Exhibit 1.1
Draft of 8/26/99
4,600,000 Shares
ALTIGEN COMMUNICATIONS, INC.
Common Stock
UNDERWRITING AGREEMENT
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___________, 1999
CIBC World Markets Corp.
Xxxx Xxxxxxxx Xxxxxxx, a division of Xxxx Xxxxxxxx Incorporated
FAC/Equities, a division of First Albany Corporation
c/o CIBC World Markets Corp.
World Financial Center
New York, New York 10281
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
AltiGen Communications, Inc., a Delaware corporation (the "Company")
propose, subject to the terms and conditions contained herein, to sell to you
and the other underwriters named on Schedule I to this Agreement (the
"Underwriters"), for whom you are acting as Representatives (the
"Representatives"), an aggregate of 4,600,000 shares (the "Firm Shares") of the
Company's Common Stock, $.001 par value (the "Common Stock"). All of the
4,600,000 Firm Shares are to be issued and sold by the Company. The respective
amounts of the Firm Shares to be purchased by each of the several Underwriters
are set forth opposite their names on Schedule I hereto. In addition, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional 690,000 shares (the "Option Shares") of Common Stock from it for the
purpose of covering over-allotments in connection with the sale of the Firm
Shares. The Firm Shares and the Option Shares are together called the "Shares."
CIBC World Markets Corp. has agreed to reserve a portion of the Shares to
be purchased by it under this Agreement for sale to the Company's directors,
officers, employees and business associates and other parties related to the
Company (collectively, "Participants"), as set forth in the Prospectus under the
heading "Underwriters" (the "Directed Share Program"). The Shares to be sold by
CIBC World Markets Corp. pursuant to the Directed Share Program are hereinafter
referred to as the "Directed Shares." Any Directed Shares not orally confirmed
for purchase by any Participants by the end of the business day on which this
Agreement is executed will be offered to the public by the Underwriters as set
forth in the Prospectus.
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1. Sale and Purchase of the Shares. On the basis of the representations,
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warranties and agreements contained in, and subject to the terms and conditions
of, this Agreement:
(a) The Company agrees to sell to each of the Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase from the
Company, at a price of $_____ per share (the "Initial Price"), the number of
Firm Shares set forth opposite the name of such Underwriter under the column
"Number of Firm Shares to be Purchased from the Company" on Schedule I to this
Agreement, subject to adjustment in accordance with Section 11 hereof.
(b) The Company grants to the several Underwriters an option to purchase,
severally and not jointly, all or any part of the Option Shares at the Initial
Price. The number of Option Shares to be purchased by each Underwriter shall be
the same percentage (adjusted by the Representatives to eliminate fractions) of
the total number of Option Shares to be purchased by the Underwriters as such
Underwriter is purchasing of the Firm Shares. Such option may be exercised only
to cover over-allotments in the sales of the Firm Shares by the Underwriters and
may be exercised in whole or in part at any time on or before 12:00 noon, New
York City time, on the business day before the Firm Shares Closing Date (as
defined below), and only once thereafter within 30 days after the date of this
Agreement, in each case upon written or telegraphic notice, or verbal or
telephonic notice confirmed by written or telegraphic notice, by the
Representatives to the Company no later than 12:00 noon, New York City time, on
the business day before the Firm Shares Closing Date or at least two business
days before the Option Shares Closing Date (as defined below), as the case may
be, setting forth the number of Option Shares to be purchased and the time and
date (if other than the Firm Shares Closing Date) of such purchase.
2. Delivery and Payment. Delivery by the Company of the Firm Shares to
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the Representatives for the respective accounts of the Underwriters, and payment
of the purchase price by wire transfer in New York Clearing House (same day)
funds drawn to the order of the Company for the shares purchased from the
Company, against delivery of the respective certificates therefor to the
Representatives, shall take place at the offices of CIBC World Markets Corp.,
World Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m., New York City
time, on the third business day following the date of this Agreement, or at such
time on such other date, not later than 10 business days after the date of this
Agreement, as shall be agreed upon by the Company and the Representatives (such
time and date of delivery and payment are called the "Firm Shares Closing
Date").
In the event the option with respect to the Option Shares is exercised,
delivery by the Company of the Option Shares to the Representatives for the
respective accounts of the Underwriters and payment of the purchase price by
wire transfer payable in New York Clearing House (same day) funds to the Company
shall take place at the offices of CIBC World Markets Corp. specified above at
the time and on the date (which may be the same date as, but in no event shall
be earlier than, the Firm Shares Closing Date) specified in the notice referred
to in Section 1(b) (such time and date of delivery and payment are called the
"Option Shares Closing Date"). The Firm Shares Closing Date and the Option
Shares Closing Date are called, individually, a "Closing Date" and, together,
the "Closing Dates."
