EXHIBIT 1.1
XXXXXXX CARDIOLOGY SYSTEMS, INC.
4,600,000 Shares*
Common Stock
(without par value)
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UNDERWRITING AGREEMENT
_______________, 2002
Xxxxx, Xxxxxxxx & Xxxx, Inc.
XX Xxxxxxxxx+Co
Xxxxxxxxx Xxxxxxxxx, Inc.
As representatives of the several
Underwriters named in Schedule I hereto,
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Dear Sirs:
Xxxxxxx Cardiology Systems, Inc., a California corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to you and the several Underwriters named in Schedule I hereto
(collectively, the "Underwriters"), for whom you are acting as representatives
(the "Representatives"), an aggregate of 4,000,000 shares (the "Firm Shares") of
common stock of the Company, without par value (the "Common Stock") and, at the
election of the Underwriters, up to 600,000 additional shares of Common Stock
(the "Optional Shares"). The Firm Shares and the Optional Shares, which the
Underwriters elect to purchase pursuant to Section 3 hereof, are herein
collectively called the "Shares."
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-83272) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement (including any pre-effective amendments thereto) and
any post-effective amendments thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each of the
other
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* Includes 600,000 shares subject to an option to purchase additional shares to
cover over-allotments.
Underwriters, have been declared effective by the Commission in such form;
other than a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which
became effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued under the Act and no
proceeding for that purpose has been initiated or, to the Company's
knowledge, threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement and incorporated by
reference in the Rule 462(b) Registration Statement, if any, or filed with
the Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary Prospectus";
the various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance
with Section 6(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was declared
effective or the Rule 462(b) Registration Statement, if any, at the time it
became effective, each as amended at the time such part of such
registration statement became effective, are hereinafter collectively
called the "Registration Statement"; and such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, is hereinafter called
the "Prospectus");
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or, to the Company's or the
Subsidiary's knowledge (the "Company's Knowledge"), instituted proceedings
for that purpose, and each Preliminary Prospectus, as of its date, complied
in all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by any Underwriter through
Xxxxx, Xxxxxxxx & Xxxx, Inc. expressly for use therein;
(c) The Registration Statement complied, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will comply, in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder and do not
and will not, as of the applicable effective date as to the Registration
Statement (and on any later date on which Optional Shares are to be
purchased) and any amendment thereto and as of the applicable filing date
as to the Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
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Company by any Underwriter through Xxxxx, Xxxxxxxx & Xxxx, Inc. expressly
for use therein;
(d) There are no contracts or other documents required to be described
in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the rules and regulations
thereunder which have not been accurately described or filed as required;
all material agreements, contracts or other instruments (the "Material
Contracts") to which the Company or its sole subsidiary, Xxxxxxx Inc. (the
"Subsidiary"), is a party, or by which they, or their properties may be
bound, have been duly authorized, executed and delivered by the Company or
the Subsidiary, as are party thereto, constitute valid and binding
agreements of the Company or the Subsidiary, as are party thereto, and are
enforceable in accordance with their respective terms against the Company
or the Subsidiary, as are party thereto, except as such enforceability may
be limited by (i) applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance or similar laws in effect which
affect the enforcement of creditors' rights generally, (ii) general
principles of equity, whether considered in a proceeding at law or in
equity and (iii) state or federal securities laws or policies relating to
the non-enforceability of the indemnification provisions contained therein,
and, to the Company's Knowledge, such Material Contracts are enforceable in
accordance with their respective terms by the Company or the Subsidiary, as
are party thereto, against the other parties thereto, except as such
enforceability may be limited by (x) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors' rights generally, (y) general
principles of equity, whether considered in a proceeding at law or in
equity and (z) state or federal securities laws or policies relating to the
non-enforceability of the indemnification provisions contained therein, and
such Material Contracts are in full force and effect on the date hereof;
and neither the Company nor the Subsidiary, nor, to the Company's
Knowledge, any other party is in breach of or default under any of such
contracts, except for such breaches or defaults that will not result in a
material adverse change in the business, assets, management, financial
position or results of operations of the Company and the Subsidiary taken
as a whole (hereinafter, a "Material Adverse Change");
(e) Neither the Company nor the Subsidiary has sustained since the
date of the latest audited financial statements included in the Prospectus
any loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, except as set
forth in the Prospectus or as would not result in a Material Adverse
Change; and, since such date, there has not been any change in the capital
stock (other than issuances of Common Stock in the ordinary course of
business pursuant to Company stock option and stock purchase plans
described in the Registration Statement and Prospectus) or long-term debt
of the Company or the Subsidiary, or any Material Adverse Change, or any
material transaction or obligation of the Company or the Subsidiary outside
of the ordinary course of business;
(f) The Company and the Subsidiary have good and marketable title to
all real properties owned by them, and has good title to all other
properties owned by them, in each case free and clear of all liens,
charges, encumbrances or restrictions, except as (i) are described in the
Prospectus, or (ii) do not materially affect the value of such property and
do
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not interfere with the use made and proposed to be made of such property by
the Company or the Subsidiary, as applicable; any real property and
buildings held under lease by the Company or the Subsidiary are held under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and the Subsidiary; and the
Company or the Subsidiary own or lease all such tangible properties as are
necessary to their operations as now conducted or as currently proposed to
be conducted, except where the failure to so own or lease would not result
in a Material Adverse Change;
(g) Each of the Company and the Subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
its respective jurisdiction of organization, each with full corporate power
and authority to own its properties and conduct its business as described
in the Prospectus, and each has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which such qualification is
required, except where the failure to be so qualified in any such
jurisdiction would not result in a Material Adverse Change, and neither the
Company nor the Subsidiary is in violation of its Articles of Incorporation
or bylaws;
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all the issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued, are fully paid
and non-assessable, have been issued in compliance with all applicable
federal and state securities laws, and conform in all material respects to
the description of the Common Stock contained in the Prospectus; all of the
issued and outstanding shares of capital stock of the Subsidiary (i) have
been duly authorized and validly issued, are fully paid and non-assessable,
have been issued in compliance with all applicable federal and state
securities laws, and (ii) except for pledges pursuant to the Loan
Agreement, dated June 5, 1998, as amended, between the Subsidiary and
Silicon Valley Bank and for any liens, encumbrances or claims on the
Company's assets created in the ordinary course of business, are owned of
record by the Company free and clear of all liens, encumbrances or claims;
except as disclosed in the Prospectus, neither the Company nor the
Subsidiary controls, indirectly or directly, or has any ownership interest
in any other entity, nor has outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase any
securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations; and the description of the Company's
equity incentive plans 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 by the
Act to be shown with respect thereto;
(i) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly authorized and, when issued and
delivered against payment therefor as provided herein, will be validly
issued and fully paid and non-assessable and will conform to the
description of the Common Stock contained in the Prospectus; no preemptive
rights or other rights to subscribe for or purchase exist with respect to
the issuance and sale of the Shares by the Company pursuant to this
Agreement; no shareholder of the Company
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has any right, which has not been satisfied or waived, to require the
Company to register the sale of any shares of capital stock owned by such
shareholder under the Act in the public offering contemplated by this
Agreement; no shareholder of the Company has any right to require the
Company to register the sale of any shares of capital stock owned by such
shareholder under the Act in the 180-day period after the date of the
Prospectus other than "piggy-back" registration rights held by X. X.
