EXHIBIT 1.1
XXXXXXXXXX SECURITIES
FORM OF UNDERWRITING AGREEMENT
3,500,000 Shares
NEW CENTURY FINANCIAL CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
DATED JUNE __, 1997
Table of Contents
Page
Section 1. Representations and Warranties................................................... 2
A. Representations and Warranties of the Company.................................... 2
(a) Compliance with Registration Requirements................................. 2
(b) Offering Materials Furnished to Underwriters.............................. 2
(c) Distribution of Offering Material By the Company.......................... 2
(d) The Underwriting Agreement................................................ 3
(e) Authorization of the Common Shares........................................ 3
(f) No Applicable Registration or Other Similar Rights........................ 3
(g) No Material Adverse Change................................................ 3
(h) Independent Accountants................................................... 3
(i) Preparation of the Financial Statements................................... 3
(j) Incorporation and Good Standing of the Company and its Subsidiaries....... 4
(k) Capitalization and Other Capital Stock Matters............................ 4
(l) Stock Exchange Listing.................................................... 4
(m) Non-Contravention of Existing Instruments; No Further Authorizations
or Approvals Required..................................................... 4
(n) No Material Actions or Proceedings........................................ 5
(o) Intellectual Property Rights.............................................. 5
(p) All Necessary Permits, Etc................................................ 5
(q) Title to Properties....................................................... 6
(r) Tax Law Compliance........................................................ 6
(s) Company Not an "Investment Company."...................................... 6
(t) Insurance................................................................. 6
(u) No Price Stabilization or Manipulation.................................... 6
(v) Related Party Transactions................................................ 7
(w) No Unlawful Contributions or Other Payments............................... 7
(x) Company's Accounting System............................................... 7
(y) Compliance with Environmental Laws........................................ 7
(z) ERISA Compliance.......................................................... 8
(aa) Financial Projections..................................................... 8
(bb) Events of Default......................................................... 8
(cc) Past Securitizations...................................................... 9
(dd) Exchange Act Filings...................................................... 9
(ee) Whole Loan Sales.......................................................... 9
(ff) Regulation................................................................ 9
B. Representations and Warranties of the OA Stockholders............................ 9
(a) The Underwriting Agreement................................................ 9
(b) The Custody Agreement and Power of Attorney............................... 9
(c) Title to Common Shares to be Sold; All Authorizations Obtained............ 10
(d) Delivery of the Common Shares to be Sold.................................. 10
(e) Non-Contravention; No Further Authorizations or Approvals
Required.................................................................. 10
(f) No Registration or Other Similar Rights................................... 10
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(g) No Further Consents, Etc.................................................. 11
(h) Disclosure Made by Such OA Stockholder in the Prospectus.................. 11
(i) No Price Stabilization or Manipulation.................................... 11
(j) Confirmation of Company Representations and Warranties.................... 11
Section 2. Purchase, Sale and Delivery of the Common Shares................................. 11
Section 3. Additional Covenants............................................................. 14
A. Covenants of the Company......................................................... 14
(a) Representative's Review of Proposed Amendments and Supplements............ 14
(b) Securities Act Compliance................................................. 14
(c) Amendments and Supplements to the Prospectus and Other Securities
Act Matters............................................................... 14
(d) Copies of any Amendments and Supplements to the Prospectus................ 14
(e) Blue Sky Compliance....................................................... 15
(f) Use of Proceeds........................................................... 15
(g) Transfer Agent............................................................ 15
(h) Earnings Statement........................................................ 15
(i) Periodic Reporting Obligations............................................ 15
(j) Agreement Not To Offer or Sell Additional Securities...................... 15
(k) Future Reports to the Representatives..................................... 16
B. Covenants of the OA Stockholders................................................. 16
(a) Agreement Not to Offer or Sell Additional Securities...................... 16
(b) Delivery of Forms W-8 and W-9............................................. 16
Section 4. Payment of Expenses.............................................................. 16
Section 5. Conditions of the Obligations of the Underwriters................................ 17
(a) Accountants' Comfort Letter............................................... 17
(b) Compliance with Registration Requirements; No Stop Order; No
Objection from NASD....................................................... 18
(c) No Material Adverse Change or Ratings Agency Change....................... 18
(d) Opinion of Counsel for the Company........................................ 18
(e) Opinion of Counsel for the Underwriters................................... 18
(f) Officers' Certificate..................................................... 19
(g) Bring-down Comfort Letter................................................. 19
(i) Selling Stockholder's and OA Stockholders' Certificates................... 19
(j) Selling Stockholder's and OA Stockholders' Documents...................... 19
(k) Lock-Up Agreement from Certain Stockholders of the Company Other
than the Selling Stockholder and the OA Stockholders...................... 20
(l) Additional Documents...................................................... 20
Section 6. Reimbursement of Underwriters' Expenses.......................................... 20
Section 7. Effectiveness of this Agreement.................................................. 20
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Section 8. Indemnification 21
(a) Indemnification of the Underwriters....................................... 21
(b) Indemnification of the Company, its Directors and Officers................ 22
(c) Notifications and Other Indemnification Procedures........................ 22
(d) Settlements............................................................... 23
Section 9. Contribution...................................................................... 23
Section 10. Default of One or More of the Several Underwriters............................... 25
Section 11. Termination of this Agreement.................................................... 25
Section 12. Representations and Indemnities to Survive Delivery.............................. 26
Section 13. Notices.......................................................................... 26
Section 14. Successors ...................................................................... 27
Section 15. Partial Unenforceability......................................................... 27
