FIRST SIERRA FINANCIAL, INC.
COMMON STOCK, PAR VALUE $.01 PER SHARE
UNDERWRITING AGREEMENT
June 16, 1999
E*OFFERING Corp.
As Representative of the several Underwriters
named in Schedule A hereto,
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
First Sierra Financial, Inc., a Delaware corporation (the "COMPANY"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule A hereto (the "UNDERWRITERS") an aggregate
of 4,000,000 shares and, at the election of the Underwriters, up to 600,000
additional shares of Common Stock, par value $.01 per share ("STOCK"), of the
Company. The 4,000,000 shares to be sold by the Company are herein called the
"FIRM SHARES" and the 600,000 additional shares to be sold by the Company are
herein called the "OPTIONAL SHARES." The Firm Shares and the Optional Shares
that the Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "SHARES."
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(i) A registration statement on Form S-3 (File No.
333-77079) (the "SHELF REGISTRATION STATEMENT") in respect of securities of
the Company, including the Shares, has been filed with the Securities and
Exchange SEC (the "SEC"); the Shelf Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto but including all documents incorporated
by reference in the prospectus contained therein, for each of the other
Underwriters, have been declared effective by the SEC in such form; other
than a registration statement, if any, increasing the size of the offering
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "ACT"), which became effective upon filing, no other document with
respect to the Shelf Registration Statement or document incorporated by
reference therein has heretofore been filed with the SEC; and no stop order
suspending the effectiveness of the Shelf Registration Statement or any
post-effective amendment thereto has been issued and no proceeding for that
purpose has been initiated or threatened by the SEC (any preliminary
prospectus, together with any preliminary prospectus supplement thereto,
included in the Shelf Registration Statement or filed with the SEC under the
Act is hereinafter called a "PRELIMINARY PROSPECTUS"); the various parts of
the Shelf Registration Statement, including all exhibits thereto and all
information incorporated by reference therein, including the information
contained in the form of final prospectus filed with the SEC pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Shelf Registration
Statement at the time it was declared effective and the documents
incorporated by reference in the prospectus contained in the Shelf
Registration Statement at the time such part of the Shelf Registration
Statement became effective, each as amended at the time such part of the
Shelf Registration Statement became effective, are hereinafter collectively
called the "REGISTRATION STATEMENT"; such final prospectus, in the form first
filed pursuant to Rule 424(b) under the
Act, together with the prospectus supplement thereto, is hereinafter called
the "PROSPECTUS"); and any reference herein to any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the case
may be; and any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include any
documents filed after the date of such Preliminary Prospectus or Prospectus,
as the case may be, under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be.
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the SEC, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material respects to
the requirements of the Act and the rules and regulations of the SEC thereunder,
and did not contain an 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, in the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by an Underwriter through
E*OFFERING Corp. expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the SEC thereunder and do not and will not, as
of the applicable effective date as to the Registration Statement and any
amendment thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by an Underwriter through E*OFFERING Corp. expressly for use therein;
(iv) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the SEC, as the case
may be, conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the SEC
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become effective or
are filed with the SEC, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the SEC thereunder and will not contain an 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.
(v) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements included in
the Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or stock options
(other than exercises of stock options outstanding and grants of stock options
authorized under the employee stock plans described in the Prospectus) of the
Company or any of its subsidiaries or in the consolidated long-term debt of the
Company and its subsidiaries, taken as a whole, or any material adverse change,
or any development involving a prospective material adverse change, in or
affecting the
2
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the Prospectus;
(vi) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the Prospectus
or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(vii) The Company and each of its subsidiaries own or
possess, or can acquire on commercially reasonable terms adequate licenses or
other rights to use, all patents, patent rights, inventions, trade secrets,
copyrights, trademarks, service marks, trade names, technology and know-how
currently employed by them in connection with their business as described in the
Prospectus; the Company is not obligated to pay a royalty, grant a license, or
provide other consideration to any third party in connection with its patents,
copyrights, trademarks, service marks, trade names, technology or know-how other
than as disclosed in the Prospectus, and, except as disclosed in the Prospectus,
neither the Company nor any of its subsidiaries has received any notice of
infringement or conflict with (and neither the Company nor any of its
subsidiaries knows of any infringement or conflict with) rights of others with
respect to any patents, patent rights, inventions, trade secrets, copyrights,
trademarks, service marks, trade names, technology or know-how which could
reasonably be expected to result in any material adverse effect upon the Company
and its subsidiaries, taken as a whole; and, except as disclosed in the
Prospectus, the discoveries, inventions, products or processes of the Company
and its subsidiaries referred to in the Prospectus do not, to the best knowledge