Xxxxxxxxx/QIC, LLC, Silicon Valley Bank and Greyrock Business Credit
pursuant to the Investor Rights Agreement, dated May 27, 1998, among the
Company and the parties thereto (a true and complete copy of which has been
filed with the Registration Statement); and no further approval or
authority of the shareholders or the Board of Directors of the Company will
be required for the issuance and sale of the Shares to be sold by the
Company as contemplated herein;
(j) The Company has full corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby; this
Agreement and the transactions contemplated hereby have been duly
authorized by the Company's Board of Directors and shareholders, and this
Agreement has been duly executed and delivered by the Company, constitutes
a legal, valid and binding obligation of the Company and is enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors' rights generally, (ii) general
principles of equity, whether considered in a proceeding at law or in
equity and (iii) state or federal securities laws or policies relating to
the non-enforceability of the indemnification provisions contained herein;
(k) The issue and sale of the Shares by the Company and the compliance
by the Company with all of the provisions of this Agreement will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any material indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or the Subsidiary is a party or by which the Company or
the Subsidiary is bound or to which any of the properties or assets of the
Company or the Subsidiary is subject, nor will such actions result in any
violation of the provisions of the Articles of Incorporation or bylaws of
the Company or the Subsidiary or any statute or any applicable order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or the Subsidiary or any of their properties
or assets; and no consent, approval, authorization, order, filing,
registration or qualification of or with any third party, or any such court
or governmental agency or body was or is required for the issuance and sale
of the Shares, the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the Act of
the Shares and such consents, approvals, authorizations, filings,
registrations or qualifications as have been obtained or may be required
under state securities or Blue Sky laws or the by-laws and rules of the
National Association of Securities Dealers, Inc. ("NASD") in connection
with the purchase and distribution of the Shares by the Underwriters;
(l) Except as disclosed in the Prospectus, (i) there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's Knowledge, threatened, to which the Company or the Subsidiary is
or may be a party or of which property
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owned or leased by the Company or the Subsidiary is or may be the subject,
or which are related to environmental or discrimination matters; (ii) no
labor disturbance by the employees of the Company or the Subsidiary, or to
the Company's Knowledge, by the employees of the Company's principal
suppliers or original equipment manufacturers, exists or, to the Company's
Knowledge, is imminent which is reasonably likely to result in a Material
Adverse Change, and no collective bargaining agreement exists with respect
to the Company's or the Subsidiary's employees, and to the Company's
Knowledge, no such agreement is imminent; and (iii) neither the Company nor
the Subsidiary is a party or subject to the provisions of any injunction,
judgment, decree or order of any court, regulatory body, administrative
agency or other governmental body; any of which is required to be disclosed
in the Prospectus and that is not so disclosed; or which could individually
or in the aggregate, result in a Material Adverse Change;
(m) The Company and the Subsidiary possess all state, local, federal
and foreign licenses, certificates, approvals, authorizations or permits
(collectively, the "Governmental Licenses") that are necessary to enable
them to own, lease and operate their respective properties and to conduct
their respective businesses as presently conducted and which the failure to
possess could reasonably be expected to result in a Material Adverse
Change, the Company and the Subsidiary are in compliance with the terms and
conditions of all Governmental Licenses, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Change; all Government Licenses
are valid and in full force and effect, except as could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Change; and neither the Company nor the Subsidiary has received any notice
of proceedings relating to the revocation or modification of any
Governmental License which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change;
(n) Except as otherwise previously disclosed to Underwriters, the
Company and the Subsidiary are in compliance in all material respects with
all applicable statutes, rules and regulations of U.S. Food and Drug
Administration or similar federal, state or local governmental authority
(the "FDA") and, to the Company's Knowledge, of foreign governmental
authority ("Foreign Authorities") with respect to the design, manufacture,
packaging, sale, labeling, storing, testing, distribution, or marketing of
the products being manufactured, distributed or developed by the Company
and the Subsidiary (the "Company Products"). To the Company's Knowledge,
the Company and the Subsidiary have all requisite permits, approvals,
registrations, licenses or the like from the FDA and Foreign Authorities to
conduct the Company's and the Subsidiary's business as it is currently
conducted. The Company and the Subsidiary are in compliance with all
applicable registration and listing requirements set forth in the Federal
Food, Drug & Cosmetic Act (the "Act"), 21 U.S.C. 360, and 21 CFR Part 807
and all similar applicable laws. The Company and the Subsidiary adhere in
all material respects to applicable regulations in the manufacture of the
Company Products, including applicable Quality System regulations. The
Company has previously delivered or made available to Underwriters all
applications, approvals, registrations or licenses obtained by the Company
or the Subsidiary from Foreign Authorities or the FDA or required in
connection with the conduct of the Company's or the Subsidiary's business
as it is currently conducted. The Company has also made available to
Underwriters
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all material written communications and written records of the Company or
the Subsidiary of oral communications between the Company or the Subsidiary
and the FDA or Foreign Authorities since June 1, 1998. The Company and the
Subsidiary have not made any false statements in, or material omissions
from, the applications, approvals, reports and other submissions to the FDA
or Foreign Authorities, or in or from any other records and documentation
prepared or maintained to comply with the laws, rules, and regulations of
the FDA or Foreign Authorities relating to Company Products. Except as
otherwise previously disclosed to the Underwriters, the Company and the
Subsidiary have not received from the FDA any notice of adverse findings,
FDA Form 483 inspectional observations, notices of violations, warning
letters, criminal proceeding notices under Section 305 of the Act, or other
similar communication from the FDA or from Foreign Authorities. There have
been no seizures conducted or threatened by the FDA, and no recalls, market
withdrawals, field notifications, notifications of misbranding or
adulteration or safety alerts conducted, requested or threatened by the FDA
or Foreign Authorities relating to the Company Products. The Company and
the Subsidiary have not received any notification, written or oral, that
remains unresolved, from Foreign Authorities, the FDA or other authorities
indicating that any Company Product is misbranded or adulterated as defined
in the Act and the rules and regulations promulgated thereunder. To the
Company's Knowledge, neither the Company, the Subsidiary, nor any officer,
key employee or agent of the Company or Subsidiary has been convicted of
any crime or engaged in any conduct that would reasonably be expected to
result in (i) debarment under 21 U.S.C. Section 335a or any similar state
law or regulation or (ii) exclusion under 42 U.S.C. Section 1320a-7 or any
similar state law or regulation. Additionally, to the Company's Knowledge,
neither the Company nor the Subsidiary has committed any act, made any
statement or failed to make any statement that would reasonably be expected
to provide a basis for the FDA to invoke its policy with respect to "Fraud,
Untrue Statements of Material Facts, Bribery, and Illegal Gratuities" set
forth in 56 Fed.Reg. 46191 (September 10, 1991) and any amendments thereto;
(o) The Company and the Subsidiary are in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, including without limitation
those relating to occupational safety and health, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants,
including without limitation those relating to the storage, handling or
transportation of hazardous or toxic materials (collectively,
"Environmental Laws"); except where such noncompliance could not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Change;
(p) Xxxxxx Xxxxxxxx LLP, who have audited the consolidated financial
statements of the Company and the Subsidiary included in the Registration
Statement, are independent public accountants within the meaning of the Act
and the rules and regulations of the Commission thereunder;
(q) The consolidated financial statements and schedules of the
Company, and the related notes thereto, included in the Registration
Statement and the Prospectus present fairly the financial position of the
Company as of the respective dates of such financial statements and
schedules, and the results of operations and cash flows of the Company for
the respective