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Certificates evidencing the Shares shall be registered in such names and
shall be in such denominations as the Representatives shall request at least two
full business days before the Firm Shares Closing Date or, in the case of Option
Shares, on the day of notice of exercise of the option as described in Section
l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. Registration Statement and Prospectus; Public Offering. The Company
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has prepared and filed in conformity with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the published rules and
regulations thereunder (the "Rules") adopted by the Securities and Exchange
Commission (the "Commission") a Registration Statement (as hereinafter defined)
on Form S-1 (No. 333-80037), including a preliminary prospectus relating to the
Shares, and such amendments thereof as may have been required to the date of
this Agreement. Copies of such Registration Statement (including all amendments
thereof) and of the related Preliminary Prospectus (as hereinafter defined) have
heretofore been delivered by the Company to you. The term "Preliminary
Prospectus" means any preliminary prospectus (as described in Rule 430 of the
Rules) included at any time as a part of the Registration Statement or filed
with the Commission by the Company with the consent of the Representatives
pursuant to Rule 424(a) of the Rules. The term "Registration Statement" as used
in this Agreement means the initial registration statement (including all
exhibits and financial schedules), as amended at the time and on the date it
becomes effective (the "Effective Date") and as thereafter amended by post
effective amendments. If the Company has filed an abbreviated registration
statement to register additional Shares pursuant to Rule 462(b) under the Rules
(the "462(b) Registration Statement") then any reference herein to the
Registration Statement shall also be deemed to include such 462(b) Registration
Statement. The term "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement at the time of effectiveness
or, if Rule 430A of the Rules is relied on, the term Prospectus shall also
include the final prospectus filed with the Commission pursuant to Rule 424(b)
of the Rules.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representatives
deem advisable. The Company hereby confirms that the Underwriters and dealers
have been authorized to distribute or cause to be distributed each Preliminary
Prospectus and are authorized to distribute the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
4. Representations and Warranties of the Company. The Company hereby
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represents and warrants to each Underwriter as follows:
(a) On the Effective Date, the Registration Statement complied, and on the
date of the Prospectus, the date any post-effective amendment to the
Registration Statement becomes effective, the date any supplement or amendment
to the Prospectus is filed with the Commission and each Closing Date, the
Registration Statement and the Prospectus (and any amendment
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thereof or supplement thereto) will comply, in all material respects, with the
applicable provisions of the Securities Act and the Rules and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder. The Registration Statement did not, as
of the Effective Date, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading; and on the other dates referred
to above neither the Registration Statement nor the Prospectus, nor any
amendment thereof or supplement thereto, will contain any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
When any related preliminary prospectus was first filed with the Commission
(whether filed as part of the Registration Statement or any amendment thereto or
pursuant to Rule 424(a) of the Rules) and when any amendment thereof or
supplement thereto was first filed with the Commission, such preliminary
prospectus as amended or supplemented complied in all material respects with the
applicable provisions of the Securities Act and the Rules and did not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. Notwithstanding the foregoing, none of the
representations and warranties in this paragraph 4(a) shall apply to statements
in, or omissions from, the Registration Statement or the Prospectus made in
reliance upon, and in conformity with, information herein or otherwise furnished
in writing by the Representatives on behalf of the several Underwriters for use
in the Registration Statement or the Prospectus. With respect to the preceding
sentence, the Company acknowledges that the only information furnished in
writing by the Representatives on behalf of the several Underwriters for use in
the Registration Statement or the Prospectus is the paragraph with respect to
stabilization on the inside front cover page of the Prospectus and the
statements contained under the caption "Underwriting" in the Prospectus.
(b) The Registration Statement is effective under the Securities Act and
no stop order preventing or suspending the effectiveness of the Registration
Statement or suspending or preventing the use of the Prospectus has been issued
and no proceedings for that purpose have been instituted or are threatened under
the Securities Act; any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) of the Rules has been or will be made in the
manner and within the time period required by such Rule 424(b).
(c) The consolidated financial statements of the Company (including all
notes and schedules thereto) included in the Registration Statement and
Prospectus present fairly the financial position, the results of operations, the
statements of cash flows and the statements of stockholders' equity and the
other information purported to be shown therein of the Company at the respective
dates and for the respective periods to which they apply; and such financial
statements and related schedules and notes have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved, and all adjustments necessary for a fair presentation of the
results for such periods have been made. The summary and selected financial data
included in the Prospectus present fairly the information shown therein as at
the respective dates and for the respective periods specified and the summary
and selected financial data have been presented on a basis consistent with the
consolidated financial statements so set forth in the Prospectus and other
financial information.