Section 16.................................................................................... 27
(a) Governing Law Provisions.................................................. 27
(b) Consent to Jurisdiction................................................... 27
(c) Waiver of Immunity........................................................ 27
Section 17. Failure of One or More of the OA Stockholders to Sell and Deliver
Common Shares.................................................................... 28
Section 18. General Provisions............................................................... 28
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UNDERWRITING AGREEMENT
June __, 1997
XXXXXXXXXX SECURITIES
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
XXXXX XXXXXXX INC.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
As Representatives of the several Underwriters
Ladies and Gentlemen:
INTRODUCTORY. New Century Financial Corporation, a Delaware corporation
(the "Company), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of 2,900,000 shares of its Common
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Stock, par value $.01 per share (the "Common Stock"); and Cornerstone Fund I,
L.L.C. (the "Selling Stockholder") proposes to sell to the Underwriters an
aggregate of 600,000 shares of Common Stock. The 2,900,000 shares of Common
Stock to be sold by the Company and the 600,000 shares of Common Stock to be
sold by the Selling Stockholder are collectively called the "Firm Common
Shares". In addition, the Company, the Selling Stockholder and Cornerstone
Equity Partners, L.L.C. (collectively, the "OA Stockholders") have severally
granted to the Underwriters an option to purchase up to an additional 525,000
shares (the "Optional Common Shares") of Common Stock, as provided in Section 2,
each OA Stockholder selling up to the amount set forth opposite such OA
Stockholder's name in Schedule B. The Firm Common Shares and, if and to the
----------
extent such option is exercised, the Optional Common Shares are collectively
called the "Common Shares". Xxxxxxxxxx Securities and Xxxxx Xxxxxxx Inc. 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.
333-25483), 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"; provided,
however, if the Company has, with the consent of Xxxxxxxxxx Securities, elected
to rely upon Rule 434 under the Securities Act, the term "Prospectus" shall mean
the Company's prospectus subject to completion (each, a "preliminary
prospectus") dated June 10, 1997 (such preliminary prospectus is called the
"Rule 434 preliminary prospectus"), together with the applicable term
sheet (the "Term Sheet") prepared and filed by the Company with the Commission
under Rules 434 and 424(b) under the Securities Act and all references in this
Agreement to the date of the Prospectus shall mean the date of the Term Sheet.
All references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a preliminary prospectus, the Prospectus or the Term
Sheet, 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 ("XXXXX").
The Company the Selling Stockholder and each of the OA Stockholders hereby
confirm their respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES.
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 XXXXX (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 through the end of
the Prospectus Delivery Period, 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
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 or with respect to the Underwriting section of the Prospectus
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 Representative(s) one complete manually signed copy 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
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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. The
Company has not 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, the Registration Statement and any
other materials permitted by the Securities Act.
(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 OA
Stockholders (including the Selling Stockholder) 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 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; and (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.
(h) Independent Accountants. KPMG Peat Marwick LLP, who have
expressed their 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.
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(i) Preparation of the Financial Statements. The financial
statements and related notes thereto filed with the Commission as a part of
the Registration Statement and included in the Prospectus present fairly in
all material respects 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. Such financial statements and
supporting schedules have been prepared in conformity with generally
accepted accounting principles as applied in the United States 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 Consolidated Selected
Financial and Other Data," "Selected Consolidated Financial and Other 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.
(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 corporation 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.
Each of the Company and each subsidiary is duly qualified as a foreign
corporation 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.
All of the issued and outstanding capital stock of each subsidiary has been
duly authorized and validly issued, is fully paid and nonassessable and is
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
21.1 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 or warrants
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 the OA
Stockholders (including the Selling Stockholder)) have been duly authorized
and validly issued, are fully paid and nonassessable and have been issued
in all material respects compliance with federal and state securities laws.
None 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 description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the options
or
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other rights granted thereunder, set forth in the Prospectus accurately and
fairly presents in all material respects 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 listing on the Nasdaq National Market, subject only to official notice
of issuance.
(m) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement, note,
contract, 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
(including, without limitation, the Company's revolving credit facilities
with [First Bank National Association and Guaranty Federal Bank and Salomon
Brothers], as lenders, or to which any of the property or assets of the
Company or any of its subsidiaries is subject (each, an "Existing
Instrument"), except for such Defaults as would not, individually or in the
aggregate, result in a Material Adverse Change. The Company's execution,
delivery and performance of this Agreement and consummation of the
transactions contemplated hereby and by the Prospectus (i) have been duly
authorized by all necessary corporate action and will not result in any
violation of the provisions of the charter or by-laws 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, or require the consent of any other part to, any Existing
Instrument, except for such conflicts, breaches, Defaults, Debt Repayment
Triggering Event, liens, charges or encumbrances as would not, individually
or in the aggregate, result in a Material Adverse Change and (iii) will not
result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any subsidiary.
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 Company's execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby,
except such as have been obtained or made by the Company and are in full
force and effect under the Securities Act, the Securities Exchange Act of
1934, applicable state securities or blue sky laws and from the National
Association of Securities Dealers, Inc. (the "NASD"). 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 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.
