yes
Michigan Yes Yes
Minnesota Yes Exempt
Mississippi Yes
Missouri Yes
Montana Yes Yes
Nebraska Yes
Nevada Yes Exempt
New Hampshire Yes In Process
New Jersey Yes In Process
New Mexico Yes Exempt
New York Yes
North Carolina Yes Yes
North Dakota Yes
Ohio Yes
Oklahoma Yes
Oregon Yes Yes
Pennsylvania Yes
Rhode Island Yes Yes
South Carolina Yes Yes
South Dakota Yes
Tennessee Yes Yes
Texas Yes Exempt
Utah Yes Yes
Vermont Yes Yes
Virginia Yes Yes
Washington Yes Yes
West Virginia Yes Exempt
Wisconsin Yes Yes
Wyoming Yes Yes
Federal National Mtg Yes
Federal Home Loan Mtg Yes
Dept of HUD Yes
Veterans Administration Yes
==============================================================================
4
EXHIBIT A
OPINION OF COMPANY COUNSEL
--------------------------
The opinion of counsel for the Company (this "Opinion") shall be addressed
to NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC, as Representatives of the several
underwriters listed in Schedule A to the Underwriting Agreement, shall be dated
----------
as of the First Closing Date or the Second Closing Date, as applicable, shall
expressly authorize O'Melveny & ▇▇▇▇▇ LLP, as counsel for the Underwriters, to
rely upon this Opinion in connection with such firm's opinion to be rendered
pursuant to section 5(e) of the Underwriting Agreement and shall include as an
exhibit any representation certificate(s) relied upon by counsel for the
Company.
All capitalized terms used herein without definitions shall have the
meaning given such terms in the Underwriting Agreement to which this Exhibit A
---------
is attached (the "Underwriting Agreement").
References to the Prospectus in this Exhibit A include any supplements
---------
thereto at the Closing Date.
(a) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California.
(b) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in the State of California and in each other
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except for such
jurisdictions (other than the State of California) where the failure to so
qualify or to be in good standing would not, individually or in the aggregate,
result in a Material Adverse Change.
(c) The Company has all requisite corporate power and authority (i) to own,
lease and operate its properties and to conduct its business as described in
the Prospectus, (ii) to enter into and perform its obligations under the
Underwriting Agreement, and (iii) to issue, sell and deliver the Common Shares
to the Underwriters pursuant to the Underwriting Agreement.
(d) Each Subsidiary (as defined in Rule 405 under the Securities Act) has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Underwriting Agreement and the
Prospectus and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except for such jurisdictions where the failure to so
qualify or to be in good standing would not, individually or in the aggregate,
result in a Material Adverse Change.
A-1
(e) To such counsel's knowledge, the Company does not own or control,
directly or indirectly, any corporation, association or other entity other
than the Subsidiaries listed in Exhibit 21 to the Registration Statement.
(f) The authorized, issued and outstanding capital stock of the Company
(including the Common Stock) conforms to the descriptions thereof set forth or
incorporated by reference in the Prospectus, including, but not limited to,
the section entitled "Capitalization." All of the outstanding shares of
Common Stock (including the shares of Common Stock owned by Selling
Shareholders) have been duly authorized and validly issued, are fully paid and
nonassessable and, to the best of such counsel's knowledge, have been issued
in compliance with the registration and qualification requirements of federal
and state securities laws. The form of certificate used to evidence the
Common Stock is in due and proper form and complies with all applicable
requirements of the charter and by-laws of the Company and the General
Corporation Law of the State of California. The description of the Company's
stock option, stock bonus and other stock plans or arrangements, and the
options or other rights granted and exercised thereunder, set forth in the
Prospectus accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights.
(g) All of the issued and outstanding capital stock of each significant
Subsidiary has been duly authorized and validly issued, is fully paid and non-
assessable and is owned by the Company, directly or through Subsidiaries, free
and clear of any security interest, mortgage, pledge, lien, encumbrance or, to
the best knowledge of such counsel, any pending or threatened claim.
(h) No stockholder of the Company or any other person has any preemptive
right, right of first refusal or other similar right to subscribe for or
purchase securities of the Company arising (i) by operation of the charter or
by-laws of the Company or the General Corporation Law of the State of
California or (ii) to the best knowledge of such counsel, otherwise.
(i) The Underwriting Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
thereunder may be limited by applicable law and except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or
by general equitable principles.
(j) The Common Shares to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale pursuant to the Underwriting
Agreement and, when issued and delivered by the Company pursuant to the
Underwriting Agreement against payment of the consideration set forth therein,
will be validly issued, fully paid and nonassessable.