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(d) Xxxxxx Xxxxxxxx LLP, whose reports are filed with the Commission as a
part of the Registration Statement, are and, during the periods covered by their
reports, were independent public accountants as required by the Securities Act
and the Rules.
(e) The Company and each of its Subsidiaries (as hereinafter defined) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each such subsidiary
or other entity controlled directly or indirectly by the Company (collectively,
"Subsidiaries") is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted by it or location of the assets or properties owned, leased or
licensed by it requires such qualification, except for such jurisdictions where
the failure to so qualify would not have a material adverse effect on the assets
or properties, business, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole (a "Material Adverse Effect").
The Company and each of its Subsidiaries has all requisite corporate power and
authority, and all necessary authorizations, approvals, consents, orders,
licenses, certificates and permits of and from all governmental or regulatory
bodies or any other person or entity (collectively, the "Permits"), to own,
lease and license its assets and properties and conduct its business, all of
which are valid and in full force and effect, as described in the Registration
Statement and the Prospectus, except where the lack of such Permits would not
have a Material Adverse Effect; the Company and each of its Subsidiaries has
fulfilled and performed in all material respects all its material obligations
with respect to such Permits and no event has occurred that allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the Company
thereunder. Except as may be required under the Securities Act and state and
foreign Blue Sky laws, no other Permits are required to enter into, deliver and
perform this Agreement and to issue and sell the Shares.
(f) The Company and each of its Subsidiaries owns and possesses adequate
rights in all patents, patent rights, licenses, inventions, copyrights,
technology, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems, or procedures),
trademarks, service marks, trade names, and trade dress rights (collectively,
the "Intellectual Property") currently employed by it in the operation of its
business and all such Intellectual Property which is material to the conduct of
its business as described in the Prospectus. Neither the Company nor any of its
Subsidiaries is aware of any infringement, misappropriation or violation by
others of, or conflict by others with rights of the Company or of its
Subsidiaries with respect to, any such Intellectual Property. Except as
disclosed in the Prospectus, neither the Company nor any of its Subsidiaries has
received any notice of or is otherwise aware of any infringement,
misappropriation or violation by the Company or of its Subsidiaries of, or
conflict by the Company with rights of others with respect to, any Intellectual
Property of others. Without limiting the foregoing, there are no United States
or foreign patents known to the Company or any of its Subsidiaries which the
Company or any of its Subsidiaries infringes by its present activities or has
infringed by its past activities, or which would preclude the pursuit of its
business and business strategy as described in the Prospectus. Without limiting
the generality of the foregoing, except as described in the Prospectus under the
caption ["Business-Legal Proceedings,"] there is no pending or, to the Company's
or any of its Subsidiaries' knowledge, threatened action, suit, proceeding or
claim challenging the validity,
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enforceability or scope of the Company's or of its Subsidiaries rights in or to
any such Intellectual Property; and except as described in the Prospectus, there
is no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others that the Company has infringed, misappropriated or
otherwise violated, or is infringing, misappropriating or violating, any rights
of others in Intellectual Property, except for claims made by certain inventors
of U.S. patent no. 5,533,104 as set forth in letters dated May 5, 1998 and
December 10, 1998, copies of which have been provided to counsel to the
Underwriters.
(g) The Company and each of its Subsidiaries has good and marketable title
in fee simple to all items of real property and good and marketable title to all
personal property described in the Prospectuses as being owned by it and any
real property and buildings described in the Prospectuses as being held under
lease by the Company and each of its Subsidiaries is held by it under valid,
existing and enforceable leases, free and clear of all liens, encumbrances,
claims, security interests and defects, except such as are described in the
Registration Statement and the Prospectus or would not have a Material Adverse
Effect.
(h) There are no litigation or governmental proceedings to which the
Company or its Subsidiaries is subject or which is pending or, to the knowledge
of the Company, threatened, against the Company or any of its Subsidiaries,
which might have a Material Adverse Effect, affect the consummation of this
Agreement or which is required to be disclosed in the Registration Statement and
the Prospectus that is not so disclosed.
(i) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as described therein, (i)
there has not been any material adverse change with regard to the assets or
properties, business, results of operations or financial condition of the
Company; (ii) neither the Company nor its Subsidiaries has sustained any loss or
interference with its assets, businesses or properties (whether owned or leased)
from fire, explosion, earthquake, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree which would have a Material Adverse
Effect; and (iii) since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, except as reflected therein, neither
the Company nor its Subsidiaries has (A) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, except such
liabilities or obligations incurred in the ordinary course of business, (B)
entered into any transaction not in the ordinary course of business or (C)
declared or paid any dividend or made any distribution on any shares of its
stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase
or otherwise acquire any shares of its stock.