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periods covered thereby; such statements, schedules and related notes have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved ("GAAP") as
certified by the independent public accountants named in paragraph (p)
above; no other financial statements or schedules are required to be
included in the Registration Statement; and the selected financial data set
forth in the Prospectus under the captions "Summary Financial Data,"
"Capitalization," "Selected Financial Data," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Results of
Operations" present fairly in all material respects the information set
forth therein on the basis stated in the Registration Statement and have
been compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement; and the pro forma
financial information included in the Registration Statement and the
Prospectus has been prepared on a basis consistent with the historical
financial statements contained in the Prospectus (except for the pro forma
adjustments specified therein), includes all material adjustments to the
historical financial information required by Rule 11-02 of Regulation S-X
under the Act and the Exchange Act (as defined herein) to reflect the
transactions described in the Prospectus, gives effect to assumptions made
on a reasonable basis and fairly presents the historical and proposed
transactions contemplated by the Prospectus;
(r) The Company and the Subsidiary own or possess all trademarks,
trade names, patent rights, copyrights, licenses, trade secrets,
proprietary rights and other similar rights (collectively, the
"Intellectual Property") necessary to conduct their business as now
conducted; the Company and the Subsidiary have not received notice of any
infringement by the Company or the Subsidiary of any Intellectual Property
of others; to the Company's Knowledge, there is no written claim of
infringement being made against the Company or the Subsidiary regarding
Intellectual Property and no reasonable basis therefor exists, which, if
adversely decided, could result in a Material Adverse Change; to the
Company's Knowledge, the Company and the Subsidiary are not infringing, nor
in conflict with rights of others with respect to any Intellectual Property
or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest at the date hereof
of the Company or the Subsidiary therein, except in any such case as would
not individually or in the aggregate result in a Material Adverse Change;
none of the Intellectual Property employed by the Company or the Subsidiary
has been obtained or is being used by the Company or the Subsidiary in
violation of any contractual obligation binding on the Company or the
Subsidiary or, to the Company's Knowledge, any of their respective
officers, directors, employees or consultants or otherwise in violation of
the rights of any person, except for such violations that could not result
in a Material Adverse Change; neither the operation of the business of the
Company and the Subsidiary by the employees of the Company or the
Subsidiary, nor the conduct of the business of the Company and the
Subsidiary as proposed, will, to the Company's Knowledge, result in a
breach or violation of the terms, conditions or provisions of, or
constitute a default under, any material contract, covenant or instrument
under which any of such employees is now obligated which is reasonably
likely to result in a Material Adverse Change; and the Company and the
Subsidiary have taken reasonable measures to prevent the unauthorized
dissemination or publication of its confidential information or the
confidential information of third parties in its possession; and each
technical employee of the Company and the Subsidiary has executed
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an agreement with the Company or the Subsidiary (as the case may be)
regarding confidential information and the assignment of proprietary
information to the Company or the Subsidiary (as the case may be), and no
such person has excluded works or inventions made prior to his or her
employment with the Company from his or her assignment of inventions
pursuant to such agreement where such exclusion would not result in a
Material Adverse Change;
(s) The Company and the Subsidiary have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes
(including, without limitation, withholding taxes), penalties and interest,
assessments, fees and other charges shown as due thereon; and, except as
disclosed in the Registration Statement and Prospectus, the Company has not
received any notice of any tax deficiency which has been or is reasonably
likely to be asserted against the Company or the Subsidiary which is
reasonably likely to result in a Material Adverse Change;
(t) The Company is not, and after giving effect to the offering and
the sale of the Shares as contemplated herein will not be, an "investment
company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(u) Each of the Company and the Subsidiary maintains insurance of the
types and in the amounts which are consistent with the customary industry
practice, including, but not limited to, insurance covering products
liability claims and real and personal property owned or leased by the
Company and the Subsidiary against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against by companies
engaged in businesses substantially similar to that of the Company (except
where failure to so maintain would not result in a Material Adverse
Change), all of which insurance is in full force and effect and during the
past five years, the Company and the Subsidiary have not had any material
products recall;
(v) Since incorporation, neither the Company nor the Subsidiary, nor
any person acting on their behalf, has at any time (i) directly or
indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course of
business) to any customer, supplier, employee or agent of a customer or
supplier, or other person who was, is or may be in a position to help or
hinder the business of the Company or the Subsidiary which (x) might
subject the Company, the Subsidiary or any other individual or entity to
any damages or penalties in any civil, criminal or governmental litigation
or proceeding (domestic or foreign); (y) if not so given, could be expected
to result in a Material Adverse Change; or (z) if not continued in the
future, could be expected to result in a Material Adverse Change; (ii) made
any unlawful contribution to any candidate for foreign office, or failed to
disclose fully any contribution in violation of law, or (iii) made any
payment to any foreign, federal or state governmental officer or official,
or other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States or any
jurisdiction thereof;
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(w) The Company has not (i) taken and will not take, directly or
indirectly through any of its directors, officers or controlling persons,
any action which is designed to, or which has constituted or which might
reasonably be expected to, cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Shares; or (ii) since the date of the Prospectus, (A) sold,
bid for, purchased or paid any person any compensation for soliciting
purchases of Common Stock; or (B) paid or agreed to pay any person any
compensation for soliciting another to purchase any other securities of the
Company;
(x) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; and (iii) to the extent required by GAAP, the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences;
(y) There are no (i) business relationships or related party
transactions involving the Company or the Subsidiary, on the one hand, and
any other person or entity, on the other hand, required by the Act to be
described in the Prospectus which have not been described as required; or
(ii) outstanding loans, advances (except for normal business expenses in
the ordinary course) or guarantees of indebtedness by the Company or the
Subsidiary to or for the benefit of any of their officers or directors, or
any of the members of their families;
(z) The Company has filed a registration statement pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to register the Common Stock, has filed an application to list the
Common Stock on the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") National Market System and has received
notification that the listing has been approved, subject to notice of
issuance of the Shares;
(aa) Each officer and director of the Company, each beneficial owner
of shares of Common Stock and each holder of warrants to purchase capital
stock of the Company, other than those persons listed on Schedule II
hereto, has executed the form of lock-up agreement restricting dispositions
of the Company's securities for a period of 180 days after the date of the
Prospectus (the "Lock-Up Agreements") which was provided by the
Representatives to the Company for distribution to its shareholders and
warrant holders; the Company has provided to counsel for the
Representatives a complete and accurate list of all securityholders of the
Company and the number and type of securities held by each securityholder,
and true, accurate and complete copies of all of the agreements presently
in effect or effected hereby pursuant to which its officers, directors,
shareholders and optionholders have agreed to be bound by restrictions
substantially similar to those contained in the Lock-Up Agreements (the
"Company Lock-Up Agreements"); and each Company optionholder, other than
those persons listed on Schedule II, has executed a Company Lock-Up
Agreement in substantially the same form; and
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(bb) Philips Electronics North America Corporation, a Company
shareholder ("Philips"), is restricted from selling any of its shares of
Company capital stock in accordance with Rule 144 issued under the Act
until August 1, 2002, at the earliest.