(k) Each of the Registration Statement and the Rule 462(b) Registration
Statement, if any, has been declared effective by the Commission under the
Securities Act. To the best knowledge of such counsel, no stop order
suspending the effectiveness of either of the Registration Statement or the
Rule 462(b) Registration Statement, if any, has been issued
A-2
under the Securities Act and no proceedings for such purpose have been
instituted or are pending or are contemplated or threatened by the Commission.
Any required filing of the Prospectus and any supplement thereto pursuant to
Rule 424(b) under the Securities Act has been made in the manner and within
the time period required by such Rule 424(b).
(l) The Registration Statement, including any Rule 462(b) Registration
Statement, the Prospectus including any document incorporated by reference
therein, and each amendment or supplement to the Registration Statement and
the Prospectus including any document incorporated by reference therein, as of
their respective effective or issue dates (other than the financial statements
and supporting schedules included or incorporated by reference therein or in
exhibits to or excluded from the Registration Statement, as to which no
opinion need be rendered) comply as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act.
(m) The Common Shares have been approved for listing on the Nasdaq National
Market.
(n) The statements (i) in the Prospectus under the captions "Risk Factors,"
"Description of Capital Stock," "Management's Discussion and Analysis and
Results of Operations--Liquidity," "Business," "Certain Relationships and
Related Transactions," "Shares Eligible for Future Sale," "Certain United
States Income Tax Considerations" and "Underwriting" and (ii) in Item 14 and
Item 15 of the Registration Statement, insofar as such statements constitute
matters of law, summaries of legal matters, the Company's charter or by-law
provisions, documents or legal proceedings, or legal conclusions, has been
reviewed by such counsel and fairly present and summarize, in all material
respects, the matters referred to therein.
(o) There are no legal or governmental actions, actions, suits, inquiries,
investigations or proceedings pending or threatened which are required to be
disclosed in the Registration Statement, other than those disclosed therein.
(p) To the best knowledge of such counsel, there are no unresolved
disputes, threats of litigation or litigation between ▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇
▇. ▇▇▇▇ or any of their respective family members.
(q) All descriptions in the Registration Statement of contracts and other
documents to which the Company is a party are accurate in all material
respects; there are no franchises, contracts, indentures, mortgages, loan
agreements, notes, lease or other instruments required to be described in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed as exhibits thereto, and the
descriptions thereof or references thereto are correct in all material
respects.
(r) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto;
and the descriptions thereof and references thereto are correct in all
material respects.
A-3
(s) No consent, approval, authorization or other order of, or registration
or filing with, any court or other governmental authority or agency, is
required for the Company's execution, delivery and performance of the
Underwriting Agreement and consummation of the transactions contemplated
thereby and by the Prospectus, except as required under the Securities Act,
applicable state securities or blue sky laws and from the NASD.
(t) The execution and delivery of the Underwriting Agreement by the Company
and the performance by the Company of its obligations thereunder (other than
performance by the Company of its obligations under the indemnification
section of the Underwriting Agreement, as to which no opinion need be
rendered) (i) have been duly authorized by all necessary corporate action on
the part of the Company; (ii) will not result in any violation of the
provisions of the charter or by-laws of the Company or any Subsidiary; (iii)
will not constitute a breach of, or Default or a Debt Repayment Triggering
Event under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
Subsidiaries pursuant to, to the best knowledge of such counsel, any other
material Existing Instrument; or (iv) to the best knowledge of such counsel,
will not result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any Subsidiary.
(u) To the best knowledge of such counsel, the Company possesses such
permits, licenses, approvals, consents and other authorizations (collectively,
"Necessary Permits") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct its business as
contemplated in the Prospectus and is in compliance with the terms and
conditions of all such Necessary Permits.
(v) Neither the Company nor any Subsidiary is or upon the issuance and sale
of the Common Shares as contemplated in the Underwriting Agreement and after
application of the net proceeds from the sale of the Common Shares as
described in the Prospectus will be, an "investment company" or controlled by
an "investment company" within the meaning of Investment Company Act of 1940.
(w) Except as disclosed in the Prospectus under the caption "Shares
Eligible for Future Sale", to the best knowledge of such counsel, there are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by the Underwriting Agreement, other than the
Selling Shareholders, except for such rights as have been duly waived.