(n) No Material Actions or Proceedings. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or, to the Company's knowledge
affecting the Company or any of its subsidiaries, (ii) which has as the
subject thereof any officer or director (in their capacities as such) of,
or property owned or leased by, the Company or any of its subsidiaries or
(iii) relating to environmental 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 result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement. No
material labor dispute with the employees of the Company
5
or any of its subsidiaries exists or, to the best of the Company's
knowledge, is threatened or imminent.
(o) Intellectual Property Rights. The Company and its
subsidiaries own or possess sufficient trademarks, trade names, patent
rights, copyrights, licenses, approvals, trade secrets and other similar
rights (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, which infringement or conflict, if the subject
of an unfavorable decision, would result in a Material Adverse Change.
(p) All Necessary Permits, Etc. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct their respective businesses, the absence of
which would 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 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.
(q) 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 Section 1(A)
(i) above (or elsewhere 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 material 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 material real property, improvements, equipment or personal
property by the Company or such subsidiary.
(r) Tax Law Compliance. The Company and its consolidated
subsidiaries have filed all necessary federal, state and foreign income and
franchise tax returns and have paid all taxes required to be paid by any of
them, the failure to pay or file would result in a Material Adverse Change
and, if due and payable, any related or similar assessment, fine or penalty
levied against any of them. 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 material 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.
(s) 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"). The Company is not, and
after receipt of payment for the Common Shares will not be, an "investment
company" within the meaning of Investment Company Act and intends to
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
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(t) 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 real and personal property
owned or leased by the Company and its subsidiaries against theft, damage,
destruction, acts of vandalism and earthquakes. The Company does not 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.
(u) No Price Stabilization or Manipulation. The Company 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 the Common Stock to facilitate the sale or
resale of the Common Shares.
(v) Related Party Transactions. There are no business
relationships or related-party transactions involving the Company or any
subsidiary or any other person required under the Securities Act to be
described in the Prospectus which have not been described as required.
(w) 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 acting on behalf of the
Company or any subsidiary, has made any contribution or other payment to
any official 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.
(x) Company's Accounting System. The Company maintains 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.
(y) 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
7
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 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.
(z) 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 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.
(aa) Events of Default. No Master Servicer Event of Default or
increase in the Overcollateralization amount (as defined in the Pooling and
Servicing Agreement, dated as of February 1, 1997 by and among Salomon
Brothers Mortgage Securities VII, Inc., New Century Mortgage Corporation
and First Trust National Association), no Event of Default (as defined in
the Insuarnace and Indemnity Agreement, dated as of February 27, 1997, by
and among Financial Security Assurance Inc., New Century Mortgage
Corporation and Salomon
8
Brothers Mortgage Securities VII, Inc.), no Event of Default (as defined in
the Amended and Restated Credit Agreement, dated October 25, 1996, by and
among New Century Mortgage Corporation, First Bank National Association and
the banks party therto, as the same has been amended as of the date of this
Agreement), no Termination Event (as defined in the leter agreement, dated
November 4, 1996, between Solomon Brothers Realty Corp and New Century
Mortgage Corporation) has occurred and, to the best of the Company's
knowledge, there is no event which, with the giving of notice or the
passage of time or both, would give rise to such a Default, Event of
Default or Events of Servicing Termination.
(bb) Past Securitizations. The description of past
securitization transactions effected by the Company, as contained in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), is true and complete in
all material respects and to the Company's best knowledge, no event or
series of events has occurred that would result in any of the securities
issued in connection with any of such transactions being downgraded or
placed on a watch list with negative implications by any rating agency or
similar organization, or that would impair the Company's or its
subsidiaries' ability to consummate future securitization transactions upon
economic terms consistent with past securitization transactions or
otherwise cause the Company and its subsidiaries to suffer any Material
Adverse Change with respect to any past or future securitization
transaction (other than any such event or series of events described in the
Prospectus, or, if the Prospectus is not yet in existence, the most recent
Preliminary Prospectus).
(cc) Exchange Act Filings. The Company has filed all reports
required under the Exchange Act with respect to the registration statements
filed in connection with the asset securitizations sponsored by the
Company.
(dd) Whole Loan Sales. The description of whole loan sales
effected by the Company, as contained in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), is true and complete in all material respects and
no event or series of events has occurred that would result in any of the
securities issued in securitizations using such loans being downgraded or
placed on a watch list with negative implications by any rating agency or
similar organization, or that would impair the Company's or New Century
Mortgage Corporation's (the "Subsidiary") ability to consummate future
whole loan sales or to securitize such loans itself upon economic terms
consistent with past whole loan sales and securitizations of such loans or
otherwise cause the Company and the Subsidiary to suffer any Material
Adverse Change with respect to any past or future whole loan sale or
securitization (other than any such event or series of events described in
the Prospectus, (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(ee) Regulation. The description of government rules and
regulations as contained in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) under the captions "Risk Factors" and "Regulation" are true and
correct in all material respects.
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.
9
B. REPRESENTATIONS AND WARRANTIES OF THE OA STOCKHOLDERS. Each OA
Stockholder including the Selling Stockholder 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 OA Stockholder
and is a valid and binding agreement of such OA Stockholder, 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 such OA Stockholder and [___], as custodian
(the "Custodian"), relating to the deposit of the Common Shares to be sold
by such OA Stockholder (the "Custody Agreement") and (ii) Power of Attorney
appointing certain individuals named therein as such OA Stockholder'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 OA Stockholder has been duly
authorized, executed and delivered by such OA Stockholder and is a valid
and binding agreement of such OA Stockholder, 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.