2. SHARES SUBJECT TO SALE.
(a) On the basis of the representations, warranties and agreements of
the Company contained herein, and subject to the terms and conditions of
this Agreement, (i) the Company agrees to issue and sell to each
Underwriter, severally and not jointly, and (ii) each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at a
purchase price per share of $______, the respective number of Firm Shares
set forth opposite the name of each respective Underwriter in Schedule I
hereto; and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided below, (i)
the Company agrees to issue and sell the Optional Shares to each
Underwriter, severally and not jointly, and (ii) each of the Underwriters
agrees, severally and not jointly, to purchase from the Company at the
purchase price per share set forth above, that portion of the number of
Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by
multiplying such number of Optional Shares by a fraction, the numerator of
which is the maximum number of Optional Shares which such Underwriter is
entitled to purchase as set forth opposite the name of such Underwriter in
Schedule I hereto and the denominator of which is the maximum number of the
Optional Shares which all of the Underwriters are entitled to purchase
hereunder.
(b) The Company as and to the extent indicated in Schedule III hereto,
hereby grants, severally and not jointly, to the Underwriters the right to
purchase at their election up to an aggregate of 600,000 Optional Shares at
the purchase price per share set forth in the paragraph above, for the sole
purpose of covering over-allotments in the sale of the Firm Shares. Any
such election to purchase Optional Shares shall be made in proportion to
the maximum number of Optional Shares to be sold by the Company. Any such
election to purchase Optional Shares may be exercised in whole or in part
only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Firm Shares by written
notice from Xxxxx, Xxxxxxxx & Xxxx, Inc. to the Company, given within a
period of 45 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Shares to be purchased and the date
on which such Optional Shares will be purchased and are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery
(as defined below in Section 4) or, unless one of the Representatives and
the Company otherwise agree in writing, earlier than two or later than
three business days after the date of such notice. The Representatives
confirm that each Underwriter has authorized the Representatives for its
account, to accept delivery of, and receipt for, and make payment of the
purchase price for, the Firm Shares and the Optional Shares, if any, which
such Underwriter has agreed to purchase.
3. OFFERING. Upon the authorization by any Representative of the release of
the Firm Shares, the several Underwriters propose to offer the Firm Shares for
sale upon the terms and conditions set forth in the Prospectus.
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4. CLOSING. Certificates in definitive form for the Shares to be purchased
by each Underwriter hereunder, and in such denominations and registered in such
names as Xxxxx, Xxxxxxxx & Xxxx, Inc. may request upon at least forty-eight
hours' prior notice to the Company shall be delivered by or on behalf of the
Company to you for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor by wire transfer of
same day funds, to the account specified by the Company to Xxxxx, Xxxxxxxx &
Xxxx, Inc., all at the office of Xxxxx, Xxxxxxxx & Xxxx, Inc., 00 Xxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000. The time and date of such delivery and payment
shall be, with respect to the Firm Shares, 9:30 a.m., Boston time, on
_______________, 2002 or such other time and date as you and the Company may
agree upon in writing (the "Closing Date"), and, with respect to the Optional
Shares, 9:30 a.m., Boston time, on the date specified by you in the written
notice given by you of the Underwriters' election to purchase such Optional
Shares, or at such other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery," such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery," and each such time and date for delivery is herein called a "Time of
Delivery." Such certificates will be made available for checking and packaging
at least twenty-four hours prior to each Time of Delivery at such location as
you may specify.
5. COVENANTS OF THE COMPANY. The Company agrees with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus of which you shall not have been previously advised and
furnished with a copy or to which you shall have objected promptly after
reasonable notice thereof; to advise you promptly after it receives notice
of the time when the Registration Statement, or any amendment thereto, has
been filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you copies thereof; to
advise you, promptly after it receives notice of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or Prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or
suspending any such qualification, to use reasonable efforts to obtain the
withdrawal of such order;
(b) To use reasonable efforts, in cooperation with the Underwriters,
to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as you may reasonably request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of the Shares, provided that in connection therewith the Company shall not
be required to qualify as a foreign corporation or as a dealer in
securities or to file a general
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consent to service of process in any jurisdiction or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise subject;
(c) To furnish the Underwriters with written and electronic copies of
the Prospectus in such quantities as you may from time to time reasonably
request, and, if the delivery of a prospectus is required by law at any
time prior to the expiration of nine months after the time of issuance of
the Prospectus in connection with the offering or sale of the Shares and if
at such time any events shall have occurred as a result of which, in the
reasonable opinion of the Company, the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon your
request to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many written and electronic copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission
or effect such compliance, and in case any Underwriter is required by law
to deliver a prospectus in connection with sales of any of the Shares at
any time nine months or more after the time of issue of the Prospectus,
upon your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many written and electronic copies as you
may request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than the forty-fifth (45th) day
following the end of the full fiscal quarter first occurring after the
first anniversary of the effective date of the Registration Statement (as
defined in Rule 158(c) of the Act), an earnings statement of the Company
and the Subsidiary (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158 of the Act);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, without
the prior written consent of Xxxxx Xxxxxxxx & Xxxx, Inc., not to offer,
sell, contract to sell or otherwise dispose of any securities of the
Company which are substantially similar to the Shares, including but not
limited to any securities that are convertible into or exchangeable for, or
that represent the right to receive, Common Stock or any such substantially
similar securities (other than (i) the sale of the Shares to be sold by the
Company hereunder; (ii) the Company's issuance in the ordinary course of
business of shares upon exercise of outstanding Stock options or warrants
or the conversion of any security outstanding on the date hereof and
referred to in the section of the Prospectus entitled "Capitalization"
awarded under the Company's 1998 Amended and Restated Equity Incentive Plan
and 2002 Equity Incentive Plan (including the Stock Option Grant Program
for Nonemployee Directors under the 2002 Stock Incentive Plan); (iii) the
Company's issuance of shares under the 2002 Employee Stock Purchase Plan;
and (iv) the Company's issuance of shares constituting in the aggregate up
to 25% of the issued and outstanding shares of capital stock of the Company
as consideration or partial consideration
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for business acquisitions or in connection with the formation of joint
ventures or strategic partnerships; provided, that in each case specified
in subparagraphs (i) through (iv) of this paragraph (e), the recipients of
such securities agree to be bound by this Section 6(e) for the duration of
the 180-day period after the date of the Prospectus to the extent they are
not otherwise contractually bound by similar restrictions, and shall
execute an agreement to that effect, without your prior written consent;
(f) Subject to the requirements of the Securities Exchange Act of 1934
and the rules and regulations thereunder, during a period of five years
from the effective date of the Registration Statement, to furnish to its
shareholders after the end of each fiscal year an annual report (including
a balance sheet and statements of income, shareholders' equity and cash
flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and, after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement), to make
available to its shareholders consolidated summary financial information of
the Company and the Subsidiary for such quarter in reasonable detail; and
to timely file with the Commission such information on Form 10-Q or Form
10-K as may be required under Rule 463 of the Act;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders of the