(j) There is no document, contract or other agreement of a character
required to be described in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which is not described or
filed as required by the Securities Act or Rules. Each description of a
contract, document or other agreement in the Registration Statement and the
Prospectus accurately reflects in all respects the terms of the underlying
document, contract or agreement. Each agreement described in the Registration
Statement and Prospectus or listed in the Exhibits to the Registration Statement
is in full force and effect and is valid and enforceable
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by and against the Company or the Subsidiary, as the case may be, in accordance
with its terms. Neither the Company nor the Subsidiary, if the Subsidiary is a
party, nor to the Company's knowledge, any other party is in default in the
observance or performance of any term or obligation to be performed by it under
any such agreement, and no event has occurred which with notice or lapse of time
or both would constitute such a default, in any such case which default or event
would have a Material Adverse Effect. No default exists, and no event has
occurred which with notice or lapse of time or both would constitute a default,
in the due performance and observance of any term, covenant or condition, by the
Company or the Subsidiary, if the Subsidiary is a party thereto, of any other
agreement or instrument to which the Company or the Subsidiary is a party or by
which it or its Company, the Subsidiary or their properties or business may be
bound or affected which default or event would have a Material Adverse Effect.
(k) Neither the Company nor any of its Subsidiaries is in violation of any
term or provision of its charter or bylaws or of any franchise, license, permit,
judgment, decree, order, statute, Rule or regulation, where the consequences of
such violation would have a Material Adverse Effect.
(l) Neither the execution, delivery and performance of this Agreement by
the Company nor the consummation of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the Company of the
Shares) will give rise to a right to terminate or accelerate the due date of any
payment due under, or conflict with or result in the breach of any term or
provision of, or constitute a default (or an event which with notice or lapse of
time or both would constitute a default) under, or require any consent or waiver
under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or any of its
Subsidiaries pursuant to the terms of, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any of its Subsidiaries is
a party or by which either the Company or any of its Subsidiaries or any of
their properties or businesses is bound, or any franchise, license, permit,
judgment, decree, order, statute, rule or regulation applicable to the Company
or any of its Subsidiaries or violate any provision of the charter or bylaws of
the Company or any of its Subsidiaries, except for such consents or waivers
which have already been obtained and are in full force and effect.
(m) The Company has authorized and outstanding capital stock as set forth
under the caption "Capitalization" in the Prospectus. The certificates
evidencing the Shares are in due and proper legal form and have been duly
authorized for issuance by the Company. All of the issued and outstanding shares
of Common Stock have been duly and validly issued and are fully paid and
nonassessable. There are no statutory preemptive or other similar rights to
subscribe for or to purchase or acquire any shares of Common Stock of the
Company or its Subsidiaries or any such rights pursuant to its Certificate of
Incorporation or bylaws or any agreement or instrument to or by which the
Company or any of its Subsidiaries is a party or bound. The Shares, when issued
and sold pursuant to this Agreement, will be duly and validly issued, fully paid
and nonassessable and none of them will be issued in violation of any preemptive
or other similar right. Except as disclosed in the Registration Statement and
the Prospectus, there is no outstanding option, warrant or other right calling
for the issuance of, and there is no commitment, plan or arrangement to issue,
any share of stock of the Company or its Subsidiaries
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or any security convertible into, or exercisable or exchangeable for, such
stock. The Common Stock and the Shares conform in all material respects to all
statements in relation thereto contained in the Registration Statement and the
Prospectus. All outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued, and are fully paid and nonassessable and are
owned directly by the Company or by another wholly-owned subsidiary of the
Company free and clear of any security interests, liens, encumbrances, equities
or claims, other than those described in the Prospectus.
(n) No holder of any security of the Company has the right to have any
security owned by such holder included in the Registration Statement or to
demand registration of any security owned by such holder during the period
ending 180 days after the date of this Agreement. Each stockholder who owns more
than 1% of the Company's outstanding capital stock and each director and
executive officer of the Company has delivered to the Representatives an
enforceable written lock-up agreement in the form attached to this Agreement
("Lock-Up Agreement").
(o) All necessary corporate action has been duly and validly taken by the
Company to authorize the execution, delivery and performance of this Agreement
and the issuance and sale of the Shares by the Company. This Agreement has been
duly and validly authorized, executed and delivered by the Company and
constitute and will constitute legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except (i) as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
and (ii) to the extent that rights to indemnity or contribution under this
Agreement may be limited by Federal and state securities laws or the public
policy underlying such laws.