(c) Title to Common Shares to be Sold; All Authorizations
Obtained. Such OA Stockholder 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 OA Stockholder 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 OA Stockholder 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 to the Underwriters by such OA Stockholder
pursuant to this Agreement against payment therefor as provided herein will
pass good and valid title to such Common Shares, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or other claim
(assuming that the Underwriters are not acquiring such Common Shares in
good faith and without knowledge of any adverse claims with respect
thereto).
(e) Non-Contravention; No Further Authorizations or Approvals
Required. The execution and delivery by such OA Stockholder of, and the
performance by such OA Stockholder of its obligations 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 OA Stockholder or any other agreement or instrument to
which such OA Stockholder 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 OA Stockholder
of any court, regulatory body, administrative
10
agency, governmental body or arbitrator having jurisdiction over such OA
Stockholder. 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 OA Stockholder 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 OA Stockholder
does not have 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
"Shares Eligible for Future Sale".
(g) No Further Consents, Etc. Except for the (i) exercise by
such OA Stockholder of certain registration rights pursuant to the
Registration Rights Agreement dated as of [___] (which registration rights
have been duly exercised pursuant thereto), (ii) consent of such OA
Stockholder to the respective number of Common Shares to be sold by all of
the OA Stockholders pursuant to this Agreement and (iii) waiver by certain
other holders of Common Stock of certain registration rights pursuant to
such Registration Rights Agreement, no consent, approval or waiver is
required under any instrument or agreement to which such OA Stockholder 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 OA
Stockholder under this Agreement or the consummation by such OA Stockholder
of any of the other transactions contemplated hereby.
(h) Disclosure Made by Such OA Stockholder in the Prospectus.
All information furnished by or on behalf of such OA Stockholder 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 misleading. Such OA Stockholder confirms as
accurate the number of shares of Common Stock set forth opposite such OA
Stockholder's name (and in the associated footnotes) in the Prospectus
under the caption "Principal and Selling Stockholders" (both prior to and
after giving effect to the sale of the Common Shares).
(i) No Price Stabilization or Manipulation. Such OA Stockholder
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 the Common Stock to
facilitate the sale or resale of the Common Shares.
(j) Confirmation of Company Representations and Warranties. Such
OA Stockholder does not believe that the representations and warranties of
the Company contained in Section 1(A) hereof are not true and correct in
all material respects, is familiar with the Registration Statement and the
Prospectus and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement or the Prospectus
which has had a Material Adverse Effect.
11
Any certificate signed by or on behalf of any OA Stockholder and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by such OA Stockholder to each
Underwriter as to the matters covered thereby.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
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
2,500,000 Firm Common Shares and (ii) the Selling Stockholder agrees to sell to
the several Underwriters an aggregate of 500,000 Firm Common Shares. 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
Stockholder 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 Stockholder (and to the OA
Stockholders for each Optional Common Stock) shall be $[___] per share.
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 O'Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx Xxxxx, Xxxxxxxxxx (or such other place as may be agreed to by the
Company and the Representatives) at 6:00 a.m. San Francisco time, on June ____,
1997, or such other time and date not later than 10:30 a.m. San Francisco time,
on June ____, 1997 as the Representatives shall designate by notice to the
Company (the time and date of such closing are called the "First Closing Date").
The Company and the Selling Stockholder 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 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.
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 OA
Stockholders hereby grant an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 450,000 Optional Common Shares
from the OA Stockholders 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 OA Stockholders (with a copy 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, (a) 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
12
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 and
(b) each OA Stockholder agrees, severally and not jointly, to sell the number of
Optional Common Shares set forth in Schedule B opposite the name of such OA
----------
Stockholder. The Representatives may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the OA Stockholders
(with a copy to the Company).
Public Offering of the Common Shares. The Representatives hereby
advise the Company and the OA Stockholders 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 their sole judgment, have determined is advisable and practicable.
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. Payment for the Common Shares to be sold by the
Selling Stockholder and the OA Stockholders 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 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. Either Xxxxxxxxxx Securities or Xxxxx Xxxxxxx, in their individual
capacities 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.
The Selling Stockholder and each OA Stockholder hereby agree that (i)
each 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 Stockholder or such OA Stockholder to the several Underwriters, or
otherwise in connection with the performance of such Selling Stockholder's or
such OA Stockholder's obligations hereunder and (ii) the Custodian is authorized
to deduct for such payment any such amounts from the proceeds to such Selling
Stockholder or such OA Stockholder hereunder and to hold such amounts for the
account of such Stockholder or such OA Stockholder with the Custodian under the
Custody Agreement.
Delivery of the Common Shares. The Company and the Selling
Stockholder 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 and the OA Stockholders 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 them 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
13
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. 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.
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 hereby represents,
warrants and covenants to 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 (which
period for purposes of this Agreement shall not exceed the date nine months
following the First Closing Date) (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 objects.
(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 it 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.
(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
14
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 to
promptly 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) 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 state securities or blue sky laws or Canadian provincial 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 reasonably 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 practicable
moment.
(f) Use of Proceeds. The Company 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.
(g) Transfer Agent. The Company shall engage and maintain, at
its expense, a registrar and transfer agent for the Common Stock.