of the Company or any of its subsidiaries, infringe or conflict with any right
or patent of any third party, or any discovery, invention, product or process
which is the subject of a patent application filed by any third party which
could have a material adverse effect on the Company and its subsidiaries, taken
as a whole; and no third party, including any academic or governmental
organization, possesses rights to the Company's patents, copyrights, trademarks,
service marks, trade names, technology or know-how which, if exercised, could
enable such third party to develop products competitive to those of the Company
or could have a material adverse effect on the ability of the Company to conduct
its business in the manner described in the Prospectus;
(viii) The Company and its subsidiaries possess all consents,
licenses, certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have a
materially adverse effect on the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, taken as whole (a "MATERIAL ADVERSE EFFECT"), otherwise than as
set forth or contemplated in the Prospectus;
(ix) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and conduct
its business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, except where the
failure to be so qualified in any such jurisdiction would not have a
3
Material Adverse Effect; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation;
(x) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description of the Stock contained in the
Prospectus; and all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares) are owned directly
or indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims except those created by the Company's credit facility
described in the Prospectus;
(xi) Except as set forth in the Prospectus, (a) the Company
does not have outstanding any statutory preemptive rights, and (b) the Company
does not have outstanding any options to purchase, or any contractual preemptive
rights, or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations;
(xii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is subject to no
material liability or disability by reason of failure to be so qualified in any
such jurisdiction;
(xiii) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(xiv) The issue and sale of the Shares to be sold by the
Company hereunder and the compliance by the Company with all of the provisions
of this Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such action result in any
violation of the provisions of the Certificate of Incorporation or By-laws of
the Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Shares or
the consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as may be
required by the National Association of Securities Dealers, Inc. (the "NASD")
and under state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters;
(xv) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement
lease or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound;
4
(xvi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock are accurate, complete and fair;
(xvii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and, to the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others;
(xviii) Each of the executive officers and directors of the
Company, as identified in the section captioned "Management" in the Prospectus,
has delivered an agreement (collectively, the "LOCK-UP AGREEMENTS") that
restricts him or her, subject to certain exceptions, from, among other things,
selling any shares of Common Stock or any securities convertible into or
exchangeable for shares of Common Stock held by him or her for a period of 90
days after the date of the Prospectus, without the prior written consent of
E*OFFERING Corp.;
(xix) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or an
entity "controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT"); and
(xx) Xxxxxx Xxxxxxxx LLP, who have certified certain
financial statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the SEC
thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price per
share of $17.3375, the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule A hereto and (b) in the event and to the extent that the
Underwriters shall exercise the election to purchase Optional Shares as provided
below, the Company agrees to sell to each of the Underwriters, and each
Underwriter agrees, severally and not jointly, to purchase from the Company, at
the purchase price per share set forth in clause (a) of this Section 2, that
portion of the number of Optional Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule A hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 600,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
three or later than ten business days after the date of such notice.
5
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each of the Underwriters hereunder,
in definitive form and in such authorized denominations and registered in such
names as E*OFFERING Corp. may request upon at least 48 hours' prior notice to
the Company, shall be delivered by or on behalf of the Company to E*OFFERING
Corp., through the facilities of The Depository Trust Company ("DTC"), for the
account of such Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by wire transfer of Federal (same-day) funds to
the respective accounts specified by the Company and the Custodian to E*OFFERING
Corp. at least 48 hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "DESIGNATED
OFFICE"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 7:30 a.m., San Francisco time, on June 22, 1999 or such
other time and date as E*OFFERING Corp. and the Company may agree upon in
writing, and, with respect to the Optional Shares, 7:30 a.m., San Francisco
time, on the date specified by E*OFFERING Corp. in the written notice given by
E*OFFERING Corp. of the Underwriters' election to purchase such Optional Shares,
or such other time and date as E*OFFERING Corp. and the Company may agree upon
in writing. Such time and date for delivery of the Firm Shares is herein called
the "FIRST TIME OF DELIVERY", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "SECOND TIME OF
DELIVERY", and each such time and date for delivery is herein called a "TIME OF
DELIVERY".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(m) hereof, will be delivered at the offices of the Company
at 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000 (the "CLOSING LOCATION"), and the
Shares will be delivered at the Designated Office, all at each Time of Delivery.