(p) Neither the Company nor any of its Subsidiaries is involved in any
labor dispute nor, to the knowledge of the Company, is any such dispute
threatened, which dispute would have a Material Adverse Effect. The Company is
not aware of any existing or imminent labor disturbance by the employees of any
of its principal suppliers or contractors, which would have a Material Adverse
Effect. The Company is not aware of any threatened or pending litigation between
the Company or its Subsidiaries and any of its executive officers which, if
adversely determined, could have a Material Adverse Effect and has no reason to
believe that such officers will not remain in the employment of the Company.
(q) No transaction has occurred between or among the Company and any of
its officers or directors or five percent stockholders or any affiliate or
affiliates of any such officer or director or five percent stockholders that is
required to be described in and is not described in the Registration Statement
and the Prospectus.
(r) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
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(s) The Company has not taken, nor will it take, directly or indirectly,
any action designed to or which might reasonably be expected to cause or result
in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the Common Stock
to facilitate the sale or resale of any of the Shares.
(t) The Company and its Subsidiaries has filed all Federal, state, local
and foreign tax returns which are required to be filed through the date hereof,
or has received extensions thereof, and has paid all taxes shown on such returns
and all assessments received by it to the extent that the same are material and
have become due, and there are no tax audits or investigations pending, which if
adversely determined would have a Material Adverse Effect; nor are there any
material proposed additional tax assessments against the Company and any of its
Subsidiaries.
(u) The Shares have been duly authorized for quotation on the National
Association of Securities Dealers Automated Quotation ("Nasdaq") National Market
System, subject to official Notice of Issuance, and a registration statement has
been filed on Form 8-A pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which registration statement complies in
all material respects with the Exchange Act.
(v) The books, records and accounts of the Company and its Subsidiaries
accurately and fairly reflect, in reasonable detail, the transactions in, and
dispositions of, the assets of, and the results of operations of, the Company
and its Subsidiaries. The Company and each of its Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurances 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 accordance with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(w) The Company and its Subsidiaries is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are customary in the businesses in which they are engaged or propose to engage
after giving effect to the transactions described in the Prospectus; and neither
the Company nor any Subsidiary of the Company has reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material Adverse
Effect. Neither the Company nor any Subsidiary has been denied any insurance
coverage, which it has sought or for which it has applied.
(x) Each approval, consent, order, authorization, designation, declaration
or filing of, by or with any regulatory, administrative or other governmental
body necessary in connection with the execution and delivery by the Company of
this Agreement and the consummation of the transactions herein contemplated
required to be obtained or performed by the Company (except such additional
steps as may be required by the National Association of Securities Dealers, Inc.
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(the "NASD") or may be necessary to qualify the Shares for public offering by
the Underwriters under the state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(y) There are no affiliations with the NASD among the Company's officers,
directors or, to the best of the knowledge of the Company, any five percent or
greater stockholder of the Company, except as set forth in the Registration
Statement or otherwise disclosed in writing to the Representatives of the
Underwriters.
(z) (i) Each of the Company and its Subsidiaries is in compliance in all
material respects with all rules, laws and regulation relating to the use,
treatment, storage and disposal of toxic substances and protection of health or
the environment ("Environmental Law") which are applicable to its business; (ii)
neither the Company nor any of its Subsidiaries has received any notice from any
governmental authority or third party of an asserted claim under Environmental
Laws; (iii) each of the Company and its Subsidiaries has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its business and is in compliance with all terms and conditions of
any such permit, license or approval; (iv) to the Company's knowledge, no facts
currently exist that will require the Company or its Subsidiaries to make future
material capital expenditures to comply with Environmental Laws; and (v) no
property which is or has been owned, leased or occupied by the Company or its
Subsidiaries has been designated as a Superfund site pursuant to the
Comprehensive Environmental Response, Compensation of Liability Act of 1980, as
amended (42 U.S.C. Section 9601, et. seq.) or otherwise designated as a
contaminated site under applicable state or local law.
(aa) The Company has been advised concerning the Investment Company Act of
1940, as amended (the "Investment Company Act") and is not and, after giving
effect to the offering and sale of the Shares and the application of proceeds
thereof as described in the Prospectus, will not be an "investment company"
within the meaning of the Investment Company Act.
(bb) Neither the Company nor any of its Subsidiaries nor any other person
associated with or acting on behalf of the Company or its Subsidiaries
including, without limitation, any director, officer, agent or employee of the
Company or its Subsidiaries has, directly or indirectly, while acting on behalf
of the Company or its Subsidiaries (i) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any other unlawful
payment.