(h) Earnings Statement. As soon as practicable, the Company will
make generally available to its security holders and to the Representatives
an earnings statement (which need not be audited) covering the twelve-month
period ending __________ that satisfies the provisions of Section 11(a) of
the Securities Act.
(i) 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.
(j) 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
15
consent of Xxxxxxxxxx Securities (which consent may be withheld at the sole
discretion of Xxxxxxxxxx Securities), directly or indirectly, sell, offer,
contract or grant any option to purchase, 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 a warrant (the "Comerica
Warrant") to Comerica Incorporated exercisable for up to 100,000 shares of
Common Stock or Common Stock upon exercise of the Comerica Warrant 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 180 day period without the prior written
consent of Xxxxxxxxxx Securities (which consent may be withheld at the sole
discretion of the Xxxxxxxxxx Securities).
(k) Future Reports to the Representatives. During the period of
five years hereafter the Company will furnish to the Representatives at 000
Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000 Attention:[ ]: (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, stockholders' 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.
(l) Amendment to Credit Facility. The Company will use
commercially reasonable efforts to within 45 days following the First
Closing consummate an amendment to its warehouse line of credit maintained
with First Bank National Association increasing the principal amount that
may be borrowed under such line to at least $150 million.
B. COVENANTS OF THE OA STOCKHOLDERS. Each OA Stockholder (including
the Selling Stockholder) further covenants and agrees with each Underwriter:
(a) Agreement Not to Offer or Sell Additional Securities. Such
OA Stockholder will not, without the prior written consent of Xxxxxxxxxx
Securities (which consent may be withheld in its sole discretion), directly
or indirectly, sell, offer, contract or grant any option to purchase
(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
16
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
Stockholder is a non-United States person) or Form W-9 (if the OA
Stockholder is a United States Person).
Xxxxxxxxxx Securities, on behalf of the several Underwriters, may, in
its sole discretion, waive in writing the performance by the Company or any OA
Stockholder of any one or more of the foregoing covenants or extend the time for
their performance.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay 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 and fees and expenses
of the Custodian), (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 and expenses of the Company's counsel and one
counsel for the Selling Stockholder and the OA Stockholders other than the
Company, 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, reasonable
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 state securities or blue sky laws or the provincial
securities laws of Canada, 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 listing the Common
Shares on the Nasdaq National Market, and (ix) all other fees, costs and
expenses referred to in Item 13 of Part II of the Registration Statement.
Except as provided in 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 OA Stockholders (including the Selling Stockholder) 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 OA Stockholders, (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 OA Stockholders 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 OA Stockholders, on the other hand.
17
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 OA Stockholders (including the Selling Stockholder) 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 OA Stockholders (including the Selling Stockholder) 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 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 [___] 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; or, if the Company elected to
rely upon Rule 434 under the Securities Act and obtained the
Representatives's consent thereto, the Company shall have filed a Term
Sheet with the Commission in the manner and within the time period
required by such Rule 424(b);
(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
18
(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 O'Melveny & Xxxxx LLP, counsel for the Company,
dated as of such Closing Date, the form of which is attached as Exhibit A
---------
(and the Representatives shall have received an additional [___] conformed
copies of such counsel's legal opinion for each of the several
Underwriters).
(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 Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel
for the Underwriters, dated as of such Closing Date, with respect to the
matters set forth in paragraphs[(i), (vii) (with respect to subparagraph
(i) only, (viii), (ix), (x) (xi) and (xiii) (with respect to the captions
"Description of Capital Stock" and "Underwriting" under subparagraph (i)
only), (xii),] and [the next-to-last paragraph] of Exhibit A (and the
---------
Representatives shall have received an additional [___] conformed copies of
such counsel's legal opinion for each of the several Underwriters).
(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 Chairman of the Board, Chief Executive Officer
or President of the Company and the Chief Financial Officer or Chief
Accounting Officer of the Company, dated as of such Closing Date, to the
effect 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 in all
material respects with the same force and effect as though expressly
made on and as of such Closing Date; and
(iii) the Company has complied in all material respects with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date.
(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 such 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 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 [___] conformed
copies of such accountants' letter for each of the several Underwriters).
19
(h) Opinion of Counsel for the Selling Stockholder and the OA
Stockholders. On each of the First Closing Date (as may be appropriate)
and the Second Closing Date the Representatives shall have received the
favorable opinion of Xxxxxxx & Xxxxx, counsel for the Selling Stockholder
and the OA Stockholders (other than the Company), dated as of such Closing
Date, the form of which is attached as Exhibit B (and the Representatives
---------
shall have received an additional [___] conformed copies of such counsel's
legal opinion for each of the several Underwriters).
(i) Selling Stockholder's and OA Stockholders' Certificates. On each
of the First Closing Date and the Second Closing Date, as may be
appropriate, the Representatives shall received a written certificate
executed by the Attorney-in-Fact of the Selling Stockholder and the OA
Stockholders, dated as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of such Selling
Stockholder or such OA Stockholder set forth in Section 1(B) of this
Agreement are true and correct in all material respects with the same
force and effect as though expressly made by such Selling Stockholder or
such OA Stockholder on and as of such Closing Date; and
(ii) such Selling Stockholder or such OA Stockholder has complied
in all material respects 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 Stockholder's and OA Stockholders' Documents. On the date
hereof, the Company, and the Selling Stockholder and the OA Stockholders
shall have furnished for review by the Representatives copies of the Powers
of Attorney and Custody Agreements executed by each of the Selling
Stockholder and the OA Stockholders and such further information,
certificates and documents as the Representatives may reasonably request.