Company generally, and deliver to you (i) as soon as they are available,
copies of any reports and financial statements furnished to or filed with
the Commission, the Nasdaq National Market or any national securities
exchange on which any class of securities of the Company is listed (such
financial statements to be on a combined or consolidated basis to the
extent the accounts of the Company and the Subsidiary are combined or
consolidated in reports furnished to its shareholders generally or to the
Commission); and (ii) such additional publicly available information
concerning the business and financial condition of the Company as you may
from time to time reasonably request, provided that if the Company so
requests, you will agree to keep all such information confidential in
accordance with Regulation FD;
(h) To use its best efforts to list, subject to notice of issuance,
the Shares on the Nasdaq National Market;
(i) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act;
(j) To maintain a transfer agent, and if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock;
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(k) To use the net proceeds received by it from the sale of the Shares
in the manner specified in the Prospectus under the caption "Use of
Proceeds" and in a manner such that the Company will not become an
"investment company" as that term is defined in the Investment Company Act;
(l) To take such necessary actions to enforce, and not waive
compliance with, nor release any of its officers, directors, shareholders,
warrant holders or optionholders from complying with, any Lock-Up
Agreements or any Company Lock-Up Agreements, including, without
limitation, issuing stop transfer instructions with the Company's transfer
agent to enforce such agreements, if necessary;
(m) To issue stop transfer instructions with the Company's transfer
agent covering the 180-day period immediately following the date of the
Prospectus to enforce the provisions contained in that certain Shareholders
Agreement, dated as of May 27, 1998, and as amended as of August 1, 2001,
by and among X. X. Xxxxxxxxx/QIC, LLC, Philips and X. X. Xxxxxxxxx/QIC
Management, LLC;
(n) Not to file with the Commission any registration statement on Form
S-8 relating to shares of its Common Stock prior to 180 days after the
effective date of the Registration Statement (other than with respect to
the Company's 1998 Amended and Restated Equity Incentive Plans, 2002 Stock
Incentive Plan and 2002 Employee Stock Purchase Plan which may be filed at
any time);
(o) Without the prior written consent of Xxxxx Xxxxxxxx & Xxxx, Inc.,
not to accelerate the vesting of any option issued under any stock option
plan such that any such option may be exercised within 180 days from the
date of the Prospectus (other than in connection with a sale of the
Company); and
(p) To appoint new members to the audit committee of the Company's
board of directors within 90-days after the date of effectiveness of the
Registration Statement, to satisfy the independence and financial literacy
requirements of the Nasdaq National Market.
6. EXPENSES. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters; (ii) the cost of printing, producing and
reproducing any Agreement among Underwriters, this Agreement, the Blue Sky
Memorandum and any other documents in connection with the offering, purchase,
sale and delivery of the Shares; (iii) all expenses and filing fees in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof and the filing fees
incident to securing any required review by the NASD of the terms of the sale of
the Shares; (iv) the reasonable fees and disbursements of counsel for the
Underwriters in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 5(b) hereof and in
connection with the Blue Sky survey and the reasonable fees and
-15-
expenses of counsel to the Underwriters incident to securing any required review
by the NASD of the terms of the sale of the Shares; (v) the cost of preparing
stock certificates; (vi) the cost and charges of any transfer agent or
registrar; and (vii) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section. It is understood, however, that, except as provided in this
Section, Section 8 and Section 11 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees and expenses of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the condition that all
representations and warranties and other statements of the Company herein are,
at and as of each Time of Delivery, true and correct, the condition that the
Company shall have performed all of its obligations hereunder and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.,
Washington, D.C. time on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation,
counsel to the Underwriters, shall have furnished to you such opinion or
opinions, dated such Time of Delivery, with respect to this Agreement, the
Registration Statement, the Prospectus and other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonable request to enable them to pass along
such matters;
(c) Xxxxxxx Coie LLP, counsel to the Company, shall have furnished to
you their written opinion, dated such Time of Delivery, in form and
substance reasonably satisfactory to you, with respect to the matters set
forth in Annex I hereto;
(d) Xxxxxxxx Xxxxxxx Xxxxx LLP, special counsel to the Company, shall
have furnished to you their written opinion, dated such Time of Delivery,
in form and substance reasonably satisfactory to you, with respect to the
Intellectual Property matters set forth in Annex II hereto
(e) On the effective date of the Registration Statement at a time
prior to execution of this Agreement, at 9:30 a.m., Boston time, on the
effective date of the most recently filed post-effective amendment to the
Registration Statement filed subsequent to the date of this Agreement, and
at each Time of Delivery, Xxxxxx Xxxxxxxx LLP shall have furnished to you
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a letter or letters, dated the respective date of delivery thereof, in form
and substance satisfactory to you, to the effect set forth in Annex III
hereto;
(f)(i) Neither the Company nor the Subsidiary shall have sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth in the Prospectus, or as would not result in a Material
Adverse Change, and (ii) since the respective dates as of which information
is given in the Prospectus, there shall not have been any Material Adverse
Change or any change in the capital stock (other than issuances in the
ordinary course of business of Common Stock pursuant to the Company's
benefit plans described in the Prospectus) or any material increase in the
long-term debt of the Company or the Subsidiary or any change, or any
development involving a prospective change, in or affecting the business,
assets, general affairs, management, financial position or results of
operations of the Company and the Subsidiary, individually or taken as a
whole, otherwise than as set forth in the Prospectus, the effect of which,
in any such case described above is in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(g) Between the date hereof and as of such Time of Delivery, none of
the following shall have occurring and be continuing: (i) additional
material governmental limitations or restrictions, not in force and effect
on the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange, the American Stock Exchange or
in the Nasdaq National Market, or trading in securities generally or in the
Shares shall have been suspended or materially limited on the Nasdaq
National Market, or a general banking moratorium shall have been declared
by federal, New York or Massachusetts authorities, or (ii) an outbreak or
escalation of hostilities involving the United States, including, without
limitation, acts of terrorism against the United States or its overseas
interests, or the declaration by the United States of a national emergency
or war, or the occurrence of any other national or international calamity
or any substantial change in political, financial or economic conditions
shall have occurred or shall have accelerated or escalated to such an
extent, as, in the judgment of the Representatives, is so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares on the terms and in the
manner contemplated in the Prospectus;
(h) The Shares to be sold by the Company at such Time of Delivery
shall have been accepted for quotation, subject to notice of issuance, on
the Nasdaq National Market System;
(i) Each shareholder and warrant holder of the Company, other than the
persons listed on Schedule II, shall have executed and delivered to you a
lock-up agreement in form and substance reasonably satisfactory to you and
you shall have received copies of Company Lock-Up Agreements executed by
every Company optionholder, other than those persons listed on Schedule II;
-17-
(j) The Company shall have complied with Section 5(c) of this
Agreement to the extent applicable as of such Time of Delivery; and
(k) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates signed by the Chief Executive Officer
and Chief Operating Officer of the Company respectively, in their
capacities as such, satisfactory to you, (i) as to the accuracy of the
representations and warranties of the Company and the Subsidiary
respectively, herein at and as of such Time of Delivery, (ii) as to the
satisfaction of all conditions and performance by the Company of all of its
obligations hereunder to be performed at or prior to such Time of Delivery,
(iii) as to such other matters as you may reasonably request and (iv) to
the matters set forth in subsections (a), (f), and (h) of this Section 7.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls such Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act (each, a