(cc) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
or any subsidiary would have any liability; neither the Company nor any
subsidiary has incurred or expects to incur liability under (i) Title IV of
ERISA with
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respect to termination of, or withdrawal from, any "pension plan" or (ii)
Section 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Internal Revenue
Code"); and each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Internal Revenue
Code is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(dd) There are no issues related to the Company's preparedness for the Year
2000 that (i) are of a character required to be described or referred to in the
Registration Statement or Prospectus by the Act which have not been accurately
described in the Registration Statement or Prospectus or (ii) might reasonably
be expected to result in any material adverse change in the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company or that might materially affect its properties, assets or rights. All
internal computer systems and each Constituent Component (as defined below) of
those systems and all computer-related products and each Constituent Component
of those products of the Company will, by December 31, 1999, fully comply with
the Year 2000 Qualification Requirements. "Year 2000 Qualification Requirements"
means that the internal computer systems and each Constituent Component (as
defined below) of those systems and all computer-related products of each
Constituent Component (as defined below) of those products of the Company (i)
have been reviewed to confirm that they store, process (including sorting and
performing mathematical operations, calculations and computations), input and
output data containing date and information correctly regardless of whether the
date contains dates and times before, on or after January 1, 2000, (ii) have
been designated to ensure date and time entry recognition and calculations, and
date data interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iv) accurately process any date rollover, and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components and peripherals provided as part of the configuration. The Company
has inquired of material vendors as to their preparedness for the Year 2000 and
has disclosed in the Registration Statement or Prospectus any issues that might
reasonably be expected to result in any material adverse change.
5. Conditions of the Underwriters' Obligations. The obligations of the
-------------------------------------------
Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
(a) Notification that the Registration Statement has become effective
shall have been received by the Representatives and the Prospectus shall have
been timely filed with the Commission in accordance with Section 7(a) of this
Agreement.
(b) No order preventing or suspending the use of any preliminary
prospectus or the Prospectus shall have been or shall be in effect and no order
suspending the effectiveness of the Registration Statement shall be in effect
and no proceedings for such purpose shall be pending
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before or threatened by the Commission, and any requests for additional
information on the part of the Commission (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of the Commission and the Representatives.
(c) The representations and warranties of the Company contained in this
Agreement and in the certificates delivered pursuant to Section 6(d) shall be
true and correct when made and on and as of each Closing Date as if made on such
date and the Company shall have performed all covenants and agreements and
satisfied all the conditions contained in this Agreement required to be
performed or satisfied by them at or before such Closing Date.
(d) The Representatives shall have received on each Closing Date a
certificate, addressed to the Representatives and dated such Closing Date, of
the chief executive or chief operating officer and the chief financial officer
or chief accounting officer of the Company to the effect that (i) the signers of
such certificate have carefully examined the Registration Statement, the
Prospectus and this Agreement and that the representations and warranties of the
Company in this Agreement are true and correct on and as of such Closing Date
with the same effect as if made on such Closing Date and the Company has
performed all covenants and agreements and satisfied all conditions contained in
this Agreement required to be performed or satisfied by it at or prior to such
Closing Date, and (ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and to the best of their knowledge, no
proceedings for that purpose have been instituted or are pending under the
Securities Act.
(e) The Representatives shall have received on the Effective Date, at the
time this Agreement is executed and on each Closing Date a signed letter from
Xxxxxx Xxxxxxxx LLP addressed to the Representatives and dated, respectively,
the Effective Date, the date of this Agreement and each such Closing Date, in
form and substance reasonably satisfactory to the Representatives, confirming
that they are independent accountants within the meaning of the Securities Act
and the Rules, that the response to Item 10 of the Registration Statement is
correct insofar as it relates to them and stating in effect that:
(i) in their opinion the audited financial statements and financial
statement schedules included in the Registration Statement and the
Prospectus and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the Securities Act
and the Rules;
(ii) on the basis of a reading of the amounts included in the
Registration Statement and the Prospectus under the headings "Summary
Consolidated Financial Information" and "Selected Consolidated Financial
Data," carrying out certain procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the comments set
forth in such letter, a reading of the minutes of the meetings of the
stockholders and directors of the Company, and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters of the Company as to transactions and events subsequent
to the date of the latest audited financial statements, except as
-12-
disclosed in the Registration Statement and the Prospectus, nothing came to
their attention which caused them to believe that:
(A) the amounts in "Summary Consolidated Financial Information," and
"Selected Consolidated Financial Data" included in the Registration
Statement and the Prospectus do not agree with the corresponding amounts in
the audited and unaudited financial statements from which such amounts were
derived; or
(B) with respect to the Company, there were, at a specified date not
more than five business days prior to the date of the letter, any increases
in the current liabilities and long-term liabilities of the Company or any
decreases in net income or in working capital or the stockholders' equity
in the Company, as compared with the amounts shown on the Company's audited
balance sheet for the fiscal year ended September 30, 1999 and the nine
months ended June 30, 1999 included in the Registration Statement; and
(iii) they have performed certain other procedures as may be
permitted under Generally Acceptable Auditing Standards as a result of
which they determined that certain information of an accounting, financial
or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company) set forth in the Registration Statement and the Prospectus and
reasonably specified by the Representatives agrees with the accounting
records of the Company.