(k) Lock-Up Agreement from Certain Stockholders of the Company Other
than the Selling Stockholder and the OA Stockholders. On the date hereof,
the Company shall have furnished to the Representatives an agreement in the
form of Exhibit C hereto from each officer, director and 1% or greater
---------
(based on shares outstanding immediately prior to the First Closing)
Stockholders of the Company, and such agreements shall be in full force and
effect on each of the First Closing Date and the Second Closing Date.
(l) 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.
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, the Selling Stockholder and the OA
Stockholders at any time on or prior to the First Closing Date and, with respect
to 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.
20
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement is
terminated prior to the First Closing by the Representatives pursuant to Section
5 (except subsections 5(b)(iii) and 5(e), or Section 11 (except as set forth in
clauses (i), (ii) and (iii) of 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 Stockholder 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. [RESERVED]
SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Underwriters. Each of the Company, the
Selling Stockholder and, subject to Section 8(e) each of the OA
Stockholders, jointly and severally, agree 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
reasonably 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,
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, the Selling
Stockholder or the OA Stockholders contained herein; or (iv) in whole or in
part upon any failure of the Company, the Selling Stockholder or the OA
Stockholders to perform their respective 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 bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling
person for any and all reasonable expenses (including the fees and
disbursements of counsel chosen by Xxxxxxxxxx Securities) as such expenses
are reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending, settling, compromising or paying
21
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, the Selling
Stockholder or the OA Stockholders 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) shall be in addition to
any liabilities that the Company, the Selling Stockholder or the OA
Stockholders may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. 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 Stockholder, the OA
Stockholders and each person, if any, who controls the Company, the Selling
Stockholder or any OA Stockholder 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
Stockholder, OA Stockholder 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, the Selling Stockholder or the OA Stockholder by the
Representatives expressly for use therein; and to reimburse the Company, or
any such director, officer, Selling Stockholder, OA Stockholder or
controlling person for any legal and other expense as reasonably incurred
by the Company, or any such director, officer, Selling Stockholder OA
Stockholder 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, the Selling Stockholder
and each of the OA Stockholders hereby acknowledges that the only
information that the Underwriters have furnished to the Company, the
Selling Stockholder and the OA Stockholders expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) are the statements set forth (A) as
the last paragraph on the inside front
22
cover page of the Prospectus concerning stabilization and passive market
making 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 (Xxxxxxxxxx Securities 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 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
23
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.
(e) Limitation Liability. The liability of each OA Stockholder
(except the Company) under this Section 8 shall not exceed an amount equal
to the proceeds received by such OA Stockholder from the sale of securities
pursuant to this Agreement.
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, the Selling Stockholder and the OA
Stockholders, 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, the
Selling Stockholder and the OA Stockholders, 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, the Selling Stockholder and the OA Stockholders, 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, the Selling Stockholder and the OA Stockholders, and the total
underwriting discount received by the Underwriters, in each case as set forth on
the front cover page of the Prospectus (or, if Rule 434 under the Securities Act
is used, the corresponding location on the Term Sheet) bear to the aggregate
initial public offering price of the Common Shares as set forth on such cover.
The relative fault of the Company, the Selling Stockholder and the OA
Stockholders, 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, the
Selling Stockholder or the OA Stockholders, 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 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.
24
The Company the Selling Stockholder, the OA Stockholders 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 UNDERWRITER. 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 provisions of Section 4, 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 may be terminated by the Representatives by notice given to
the Company and the Selling Stockholder if at any time (i) trading or quotation
in any of the Company's securities shall have been suspended or
25
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 material adverse
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 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 the Company 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, the Selling Stockholder or
the OA Stockholders to any Underwriter, except that the Company, the Selling
Stockholder and the OA Stockholders 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, the Selling Stockholder and the OA
Stockholders, 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 Stockholder, of the
OA Stockholders 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, the
Selling Stockholder or the OA Stockholders, as the case may be, and will survive
delivery of and payment for the Common Shares sold hereunder and any termination
of this Agreement.
SECTION 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:
Xxxxxxxxxx Securities
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
Xxxxx Xxxxxxx Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: [____________]
26
with a copy to:
Xxxxxxxxxx Securities
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
If to the Company:
New Century Financial Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxx
If to the Selling Stockholder:
[Custodian]
[address]
Facsimile: [___]
Attention: [___]
with a copy to:
Xxxxxxx & Xxxxx
Xxx Xxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
27
If to the OA Stockholders:
[Custodian]
[address]
Facsimile: [___]
Attention: [___]
with a copy to:
Xxxxxxx & Xxxxx
Xxx Xxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
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 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 San Francisco or the courts of the State of California in each
case located in the City and County of San Francisco (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
28
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.