"Company Indemnified Party") against any losses, claims, damages,
liabilities, or expenses joint or several (a "Loss"), to which any Company
Indemnified Party may become subject, under the Act or otherwise, insofar
as such Losses (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, with respect to any Preliminary Prospectus and the Prospectus, in
the light of the circumstances under which they were made, not misleading,
and will reimburse each Company Indemnified Party for any legal or other
expenses reasonably incurred by such Company Indemnified Party in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such Loss arises out of or
is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
any Underwriter through Xxxxx Xxxxxxxx & Xxxx, Inc. expressly for use
therein.
(b) Each Underwriter will, severally and not jointly, indemnify and
hold harmless the Company, each of the directors of the Company, each of
the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act
(each, an "Underwriter Indemnified Party") against any Loss to which any
Underwriter Indemnified Party may become subject, under the Act or
otherwise, insofar as such Losses (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein, with respect to any Preliminary
-18-
Prospectus or the Prospectus, in the light of the circumstances under which
they were made, a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only with respect to
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through any Representative expressly for use therein; and will
reimburse any Underwriter Indemnified Party for any legal or other expenses
reasonably incurred by it or them in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly as reasonably practicable after receipt by an indemnified
party under subsection (a) or (b) above of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; no
indemnification shall be available hereunder to any party who shall fail to
give notice as provided in the preceding sentence if, but only to the
extent that, the party to whom such notice was not given was unaware of the
action, suit, investigation, inquiry or proceeding to which the notice
would have related and was materially prejudiced by the failure to give
such notice; provided, however, that the omission so to notify the
indemnifying party shall not relieve it from any liability which it may
have to any indemnified party otherwise than under such subsection. In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party)
reasonably satisfactory to such indemnified party, and, if such
indemnifying party assumes the defense thereof, the indemnifying party
shall not be liable to such indemnified party under such subsection for any
legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the prior written consent of the
indemnified party (which shall not be unreasonably withheld or delayed),
effect the settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to
such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act,
by or on behalf of any indemnified party. In the event the indemnifying
party does not assume the defense of any action brought against an
indemnified party, the indemnifying party shall not, in connection with any
one such action or proceeding or separate but substantially similar actions
or proceedings arising out of the same general allegations, be liable for
the fees and expenses of more than one separate firm of attorneys at any
time for all indemnified persons, except to the extent that local counsel,
in addition to regular counsel, is required in order to effectively defend
against such action or proceeding, unless (1) the indemnifying party has
agreed in writing to pay such fees
-19-
and expenses or (2) an indemnified party reasonably determines that there
may be conflicting interests between such indemnified party and other
indemnified parties in conducting the defense of such action, including
situations in which there are one or more legal defenses available to such
indemnified party that are different from or in addition to those available
to other indemnified parties.
(d) Without limitation and in addition to its obligations under the
other subsections of this Section 8, the Company agrees to indemnify and
hold harmless Xxxxx Xxxxxxxx & Xxxx, Inc. (the "QIU"), and each person, if
any, who controls the QIU within the meaning of the Securities Act or the
Exchange Act from and against any Loss, as incurred, arising out of or
based upon the QIU's acting as a "qualified independent underwriter"
(within the meaning of Rule 2720 to the NASD's Conduct Rules) in connection
with the offering contemplated by this Agreement, and agrees to reimburse
each such indemnified person for any legal or other expense reasonably
incurred by them in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the Company shall not be liable in any such
case to the extent that any such Loss results from the gross negligence or
willful misconduct of the QIU.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any Losses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute
to the aggregate amount of such Losses (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand, and the Underwriters on the other, from the
offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then
each indemnifying party shall contribute to such aggregate amount of the
Losses paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits, but also the
relative fault of the Company on the one hand, and the Underwriters on the
other, in connection with the statements or omissions which resulted in
such Losses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company respectively, bear to the total
underwriting discounts and commissions received by the Underwriters, in
each case, as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand, or the Underwriters on
the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company, and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this subsection (e) were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to above in
this subsection (e). The aggregate amount paid or payable by an indemnified
party as a result of the Losses (or actions in respect thereof) referred to
above in this subsection (e) shall be
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deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (e), no
Underwriter shall be required to contribute any amount in excess of the
amount by which the Underwriting discount applicable to the Shares
purchased by such Underwriter exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (d) above in respect of any Losses (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute
to the aggregate amount paid or payable by such indemnified party as a
result of such Losses (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on
the one hand, and the QIU on the other, from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence
is not permitted by applicable law, then each indemnifying party shall
contribute to such aggregate amount of the Losses paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only
such relative benefits, but also the relative fault of the Company on the
one hand, and the QIU on the other, in connection with the statements or
omissions which resulted in such Losses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the QIU on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company respectively,
bear to any fee paid to the QIU for acting in the capacity of a "qualified
independent underwriter" (within the meaning of Rule 2720 to the NASD's
Conduct Rules). The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand, or the QIU
on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company, and the QIU agree that it would not be just and
equitable if contributions pursuant to this subsection (f) were determined
by pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (f). The aggregate amount paid or payable by an indemnified
party as a result of the Losses (or actions in respect thereof) referred to
above in this subsection (f) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
-21-
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six
hours after such default by any Underwriter you do not arrange for the
purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the
Company that you have so arranged for the purchase of such Shares, or the
Company notifies you that it has so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone such Time of
Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and
the Company agrees to file promptly any amendments or supplements to the
Registration Statement or the Prospectus which in your opinion may thereby
be made necessary. The term "Underwriter" as used in this Agreement shall
include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to
such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-tenth of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Company shall have the right to require each non-defaulting Underwriter to
purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
number of Shares which such Underwriter agreed to purchase hereunder) of
the Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-tenth of the aggregate number
of all the Shares to be purchased at such Time of Delivery, or if the
Company shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the
Second Time of Delivery, the obligations of the Underwriters to purchase
and of the Company to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the
Company, except for the expenses to be borne by the Company, and the
Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall
relieve a defaulting Underwriter from liability for its default.