(iv) based upon the procedures set forth in clauses (ii) and (iii)
above and a reading of the amounts included in the Registration Statement
under the headings "Summary Consolidated Financial Data" and "Selected
Consolidated Financial Data" included in the Registration Statement and
Prospectus and a reading of the financial statements from which certain of
such data were derived, nothing has come to their attention that gives them
reason to believe that the "Summary Consolidated Financial Data" and
"Selected Consolidated Financial Data" included in the Registration
Statement and Prospectus do not comply as to the form in all material
respects with the applicable accounting requirements of the Securities Act
and the Rules or that the information set forth therein is not fairly
stated in relation to the financial statements included in the Registration
Statement or Prospectus from which certain of such data were derived are
not in conformity with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited financial
statements included in the Registration Statement and Prospectus.
References to the Registration Statement and the Prospectus in this
paragraph (f) are to such documents as amended and supplemented at the date of
the letter.
(f) The Representatives shall have received on each Closing Date from
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel for the Company, an opinion, addressed
to the Representatives and dated such Closing Date, and stating in effect that:
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(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and
the jurisdiction of its incorporation. To the best of such counsel's
knowledge, except as disclosed in Exhibit 21.1 to the Registration
Statement, the Company has no subsidiary and does not control, directly or
indirectly, any corporation, partnership, joint venture, association or
other business organization. The Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the
character or location of its assets or properties (owned, leased or
licensed) or the nature of its businesses makes such qualification
necessary, except for such jurisdictions where the failure to so qualify
would not have a Material Adverse Effect.
(ii) The Company has all requisite corporate power and authority to
own, lease and license its assets and properties and conduct its business
as now being conducted and as described in the Registration Statement and
the Prospectus and with respect to the Company to enter into, deliver and
perform this Agreement and to issue and sell the Shares other than those
required under the Securities Act and state and foreign Blue Sky laws.
(iii) The Company has authorized and issued capital stock as set
forth in the Registration Statement and the Prospectus under the caption
"Capitalization"; the certificates evidencing the Shares are in due and
proper legal form and have been duly authorized for issuance by the
Company; all of the outstanding shares of Common Stock of the Company have
been duly and validly authorized and issued and are fully paid and
nonassessable and none of them was issued in violation of any preemptive or
other similar right. The Shares when issued and sold pursuant to this
Agreement will be duly and validly issued, outstanding, fully paid and
nonassessable and none of them will have been issued in violation of any
preemptive or other similar right. Except as disclosed in the Registration
Statement and the Prospectus, there are no preemptive rights or any
restriction upon the voting or transfer of any securities of the Company
pursuant to the Company's Certificate of Incorporation or bylaws or other
governing documents or any other instrument to which the Company is a party
or by which it may be bound. To the best of such counsel's knowledge,
except as disclosed in the Registration Statement and the Prospectus, there
is no outstanding option, warrant or other right calling for the issuance
of, and no commitment, plan or arrangement to issue, any share of stock of
the Company or any security convertible into, exercisable for, or
exchangeable for stock of the Company. The Common Stock and the Shares
conform in all material respects to the descriptions thereof contained in
the Registration Statement and the Prospectus.
(iv) Each of the Lock-Up Agreements executed by the Company's
directors, officers and employees has been duly and validly delivered by
such persons and constitutes the legal, valid and binding obligation of
each such person enforceable against each such person in accordance with
its terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles.
-14-
(v) All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of this
Agreement and the issuance and sale of the Shares. This Agreement has been
duly and validly authorized, executed and delivered by the Company and this
Agreement constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except
(A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles and (B) to the extent that rights to indemnity or contribution
under this Agreement may be limited by Federal or state securities laws or
the public policy underlying such laws.
(vi) Neither the execution, delivery and performance of this Agreement
by the Company nor the consummation of any of the transactions contemplated
hereby (including, without limitation, the issuance and sale by the Company
of the Shares) will give rise to a right to terminate or accelerate the due
date of any payment due under, or conflict with or result in the breach of
any term or provision of, or constitute a default (or any event which with
notice or lapse of time, or both, would constitute a default) under, or
require consent or waiver under, or result in the execution or imposition
of any lien, charge or encumbrance upon any properties or assets of the
Company pursuant to the terms of any indenture, mortgage, deed trust, note
or other agreement or instrument filed with the Commission and to which the
Company is a party or by which it or any of its properties or businesses is
bound, or any franchise, license, permit, judgment, decree, order, statute,
rule or regulation of which such counsel is aware or violate any provision
of the charter or bylaws of the Company.