(x) To the best knowledge of such counsel, neither the Company nor any
Subsidiary is in violation of its charter or by-laws or any law,
administrative regulation or administrative or court decree applicable to the
Company or any Subsidiary or is in Default in the performance or observance of
any obligation, covenant or condition contained in any material Existing
Instrument, except in each such case for such violations or Defaults as would
not, individually or in the aggregate, result in a Material Adverse Change.
(y) The Company has entered into a tax indemnification agreement dated as
of October 15, 1997, by and between the Company and The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Irrevocable Trust, The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Grantor Trust, ▇▇▇▇▇ ▇. ▇▇▇▇ Living
Trust, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇ ▇▇▇▇,
A-4
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, D. ▇▇▇▇▇▇▇ ▇▇▇▇, Jr., ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇ (the "Tax Agreement"). The statements in the Prospectus under the caption
"Termination of S Corporation Status" and elsewhere, fairly describe and
summarize, in all material respects, the Tax Agreement. The Tax Agreement has
been duly executed, authorized and delivered by the Company, and is valid and
enforceable against the Company in accordance with its terms and, to the
knowledge of such counsel, no other indemnification agreement exists
respecting the subject matter of the Tax Agreement.
(z) The Company and its Subsidiaries have sold interests in mortgages
through securitizations, as further described in the Registration Statement.
All securitizations, whether conducted by the Company, its Subsidiaries or
affiliates, including, without limitation, Headlands Home Equity Loan Trust
1997-1, have been conducted in compliance with all applicable rules and
regulations, including, but not limited to, the Securities Act and the
Exchange Act.
(aa) The Company has entered into a settlement agreement dated as of April
11, 1996, by and between ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, D. ▇▇▇▇▇▇▇ ▇▇▇▇,
Jr., ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (collectively, the "▇▇▇▇ Family"),
▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (collectively, the "▇▇▇▇ Family"), Headlands
Insurance Agency, Inc., and Marin Conveyancing Corporation (the "Settlement
Agreement"). The Settlement Agreement (i) has been duly authorized, executed
and delivered by the Company and the ▇▇▇▇ Family, and (ii) assuming due
authorization, execution and delivery of the Settlement Agreement by the other
parties thereto, is in full force and effect.
(ab) ▇▇▇▇▇ ▇. ▇▇▇▇, as Voting Trustee, ▇▇▇▇▇▇ ▇. ▇▇▇▇, as Trustee of the
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Irrevocable Trust dated May 20, 1997, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
as Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Grantor Trust dated May 21, 1997, and ▇▇▇▇▇
▇. ▇▇▇▇, as Trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇ Living Trust dated May 26, 1997
(collectively, the "▇▇▇▇ Parties"), the ▇▇▇▇ Family, the Company, Marin
Conveyancing Corporation, a California corporation ("MCC"), and Headlands
Insurance Agency, Inc., a California corporation ("HIA"), have entered into
and executed that certain Voting Trust Agreement, for the Stock of the
Company, MCC and HIA, dated September 15, 1997, as amended October 17, 1997
(the "Voting Trust Agreement"). The Voting Trust Agreement has been duly
authorized, executed and delivered by, and is valid and enforceable in
accordance with its terms against, the Company and the ▇▇▇▇ Parties. To the
best knowledge of such counsel, the Voting Trust Agreement has not been
further amended or revoked, canceled or superseded. The execution and
delivery of the Underwriting Agreement by ▇▇▇▇▇ ▇. ▇▇▇▇, as Voting Trustee
under the Voting Trust Agreement, and the performance by the Voting Trustee of
its obligations thereunder (i) have been duly authorized, executed and
delivered by all necessary action on the part of the Voting Trustee, and is a
valid and binding agreement of, the Voting Trustee, enforceable in accordance
with its terms; (ii) will not result in any violation of the provisions of the
Voting Trust Agreement; and (iii) will not constitute a breach of, or a
default under, the Voting Trust Agreement or any other agreement to which the
Voting Trustee is a party.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public
A-5
or certified public accountants for the Company and with Representatives of
the Underwriters at which the contents of the Registration Statement and the
Prospectus, and any supplements or amendments thereto, and related matters
were discussed and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus (other
than as specified above), and any supplements or amendments thereto, on the
basis of the foregoing, nothing has come to their attention which would lead
them to believe that either the Registration Statement or any amendments
thereto, at the time the Registration Statement or such amendments became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as of its date or at
the First Closing Date or the Second Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief as to the financial
statements or schedules or other financial or statistical data derived
therefrom, included or incorporated by reference in the Registration Statement
or the Prospectus or any amendments or supplements thereto).
A-6
EXHIBIT B
OPINION OF SELLING SHAREHOLDER COUNSEL
--------------------------------------
The opinion of such counsel pursuant to Section 5(h) shall be rendered to
the Representatives at the request of the Company and shall so state therein.