SECTION 17. FAILURE OF ONE OR MORE OF THE OA STOCKHOLDERS TO SELL AND
DELIVER COMMON SHARES. If one or more of the Stockholders shall fail to sell
and deliver to the Underwriters the Common Shares to be sold and delivered by
such OA Stockholders at the Second Closing Date pursuant to this Agreement, then
the Underwriters may at their option, by written notice from the Representatives
to the Company and the OA Stockholders, 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, the Selling Stockholder or the OA
Stockholders, or (ii) purchase the shares which other OA Stockholders have
agreed to sell and deliver in accordance with the terms hereof. If one or more
of the OA Stockholders shall fail to sell and deliver to the Underwriters the
Common Shares to be sold and delivered by such OA Stockholders pursuant to this
Agreement at the Second Closing Date, then the Underwriters shall have the
right, by written notice from the Representatives to the Company and the OA
Stockholders, to postpone 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.
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.
29
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,
NEW CENTURY FINANCIAL CORPORATION
By:__________________________
Xxxxxx X. Xxxx
President
SELLING STOCKHOLDER
By:__________________________
(Attorney-in-fact)
OA STOCKHOLDERS
By:__________________________
(Attorney-in-fact)
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representatives in San Francisco, California as of the date first above
written.
XXXXXXXXXX SECURITIES
XXXXX XXXXXXX INC.
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By: XXXXXXXXXX SECURITIES
By:_____________________________
30
SCHEDULE A
NUMBER OF FIRM
COMMON SHARES TO BE
UNDERWRITERS PURCHASED
------------ -------------------
Xxxxxxxxxx Securities [_____]
Xxxxx Xxxxxxx Inc. [_____]
[_____] [_____]
[_____] [_____]
[_____] [_____]
Total 3,500,000
SA-1
SCHEDULE B
MAXIMUM NUMBER
OF OPTIONAL
COMMON SHARES TO
OA STOCKHOLDER BE SOLD
-------------- ----------------
Cornerstone Fund I, L.L.C.
0000 Xxxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxx............... [257,400]
Cornerstone Equity Partners L.L.C.
0000 Xxxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxx............... [35,100]
New Century Financial Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 232,500
Attention: Xxxx Xxxxxxx.................
Total:.......................... 525,000
SB-1
EXHIBIT A
The final opinion in draft form should be attached as Exhibit A at the time this
Agreement is executed.
Opinion of counsel for the Company to be delivered pursuant to Section 5(e) of
the Underwriting Agreement.
References to the Prospectus in this Exhibit A include any supplements thereto
---------
at the Closing Date.
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the
Underwriting Agreement.
(iii) 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.
(iv) Each significant 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 Prospectus and, to
the best knowledge of such counsel, 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.
(v) All of the issued and outstanding capital stock of each such
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.
(vi) The authorized, issued and outstanding capital stock of the Company
(including the Common Stock) conform to the descriptions thereof set forth or
incorporated by reference in the Prospectus. All of the outstanding shares of
Common Stock (including the shares of Common Stock owned by the OA
Stockholders) 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 Delaware. 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.
EA-1
(vii) 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 Delaware
or (ii) to the best knowledge of such counsel, otherwise.
(viii) 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.
(ix) 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.
(x) 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 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).
(xi) 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.
(xii) The Common Shares have been approved for listing on the Nasdaq
National Market.
(xiii) 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--Litigation,"
"Business--Intellectual Property," "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.
(xiv) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement, other than those
disclosed therein.
EA-2
(xv) 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.
(xvi) 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.
(xvii) 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, (A) the Company's revolving credit facilities with
First Bank National Association and Guaranty Federal Bank and Salomon
Brothers, as lenders, or (B) 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.
(xviii) The Company is not, and after receipt of payment for the Common
Shares will not be, an "investment company" within the meaning of Investment
Company Act.
(xix) Except as disclosed in the Prospectus, 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 OA Stockholders, except for such rights
as have been duly waived.
(xx) 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, agreement, 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.
[(xxi) [No Default] or [Event of Default] (as defined in that certain
Mortgage Loan Purchase Agreement by and between Salomon Brothers Mortgage
Securities VII, Inc. ("Salomon Brothers") and New Century Mortgage Corporation
dated February 25, 1997), no [Events of Servicing Termination or increase in
the Reserve Account Required Amount] (as defined in that certain Pooling and
Servicing Agreement by and among Salomon Brothers, the Subsidiary and First
Trust National Association, dated February 1, 1997) has occurred and, to the
best of the such counsels knowledge, there is no event which, with the giving
of notice or the passage of time or both, would give rise to such an event.]
EA-3
(xxii) The description of whole loan sales effected by the Company, as
contained in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), is
true and complete in all material respects and no event or series of events
has occurred that would result in any of the securities issued in
securitizations using such loans being downgraded or placed on a watch list
with negative implications by any rating agency or similar organization, or
that would impair the Company's or New Century Mortgage Corporation's (the
"Subsidiary") ability to consummate future whole loan sales or to securitize
such loans itself upon economic terms consistent with past whole loan sales
and securitizations of such loans or otherwise cause the Company and the
Subsidiary to suffer any Material Adverse Change with respect to any past or
future whole loan sale or securitization (other than any such event or series
of events described in the Prospectus, (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xxiii) The Company has filed all reports required under the Exchange
Act with respect to the registration statements filed in connection with the
asset securitizations sponsored by the Company.
(xxiv) The description of past securitization transactions effected by
the Company, as contained in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), is true and complete in all material respects and to the
Company's best knowledge, no event or series of events has occurred that would
result in any of the securities issued in connection with any of such
transactions being downgraded or placed on a watch list with negative
implications by any rating agency or similar organization, or that would
impair the Company's or its subsidiaries' ability to consummate future
securitization transactions upon economic terms consistent with past
securitization transactions or otherwise cause the Company and its
subsidiaries to suffer any Material Adverse Effect with respect to any past or
future securitization transaction (other than any such event or series of
events described in the Prospectus, or, if the Prospectus is not yet in
existence, the most recent Preliminary Prospectus).