A meeting will be held at the Closing Location at 1:00 p.m., Houston time, on
the Business Day next preceding each Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding sentence
will be available for review by the parties hereto. For the purposes of this
Section 4, "Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in San Francisco are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the SEC's
close of business on the second business day following the execution and
delivery of this Agreement; to make no further amendment or any supplement to
the Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish you copies
thereof; to advise you, promptly after it receives notice thereof, of the
issuance by the SEC of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or Prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the SEC for the amending or supplementing of the Registration
Statement or Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the use of
any Preliminary Prospectus or Prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
6
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may reasonably request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, PROVIDED that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) On the Business Day next succeeding the date of this Agreement
and from time to time, to furnish the Underwriters with copies of the Prospectus
in San Francisco in such quantities as you may reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any events shall have occurred as a
result of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such period to amend or
supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the Act or
the Exchange Act, to notify you and upon your request to file such document and
to prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the Shares
at any time nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and deliver to
such Underwriter as many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
(d) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
except as provided hereunder, any securities of the Company that are
substantially similar to the Shares, including but not limited to any securities
that are convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than pursuant
to stock option plans and the employee stock purchase plan existing on, or upon
the conversion or exchange of convertible or exchangeable securities outstanding
as of, the date of this Agreement), without your prior written consent;
(e) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you as soon as they are available, copies of any reports and financial
statements furnished to or filed with the SEC or any national securities
exchange on which any class of securities of the Company is listed;
(f) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds;" and
(g) The Company will (i) cooperate with the Underwriters to
enforce the terms of each Lock-up Agreement (as defined in subparagraph
(xviii) of Section 1 hereof) and (ii) issue stop-transfer instructions to the
transfer agent for the Stock with respect to any transaction or contemplated
transaction that would constitute a breach of or default under the applicable
Lock-up Agreement. In addition, except with the prior written consent of
E*OFFERING Corp., the Company agrees not to amend or terminate, waive any
right under, or consent to any transaction that would otherwise be prohibited
under, any Lock-
7
up Agreement, or take any other action that would directly or indirectly have
the same effect as such an amendment, termination, waiver or consent.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement Among Underwriters, this Agreement, Blue Sky Memorandum, closing
documents (including any compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Shares; (iii)
all expenses in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 5(b) hereof, including
the fees and disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky survey; (iv) all fees and
expenses in connection with listing the Shares on the NASDAQ; (v) the filing
fees incident to, and the fees and disbursements of counsel for the Underwriters
in connection with, securing any required review by the NASD of the terms of the
sale of the Shares; (vi) the cost of preparing stock certificates; (vii) the
cost and charges of any transfer agent or registrar; (viii) the fees and
expenses of the Attorney-in-Fact and the Custodian; (ix) the costs and expenses
of travel, lodging and meals of the Company's employees in connection with the
"roadshow" and any other meeting with prospective investors in the Shares (other
than as shall have been specifically approved by the Representative to be paid
for by the Underwriters); and (x) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. In addition, it is understood that the Company
shall bear the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided
in this Section 6 and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery shall be subject, in their discretion, to the
condition that all representations and warranties and other statements of the
Company herein are, at and as of such Time of Delivery, true and correct, the
condition that the Company shall have performed all of its obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the SEC pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
no stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the SEC; and all requests for additional
information on the part of the SEC shall have been complied with to your
reasonable satisfaction;
(b) Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the Underwriters,
shall have furnished to you such written opinion or opinions, dated such Time of
Delivery, with respect to certain of the matters covered in paragraphs (ii), (v)
and (vi) and the closing paragraph of subsection (c) below as well as such other
related matters as you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to enable
them to pass upon such matters;
(c) XxXxxxxxx Will & Xxxxx, counsel for the Company, shall have
furnished to you their written opinion, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
8
(i) The Company is validly existing as a corporation in
good standing under the laws of the State of Delaware, with corporate power and
authority to own its properties and conduct its business as described in the
Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery) have
been duly and validly authorized and issued and to such counsel's knowledge, are
fully paid and non-assessable; the Shares are not subject to (a) preemptive
rights under the Company's Restated Certificate of Incorporation or under
Delaware law, or (b) to our knowledge, other rights of any security holder of
the Company to acquire all or any portion of the Shares; and the Shares conform
to the description of the Stock contained in the Prospectus;
(iii) Each subsidiary of the Company which is a "significant
subsidiary" within the meaning of Regulation S-X of the Rules and Regulations of
the SEC is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation; and all of the issued shares of capital stock
of each such subsidiary have been duly and validly authorized and issued, are to
the knowledge of such counsel, fully paid and non-assessable, and to the
knowledge of such counsel (except for directors' qualifying shares) owned of
record directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iv) To such counsel's knowledge, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which is required to be described in the Prospectus and is not so
described in the Prospectus;
(v) This Agreement has been duly authorized, executed and
delivered by the Company;
(vi) The Registration Statement has become effective under
the Act and, to such counsel's knowledge, no stop order or proceeding with
respect thereto have been instituted or threatened, or are pending, under the