References to the Prospectus in this Exhibit B include any supplements thereto
---------
at the Closing Date.
(i) The Underwriting Agreement has been duly authorized, executed and
delivered by or on behalf of, and is a valid and binding agreement of, each
such Selling Shareholder, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by applicable law and
except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(ii) The execution and delivery by and on behalf of each such Selling
Shareholder of, and the performance by each such Selling Shareholder of its
obligations under, the Underwriting Agreement and its Custody Agreement and
its Power of Attorney will not contravene or conflict with, result in a breach
of, or constitute a default under, the charter or by-laws, partnership
agreement, trust agreement or other organizational documents, as the case may
be, of each such Selling Shareholder, or, to the best of such counsel's
knowledge, violate or contravene any provision of applicable law or
regulation, or violate, result in a breach of or constitute a default under
the terms of any other agreement or instrument to which each such Selling
Shareholder is a party or by which it is bound, or any judgment, order or
decree applicable to each such Selling Shareholder of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over each such Selling Shareholder.
(iii) Each such Selling Shareholder has good and valid title to all of the
Common Shares which may be sold by each such Selling Shareholder under the
Underwriting Agreement and has the legal right and power, and all
authorizations and approvals required under its charter and by-laws,
partnership agreement, trust agreement or other organizational documents, as
the case may be, to enter into the Underwriting Agreement and its Custody
Agreement and its Power of Attorney, to sell, transfer and deliver all of the
Common Shares which may sold by each such Selling Shareholder under the
Underwriting Agreement and to comply with its other obligations under the
Underwriting Agreement, its Custody Agreement and its Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of each such
Selling Shareholder has been duly authorized, executed and delivered by and on
behalf of each such Selling Shareholder and is a valid and binding agreement
of each such Selling Shareholder, enforceable in accordance with its terms,
except as rights to indemnification thereunder may be limited by applicable
law and except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
B-1
Assuming that the Underwriters purchase the Common Shares which are sold by
each such Selling Shareholder pursuant to the Underwriting Agreement for
value, in good faith and without notice of any adverse claim, the delivery of
such Common Shares pursuant to the Underwriting Agreement will pass good and
valid title to such Common Shares, free and clear of any security interest,
mortgage, pledge, lieu encumbrance or other claim.
(v) To the best of such counsel's knowledge, no consent, approval,
authorization or other order of, or registration or filing with, any court or
governmental authority or agency, is required for the consummation by each
such Selling Shareholder of the transactions contemplated in the Underwriting
Agreement, except as required under the Securities Act, applicable state
securities or blue sky laws, and from the NASD.
(vi) The Company has entered into a settlement agreement dated as of April
11, 1996, by and between ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, D. ▇▇▇▇▇▇▇ ▇▇▇▇,
Jr., ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (collectively, the "▇▇▇▇ Family"),
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Headlands Insurance Agency, Inc., and Marin
Conveyancing Corporation (the "Settlement Agreement"). The Settlement
Agreement (i) has been duly authorized, executed and delivered by each member
of the ▇▇▇▇ Family and, assuming due authorization, execution and delivery by
the other parties thereto, and is valid and enforceable against each member of
the ▇▇▇▇ Family in accordance with its terms, (ii) resolves each and every
claim among the parties and (iii) is in full force and effect. To the best of
such counsel's knowledge, the ▇▇▇▇ Family has no other claims or rights
against the Company outside the Settlement Agreement and there are no other
agreements or accords which attempt to resolve any dispute among the parties.
(vii) The Company has entered into a tax indemnification agreement dated as
of October 15, 1997, by and between the Company and The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Irrevocable Trust, The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Grantor Trust, ▇▇▇▇▇ ▇. ▇▇▇▇ Living
Trust, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, and the ▇▇▇▇ Family (the "Tax Agreement"). The
statements in the Prospectus under the caption "Termination of S Corporation
Status" and elsewhere, fairly describe and summarize, in all material
respects, the Tax Agreement. The Tax Agreement has been duly authorized,
executed and delivered by, and is valid and enforceable against, each member
of the ▇▇▇▇ Family in accordance with its terms and no other indemnification
agreement exists respecting the subject matter of the Tax Agreement.