(xxv) The description of government rules and regulations as contained
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) under the captions "Risk
Factors" and "Regulation" are true and correct in all material respects.
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 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
EA-4
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).
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 responsible officers of the Company and public
officials.
EA-5
EXHIBIT B
The final opinion in draft form should be attached as Exhibit B at the time this
Agreement is executed.
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. All references to the OA Stockholders shall include
reference to the Selling Stockholder.
(i) The Underwriting Agreement has been duly authorized, executed
and delivered by or on behalf of, and is a valid and binding agreement of,
such OA Stockholder, 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 such OA Stockholder of, and the
performance by such OA Stockholder 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 such OA Stockholder, 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 such
OA Stockholder is a party or by which it is bound, or any judgment, order or
decree applicable to such OA Stockholder of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over such OA Stockholder.
(iii) Such OA Stockholder has good and valid title to all of the
Common Shares which may be sold by such OA Stockholder 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 such OA Stockholder 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 such OA
Stockholder has been duly authorized, executed and delivered by such OA
Stockholder and is a valid and binding agreement of such OA Stockholder,
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.
Assuming that the Underwriters purchase the Common Shares which are sold by
such OA Stockholder 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.
EB-1
(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 such OA
Stockholder 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.
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 Stockholder, the OA Stockholders and
public officials.
EB-2
EXHIBIT C
NEW CENTURY FINANCIAL CORPORATION
Form of Selling & Non-Selling Stockholders Lockup Agreement
__________, 1997
Xxxxxxxxxx Securities
As Representatives of the Several Underwriters
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
The undersigned is the beneficial owner of ___________ shares of the
common stock ("Common Stock") of New Century Financial Corporation, a Delaware
corporation (the "Company"). The undersigned understands that the Company has
filed a Registration Statement on Form S-1 (the "Registration Statement") with
the Securities and Exchange Commission (the "Commission") for the registration
of 3,450,000 shares of Common Stock (including 450,000 shares subject to an
over-allotment option) (the "Offering"). The undersigned further understands
that you are contemplating entering into an Underwriting Agreement with the
Company in connection with the Offering. All terms not otherwise defined herein
shall have the same meanings as in the Underwriting Agreement.
In order to induce the Company, you and the other Underwriters to enter
into the Underwriting Agreement and to proceed with the Offering, the
undersigned agrees, for the benefit of the Company, you and the Underwriters,
that should the Offering be effected, the undersigned will not, without the
prior written consent of Xxxxxxxxxx Securities, on behalf of the Underwriters,
directly or indirectly, offer, sell, offer to sell, contract to sell, pledge,
transfer, grant any option to purchase (including, without limitation, any short
sale), 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 any intention to do the foregoing) (i) any shares of Common Stock or
such similar securities or (ii) any other securities convertible into or
exchangeable or exercisable for any shares of Common Stock or such similar
securities, beneficially owned (within the meaning the Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) by the undersigned on the date
hereof or hereafter acquired for a period of 180 days (the "Lockup Period")
subsequent to the date of the final Prospectus filed with the Commission
pursuant to Rule 424(b) of the Securities Act of 1933, as amended (the "Act")
promulgated by the Commission or if no filing under Rule 424(b) is made, the
date of the final Prospectus included in the Registration Statement when
declared effective under the Act. The Representative may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to this Agreement.
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Further, the undersigned agrees that prior to the effective date of the
Registration Statement, the undersigned will not, without the prior written
consent of Xxxxxxxxxx Securities on behalf of the Underwriters, directly or
indirectly, offer, offer to sell, sell, contract to sell or grant any option to
purchase or otherwise dispose or transfer (or announce any offer, offer of sale,
sale, contract of sale or grant of any option to purchase or other disposition
or transfer) of (i) any shares of Common Stock or of securities substantially
similar thereto or (ii) any other securities convertible into, or exchangeable
or exercisable for, any shares of Common Stock or such similar securities,
beneficially owned (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) by the undersigned on the date hereof or
hereafter acquired without first requiring any such offering or acquiring
parties to execute and deliver to you an agreement of substantially the tenor
hereof.
Notwithstanding the foregoing, this Agreement does not prohibit (i) the
exercise of outstanding warrants and options to purchase Common Stock
beneficially owned by the undersigned (but applies to the Common Stock issued
upon the exercise thereof), as described in the Prospectus; and (ii) any
bonafide gift or gifts provided that any such donee(s) executes an agreement
subjecting all such shares of Common Stock to this Agreement for the balance of
the Lockup Period.
This Agreement shall terminate if the Registration Statement does not
become effective on or before July 31, 1997.
The undersigned, whether or not participating in the offering, confirms
that he, she or it understands that the Underwriters and the Company will rely
upon the representations set forth in this agreement in proceeding with the
Offering. This agreement shall be binding on the undersigned and his, or its
respective successors, heirs, personal representatives and assigns.
Very truly yours,
By: By:
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Print Stockholder's Name Stockholder's Signature
The foregoing is accepted and agreed to
as of the date first above written:
XXXXXXXXXX SECURITIES
By:
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