-22-
10. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company, each and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or any, or any officer or director or controlling
person of the Company or any and shall survive delivery of and payment for the
Shares.
11. EXPENSES OF TERMINATION. If this Agreement shall be terminated pursuant
to Section 9 hereof, the Company shall not then have any liability to any
Underwriter except as provided in Section 8 hereof; but, if this Agreement is
terminated due to any of the conditions set forth in Section 7 hereof not having
been met, or the Shares are not delivered by or on half of the Company as
provided herein, the Company will reimburse the Underwriters through you for all
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company shall not have any
further liability to any Underwriter in respect of the Shares not so delivered
except as provided in Section 8 hereof.
12. NOTICE. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Xxxxx, Xxxxxxxx & Xxxx, Inc. on behalf of you as the
Representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the Representatives in care of Xxxxx, Xxxxxxxx
& Xxxx, Inc., 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000, Attention:
____________________; if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: President, with a copy to Xxxxxxx Coie LLP,
0000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000. Any such statements,
requests, notices or agreements shall take effect upon receipt thereof;
provided, however, that any notice to an Underwriter pursuant to Section 8(d)
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriter's Questionnaire or
telex constituting such Questionnaire, which address will be supplied to the
Company by you on request. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof.
13. MISCELLANEOUS.
(a) This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters and the Company and, to the extent provided in
Sections 8 and 11 hereof, the officers and directors of the Company and
each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
-23-
(b) Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
(d) This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be
an original, but all such counterparts shall together constitute one and
the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination, upon request, but without warranty on your part as to the authority
of the signors thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Very truly yours,
XXXXXXX CARDIOLOGY SYSTEMS, INC.
By:
------------------------------------
Chief Executive Officer
Accepted as of the date
hereof at Boston, Massachusetts
XXXXX, XXXXXXXX & XXXX, INC.
XX XXXXXXXXX+CO
XXXXXXXXX XXXXXXXXX, INC.
By:
-------------------------------------
(Xxxxx, Xxxxxxxx & Xxxx, Inc.
On behalf of each of the Underwriters)
SCHEDULE I
UNDERWRITERS
Total Number of Number of Optional Shares
Firm Shares to be to be Purchased if
Purchased Maximum Option Exercised
----------------- -------------------------
Xxxxx, Xxxxxxxx & Xxxx, Inc.
XX Xxxxxxxxx+Co
Delafield Xxxxxxxxx, Inc.
--------- -------
TOTAL 4,000,000 600,000
========= =======
SCHEDULE II
PERSONS WHO HAVE NOT EXECUTED
A LOCK-UP AGREEMENT PROVIDED BY
THE REPRESENTATIVES TO THE COMPANY
None
SCHEDULE III
Total Number of Total Number of
Firm Shares to be Sold Optional Shares to be Sold
---------------------- --------------------------
The Company 4,000,000 600,000
--------- -------
TOTAL 4,000,000 600,000
========= =======
ANNEX I
MATTERS TO BE COVERED IN THE OPINION OF XXXXXXX COIE LLP
1. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of California, with the
requisite corporate power to own its properties and conduct its business as
described in the Registration Statement and Prospectus. The Subsidiary has been
duly incorporated and is validly existing under the laws of the State of
Washington, with the requisite corporate power to own its properties and conduct
its business as described in the Registration Statement and Prospectus. Each of
the Company and the Subsidiary is duly qualified to do business and is in good
standing in each jurisdiction listed on Schedule A to this opinion. To our
knowledge, the Company does not own or control, directly or indirectly, any
interest in any business entity, other than the Subsidiary, and except that the
Subsidiary owns 561,290 shares of Series A preferred stock of ScImage, Inc.
2. The Company has an authorized capitalization as set forth in the
Prospectus in the Section entitled "Capitalization," and all of the issued and
outstanding shares of capital stock of the Company (other than the Shares) have
been duly authorized, validly issued, and are fully paid and non-assessable. The
Shares have been duly authorized and when issued and paid for as contemplated by
the Underwriting Agreement will be validly issued, fully paid and
non-assessable; to our knowledge, will not have been issued in violation of or
subject to any pre-emptive right, co-sale right, registration right, right of
first refusal or similar rights that have not been duly waived.
3. All of the issued and outstanding shares of capital stock of the
Subsidiary have been duly authorized, validly issued, are fully paid and
non-assessable, and are owned of record by the Company free and clear of all
liens, encumbrances or claims, except for pledges pursuant to the Loan
Agreement, dated June 5, 1998, as amended, between the Subsidiary and Silicon
Valley Bank.
4. The Company has full corporate power and authority to enter into the
Underwriting Agreement, to issue the Shares, and to perform its obligations
pursuant to the Underwriting Agreement. All necessary board of directors and
shareholder action has been duly and validly taken by the Company and its
shareholders to authorize the execution, delivery and performance of this
Agreement and for the issuance and sale of the Shares. The Underwriting
Agreement has been duly authorized, executed and delivered by the Company, and
is a valid and binding agreement of the Company, enforceable in accordance with
its terms, except insofar as indemnification provisions may be limited by
applicable law and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws, or by general equitable
principles.
5. The issuance and sale by the Company of the Shares and the performance
by the Company of its obligations under, and the consummation of all
transactions contemplated in, the Underwriting Agreement, including, without
limitation, the issuance of the Shares, do not and will not (i) result in any
violation of the provisions of the articles of incorporation or by-laws of the
Company, (ii) result in a breach, violation or default on the part of the
Company under any leases,
contracts, indentures, mortgages, loan agreements or any other agreements or
instruments known to us, to which the Company or the Subsidiary is a party or by
which the Company or the Subsidiary is bound, or to which any of their
respective properties or assets are subject (except for such breaches,
violations, defaults or encumbrances that would not result in a Material Adverse
Change), or (iii) violate any existing state or federal statute or any order,
rule or regulation known to us to be customarily applicable to transactions of
the nature contemplated in the Underwriting Agreement, or any decree known to us
of any court or any governmental agency or body having jurisdiction over the
Company or the Subsidiary or any of their respective properties or assets.