(viii) None of the Selling Shareholders have been admitted to membership in
the National Association of Securities Dealers (the "NASD") under the
provisions of Articles II and III of the By-laws of the NASD. In addition,
none of the Selling Shareholders are (i) a sole proprietor, partner, officer,
director or branch manager of any member of the NASD or a person occupying a
similar status or performing similar functions, (ii) a person engaged in the
investment banking or securities business who is directly or indirectly
controlling or controlled by a member of the NASD, (iii) a person who is also
the beneficial owner of capital stock of a member of the NASD, or (iv) a
person who controls, is controlled by or is under common control with a member
of the NASD.
(ix) Upon consummation of the closing on the First Closing Date, the
"Agreement Between Shareholders and Operating Philosophy and Principles of a
New Corporation dated April 30, 1986" shall terminate and cease to be
effective as of such First Closing Date.
B-2
(x) ▇▇▇▇▇ ▇. ▇▇▇▇, as Voting Trustee, ▇▇▇▇▇▇ ▇. ▇▇▇▇, as Trustee of the
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Irrevocable Trust dated May 20, 1997, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
as Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Grantor Trust dated May 21, 1997, and ▇▇▇▇▇
▇. ▇▇▇▇, as Trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇ Living Trust dated May 26, 1997
(collectively, the "▇▇▇▇ Parties"), the ▇▇▇▇ Family, the Company, Marin
Conveyancing Corporation, a California corporation ("MCC"), and Headlands
Insurance Agency, Inc., a California corporation ("HIA"), have entered into
and executed that certain Voting Trust Agreement, for the Stock of the
Company, MCC and HIA, dated September 15, 1997, as amended October 17, 1997
(the "Voting Trust Agreement"). The Voting Trust Agreement has been duly
authorized, executed and delivered by, and is valid and enforceable in
accordance with its terms against, each member of the ▇▇▇▇ Family. The Voting
Trust transfers legal title to the Common Shares to be sold by the Selling
Shareholders under the Underwriting Agreement to the Voting Trustee. To the
best knowledge of such counsel, the Voting Trust Agreement has not been
further amended or revoked, canceled or superseded. The execution and
delivery of the Underwriting Agreement by ▇▇▇▇▇ ▇. ▇▇▇▇, as Voting Trustee
under the Voting Trust Agreement, and the performance by the Voting Trustee of
its obligations thereunder (i) have been duly authorized, executed and
delivered by all necessary action on the part of the Voting Trustee, and is a
valid and binding agreement of, the Voting Trustee, enforceable in accordance
with its terms; (ii) will not result in any violation of the provisions of the
Voting Trust Agreement; and (iii) will not constitute a breach of, or a
default under, the Voting Trust Agreement or any other agreement to which the
Voting Trustee is a party.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, the General Corporation Law of the
State of California or the federal law of the United States, to the extent they
deem proper and specified in such opinion, upon the opinion (which shall be
dated the First Closing Date or the Second Closing Date, as the case may be,
shall be satisfactory in form and substance to the Underwriters, shall expressly
state that the Underwriters may rely on such opinion as if it were addressed to
them and shall be furnished to the Representatives) of other counsel of good
standing whom they believe to be reliable and who are satisfactory to counsel
for the Underwriters; provided, however, that such counsel shall further state
that they believe that they and the Underwriters are justified in relying upon
such opinion of other counsel, and (B) as to matters of fact, to the extent they
deem proper, on certificates of the Selling Shareholders and public officials.
B-3
EXHIBIT C
---------
February __, 1998
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
BT Alex.▇▇▇▇▇ Incorporated
UBS Securities LLC
As Representatives of the Several Underwriters
c/o NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ 94
RE: Headlands Mortgage Company (the "Company")
------------------------------------------
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of Common Stock (the "Offering") for which you will act as the
Representatives of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company by,
among other things, raising additional capital for its operations. The
undersigned acknowledges that you and the other underwriters are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into underwriting arrangements with
the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of NationsBanc
▇▇▇▇▇▇▇▇▇▇ Securities LLC (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open "put equivalent position" within the meaning of Rule 16a-1(h)
under the Securities Exchange Act of 1934, or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or
securities exchangeable or exercisable for or convertible into shares of Common
Stock currently or hereafter owned either of record or beneficially (as defined
in Rule 13d-3 under Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of the
foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date one hundred eighty (180) days after the date of the
Prospectus. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock held by the undersigned except in
compliance with the foregoing restrictions.
With respect to the Offering only, the undersigned waives any registration
rights relating to registration under the Securities Act of any Common Stock
owned either of record or beneficially by the undersigned, including any rights
to receive notice of the Offering.
C-1
This agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assigns of the
undersigned.
---------------------------------
Printed Name of Holder
By:
------------------------------
Signature
------------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
C-2