Act;
(vii) The issue and sale of the Shares being delivered at
such Time of Delivery to be sold by the Company and the compliance by the
Company with all of the provisions of this Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, any agreement or instrument filed as an exhibit to the
Registration Statement, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any court or governmental agency or
body having jurisdiction over the Company or any of its assets is required for
the issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under the
Act and the Exchange Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required by the NASD
and under state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters;
9
(ix) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock are accurate summaries and fairly present, in
all material respects, the matters referred to therein;
(x) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act;
In addition to the above, such counsel shall also state that the
Registration Statement and the Prospectus as of its respective date (other than
the financial statements and related schedules and other financial data therein,
as to which such counsel need express no opinion) appeared on their face to have
been appropriately responsive in all material respects to the requirements of
the Act and the rules and regulations thereunder; although they do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (ix) of this Section 7(c), they have no
reason to believe that, as of its effective date, the Registration Statement or
any further amendment thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules and other financial
data therein, as to which such counsel need express no opinion) 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, as of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and other financial data therein, as
to which such counsel need express no opinion) contained an untrue statement of
a material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and other financial data therein, as
to which such counsel need express no opinion) contains an untrue statement of a
material fact or omis to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and they do not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement or required to
be incorporated by reference into the Prospectus or required to be described in
the Registration Statement or the Prospectus which are not filed or incorporated
by reference or described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the federal securities
laws of the United States, the Delaware General Corporation Law and the laws of
the States of California and Illinois;
(d) [Intentionally omitted]
(e) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 7:30 a.m., San Francisco time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent to
the date of this Agreement and also at each Time of Delivery, Xxxxxx Xxxxxxxx
LLP shall have furnished to you a letter or letters, dated the respective dates
of delivery thereof, in form and substance satisfactory to you, to the effect
set forth in Annex I hereto (the executed copy of the letter delivered prior to
the execution of this Agreement is attached as Annex I(a) hereto and a draft of
the form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its
10
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus, and (ii) since the respective dates as of which information is
given in the Prospectus there shall not have been any change in the capital
stock, stock options (other than exercises of stock options outstanding and
grants of stock options authorized under the employee stock plans described
in the Prospectus) or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated
in the Prospectus, the effect of which, in any such case described in clause
(i) or (ii), is in the judgment of the Representative so material and adverse
as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;
(g) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii) a
general moratorium on commercial banking activities declared by either Federal
or California or Texas State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the United States
of a national emergency or war, if the effect of any such event specified in
this Clause (iv) in the judgment of the Representative makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(h) The Company shall have obtained and delivered to the Underwriters
executed copies of a Lock-Up Agreement from each executive officer and director
of the Company;
(i) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the Business Day
next succeeding the date of this Agreement; and
(j) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company satisfactory to
you as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the Company
of all of its obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as you may reasonably request, and the
Company shall have furnished or caused to be furnished certificates as to the
matters set forth in subsections (a) and (f) of this Section, and as to such
other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written
11
information furnished to the Company by any Underwriter through E*OFFERING
Corp. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through E*OFFERING Corp. expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, clpability or a failure to act, by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the
Underwriters, on the other hand, from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company, on the one hand, and the Underwriters, on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions
12
in respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company bear to the
total underwriting discounts and commissions received by the Underwriters
with respect to the Shares purchased under this Agreement, in each case as
set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relatesto information supplied by
the Company, on the one hand, or the Underwriters, on the other, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) 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 above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within 36 hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company shall be entitled to a further period of 36 hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notify you that they have so arranged
for the purchase of such Shares, you or the Company shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
13
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
of the Shares to be purchased at such Time of Delivery, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all of the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not have any liability to any Underwriter except as provided
in Sections 6 and 8 hereof; but, if for any other reason any Shares are not
delivered by or on behalf of the Company as provided herein, the Company will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company shall then be under no
further liability to any Underwriter in respect of the Shares not so delivered
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by E*OFFERING Corp. on behalf of you as the
Representative.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the Representative to E*OFFERING Corp., 000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Attention:
Syndicate Department; and if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: President; PROVIDED, HOWEVER, that any notice
to an Underwriter pursuant to Section 8(b) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its
14
Underwriters' Questionnaire or telex constituting such Questionnaire, which
address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters and the Company, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the SEC's office in Washington, D.C.
is open for business.
15. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
[Signature Page to Underwriting Agreement Follows]
15
If the foregoing is in accordance with your understanding, please sign and
return to us seven counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
FIRST SIERRA FINANCIAL, INC.
By: /s/ Xxx Xxxxxxx
-----------------------------
Name: Xxx Xxxxxxx
Title: Chairman of the Board,
Chief Executive Officer and
President
Accepted as of the date first written above:
E*OFFERING CORP.
ON ITS BEHALF AND ON BEHALF OF EACH OF THE
SEVERAL UNDERWRITERS NAMED IN SCHEDUELE A HERETO
By: /s/ Xxxxx Xxxxxx
-----------------------------
Title: Managing Director, Capital Markets
16
SCHEDULE A
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------------------------------------- --------------- ------------------
E*OFFERING Corp. . . . . . . . . . . . . 3,790,000 568,500
Xxxxx & Company Incorporated. . . . . . . 45,000 6,750
PaineWebber Incorporated. . . . . . . . . 45,000 6,750
Prudential Securities Incorporated. . . . 45,000 6,750
XX Xxxxx Securities Corporation. . . . . 45,000 6,750
Xxxxx Xxxxxx & Co., Inc. . . . . . . . . 10,000 1,500
Southwest Securities, Inc. . . . . . . . 10,000 1,500
XX Xxxxxxxxx LLC . . . . . . . . . . . . 10,000 1,500
Total. . . . . . . . . . . . . . . . 4,000,000 600,000
17
ANNEX I
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and included
or incorporated by reference in the Registration Statement or the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act, as applicable, and the related
published rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim financial
statements, selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as indicated
in their reports thereon, copies of which have been separately furnished to
E*OFFERING Corp., as the representative of the Underwriters (the
"REPRESENTATIVE");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
unaudited condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the Prospectus
and/or included in the Company's Quarterly Report on Form 10-Q incorporated by
reference into the Prospectus as indicated in their reports thereon copies of
which have been separately furnished to the Representative; and on the basis of
specified procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred to in paragraph
(vi)(A)(i) below comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations, nothing came to their attention that caused
them to believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus and
included or incorporated by reference in Item 6 of the Company's Annual Report
on Form 10-K for the most recent fiscal year agrees with the corresponding
amounts (after restatement where applicable) in the audited consolidated
financial statements for such five fiscal years which were included or
incorporated by reference in the Company's Annual Reports on Form 10-K for such
fiscal years;
(v) They have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of
Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards, consisting
of a reading of the unaudited financial
18
statements and other information referred to below, a reading of the latest
available interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries since the
date of the latest audited financial statements included in the Prospectus,
inquiries of officials of the Company and its subsidiaries responsible for
financial and accounting matters and such other inquiries and procedures as
may be specified in such letter, nothing came to their attention that caused
them to believe that:
(A)(i) the unaudited consolidated statements of
income, consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included or incorporated by reference in the
Company's Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act and the related published rules and
regulations, or (ii) any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus or included or
incorporated by reference in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus, for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements from
which such data and items were derived, and any such unaudited data and items
were not determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements included
or incorporated by reference in the Company's Annual Report on Form 10-K for the
most recent fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the unaudited financial
statements referred to in Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with the basis for the
audited consolidated financial statements included or incorporated by reference
in the Company's Annual Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations thereunder or
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock upon exercise
of options and stock appreciation rights, upon earn-outs of performance shares
and upon conversions of convertible securities, in each case which were
outstanding on the date of the latest balance sheet included or incorporated by
reference in the Prospectus) or any increase in the consolidated long-term debt
of the Company and its subsidiaries, or any decreases in consolidated net
current assets or stockholders' equity or other items specified by the
Representative, or any increases in any items specified by the Representative,
in each case as compared with amounts shown in the latest balance sheet included
or incorporated by reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by reference in the Prospectus to
the specified date referred to in Clause (E)
19
there were any decreases in consolidated net revenues or operating profit or
the total or per share amounts of consolidated net income or other items
specified by the Representative, or any increases in any items specified by
the Representative, in each case as compared with the comparable period of
the preceding year and with any other period of corresponding length
specified by the Representative, except in each case for decreases or
increases which the Prospectus discloses have occurred or may occur or which
are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and the
limited procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out certain
specified procedures, not constituting an examination in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representative, which are
derived from the general accounting records of the Company and its subsidiaries,
which appear in the Prospectus (excluding documents incorporated by reference),
or in Part II of, or in exhibits and schedules to, the Registration Statement
specified by the Representative or in documents incorporated by reference in the
Prospectus specified by the Representative, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in agreement.
20