6. No consent, approval, authorization, order, registration or
qualification of, or with any federal or state governmental agency or body, or
to our knowledge, court, was or is required to be obtained by the Company for
the issuance and sale of the Shares by the Company or the consummation by the
Company of the transactions contemplated by the Underwriting Agreement, other
than the registration of the Shares under the Act and the rules and regulations
thereunder, except (i) as may be required under state securities or Blue Sky
laws; and (ii) as may be required by the National Association of Securities
Dealers, both as to which we express no opinion.
7. The Company is not an "investment company" or an "affiliated person" of,
or "promoter" or "principal underwriter" for, an "investment company" as defined
in the Investment Company Act.
8. The statements set forth in the Prospectus under the caption
"Description of Capital Stock," insofar as they purport to constitute a summary
of the terms of the Common Stock, and under the captions "Shares Eligible for
Future Sale" and "Plan of Distribution," insofar as they purport to describe the
provisions of the laws and documents referred to therein have been reviewed by
us and are accurate and fairly present in all material respects the information
called for with respect to such laws and documents and fairly summarize the
matters referred to therein in all material respects.
9. To our knowledge, there are no contracts or other documents to which the
Company or the Subsidiary is a party of a character required to be filed as an
exhibit to the Registration Statement, or required to be described in the
Registration Statement or the Prospectus which are not filed or described as
required.
10. We do not know of any legal or any governmental proceeding instituted,
contemplated or threatened against the Company or the Subsidiary that would be
required to be disclosed in the Prospectus that is not so disclosed.
11. To our knowledge, neither the Company nor the Subsidiary is (i) in
material violation of its respective articles of incorporation or bylaws, or
(ii) in breach of any material obligation or agreement that is described or
referred to in the Registration Statement or Prospectus.
12. The Registration Statement has become effective under the Act. To the
best of our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued by the Commission nor, to the best of our
knowledge, has any proceeding been instituted or
-2-
threatened for that purpose under the Act. The Prospectus has been filed with
the Commission pursuant to Rule 424(b) of the rules and regulations under the
Act within the time period required thereby.
13. We have participated in conferences with officials and other
representatives of the Company, the Representatives, underwriters' counsel and
the independent certified public accountants of the Company, at which such
conferences the contents of the Registration Statement and Prospectus and
related matters were discussed. Without undertaking to determine independently,
or assuming any responsibility for the accuracy or completeness of the
statements contained in the Registration Statement or the Prospectus, we have no
reason to believe that, at the time the Registration Statement became effective
and on the Closing Date, the Registration Statement and any amendment or
supplement thereto (other than the financial statements including supporting
schedules and other financial and statistical information derived therefrom, as
to which we express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or, with respect to the
Prospectus, the date of the Prospectus, at the Closing Date or any later date on
which the Optional Shares are to be purchased, as the case may be, the
Registration Statement, the Prospectus and any amendment or supplement thereto
(except as aforesaid) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, with
respect to the Prospectus, in the light of the circumstances under which they
were made, not misleading (except that we express no opinion or belief with
respect to any financial statements, financial schedules, or data derived
therefrom, contained in the Registration Statement or in the Prospectus).
The limitations inherent in the independent verification of factual matters
and the character of determinations involved in the registration process are
such, however, that we do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus except for those made under the captions
"Description of Capital Stock" or "Shares Eligible for Future Sale" in the
Prospectus, insofar as they accurately summarize in all material respects the
provisions of the laws and documents referred to therein. Also, we do not
express any opinion or belief as to the financial statements and related
schedules or any other financial and accounting information contained in the
Registration Statement or the Prospectus.
-3-
ANNEX II
MATTERS TO BE COVERED IN THE OPINION OF XXXXXXXX XXXXXXX XXXXX LLP
1. Xxxxxxxx Xxxxxxx Xxxxx LLP ("IP counsel") is familiar with the
technology used by the Company and Subsidiary in their business and the manner
of its use and have read the Registration Statement and the Prospectus,
including particularly the portions of the Registration Statement and the
Prospectus referring to patents, trade secrets, trademarks, service marks or
other proprietary information or materials.
2. Nothing has come to the attention of such IP counsel which leads them to
believe that the statements in the Prospectus under the captions, "Risk Factors
-- Failure to adequately protect our intellectual property rights will cause our
business to suffer," "Risk Factors -- If third parties claim that our products
infringe their intellectual property rights, we may be forced to expend
significant financial resources and management time and our operating results
would suffer," or "Business -- Intellectual Property" contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. In
addition, nothing has come to the attention of such IP counsel which leads them
to believe that the following statement in the Prospectus contains an untrue
statement of a material fact or omits to state a material fact required to be
stated or necessary to make such statement not misleading: "we also manufacture
and sell patented electrodes."
3. To such IP counsel's knowledge, the Company and Subsidiary own or
possess sufficient patent rights (the "Patent Rights") reasonably necessary to
conduct their business as now conducted and the expected expiration of any such
Patent Rights would not result in a Material Adverse Change. To such IP
counsel's knowledge, there is not pending or threatened in writing any action,
suit, proceeding or claim by others (A) challenging the validity or scope of any
patent rights held by or licensed to the Company or Subsidiary, or (B) asserting
that any third party patent is infringed by the activities of the Company or
Subsidiary described in the Prospectus whether by the manufacture, use or sale
of any of the Company's or Subsidiary's products or any third parties' products
sold by the Company or Subsidiary. To such IP counsel's knowledge, the Company's
and Subsidiary's discoveries, inventions, products, or processes referred to in
the Registration Statement or Prospectus do not infringe or conflict with any
right or patent of a third party.
4. To such IP counsel's knowledge, there is not pending or threatened in
writing any action, suit, proceeding or claim by the Company or Subsidiary
asserting infringement by any third party of any material patent(s) or patent
application(s) held by or licensed to the Company or Subsidiary.
5. Each of the Company and Subsidiary is listed in the records of the
United States Patent and Trademark Office and relevant foreign industrial
property offices as the owner of record of the patents and applications listed
on a schedule to this opinion (the "Inventions"). Such IP counsel is not aware
of any material defect in form regarding the preparation, filing, prosecution
and/or maintenance of the applications and patents on behalf of the Company or
Subsidiary. To
such counsel's knowledge, the Inventions are being pursued by each of the
Company and Subsidiary. To such counsel's knowledge, each of the Company and
Subsidiary owns as its sole property the Inventions.
6. The Company and Subsidiary rely on the trademarks, trade names, and
associated good will set forth on a schedule to this opinion (the "Marks"). Each
of the Company and Subsidiary is listed in the records of the United States
Patent and Trademark Office and relevant foreign industrial property offices as
the owner of record of the respective registrations and applications there for
listed in the Marks. The status of the registrations and applications there for
in the Marks is set forth on such schedule. To such counsel's knowledge, there
are no claims or assertions made by any third party that use of any of the Marks
infringes upon the rights of that third party.
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ANNEX III
[Attach comfort letter]