(vii) To such counsel's knowledge, no default exists, and no event
has occurred which with notice or lapse of time, or both, would constitute
a default, in the due performance and observance of any term, covenant or
condition by the Company of any indenture, mortgage, deed of trust, note or
any other agreement or instrument to which the Company is a party or by
which it or any of its assets or properties or businesses may be bound or
affected, where the consequences of such default would have a Material
Adverse Effect.
(viii) The Company is not in violation of any term or provision of
its charter or bylaws or any franchise, license, permit, judgment, decree,
order, statute, rule or regulation, where the consequences of such
violation would have a Material Adverse Effect.
(ix) No consent, approval, authorization or order of any court or
governmental agency or regulatory body is required for the execution,
delivery or performance of this Agreement by the Company or the
consummation of the transactions contemplated hereby or thereby, except
such as have been obtained under the Securities Act and such as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the several Underwriters.
-15-
(x) To the best of such counsel's knowledge, there is no litigation
or governmental or other proceeding or investigation, before any court or
before or by any public body or board pending or threatened against, or
involving the assets, properties or businesses of, the Company which would
have a Material Adverse Effect.
(xi) The statements in the Prospectus under the captions "Risk
Factors--We may face infringement issues that could harm our business by
requiring us to license technology on unfavorable terms or temporarily or
permanently cease sales or key products," "Description of Capital Stock,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Shares Eligible for Future
Sale," "Management," "Principal Stockholders," "Certain Transactions," and
"Business--Intellectual Property" and "--Legal Proceedings" insofar as such
statements constitute a summary of documents referred to therein or matters
of law, are fair summaries in all material respects and accurately present
the information called for with respect to such documents and matters.
Accurate copies of all contracts and other documents required to be filed
as exhibits to, or described in, the Registration Statement have been so
filed with the Commission or are fairly described in the Registration
Statement, as the case may be.
(xii) The Registration Statement, all preliminary prospectuses and
the Prospectus and each amendment or supplement thereto (except for the
financial statements and schedules and other financial and statistical data
included therein, as to which such counsel expresses no opinion) comply as
to form in all material respects with the requirements of the Securities
Act and the Rules.
(xiii) The Registration Statement is effective under the Securities
Act, and no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are threatened, pending or contemplated. Any required filing
of the Prospectus and any supplement thereto pursuant to Rule 424(b) under
the Securities Act has been made in the manner and within the time period
required by such Rule 424(b).
(xiv) The Shares have been approved for listing on the Nasdaq
National Market.
(xv) The capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock."
(xvi) The Company is not an "investment company" or an entity
controlled by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
(xvii) Except as specifically set forth in the Prospectus under the
captions "Risk Factors--We face infringement issues that could harm our
business by requiring us to license technology on unfavorable terms or
temporarily or permanently cease sales of key products," and under the
caption "Business--Legal Proceedings," there are no legal or
-16-
governmental proceedings (other than the patent application proceedings
themselves) pending or, to the best knowledge of such counsel, threatened
against the Company relating to any Intellectual Property owned or licensed
by the Company; and
(xviii) Except as specifically set forth in the Prospectus, to the
best of such counsel's knowledge the Company has not received any notice of
infringement with respect to any patent or any notice challenging the
validity, scope or enforceability of any of the patents, trademarks or
service marks owned by or licensed to the Company.
To the extent deemed advisable by such counsel, they may rely as to matters
of fact on certificates of responsible officers of the Company and public
officials. Copies of such certificates and other opinions shall be furnished to
the Representatives and counsel for the Underwriters.
In addition, such opinion shall state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the Representatives and representatives of the independent
certified public accountants of the Company, at which conferences the contents
of the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus (except as specified
in the foregoing opinion), on the basis of the foregoing, no facts have come to
the attention of such counsel which lead such counsel to believe that the
Registration Statement at the time it became effective (except with respect to
the financial statements and notes and schedules thereto and other financial
data, as to which such counsel need express no belief) 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
that the Prospectus as amended or supplemented (except with respect to the
financial statements, notes and schedules thereto and other financial data, as
to which such counsel need make no statement) on the date thereof contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) All proceedings taken in connection with the sale of the Firm Shares
and the Option Shares as herein contemplated shall be reasonably satisfactory in
form and substance to the Representatives, and their counsel and the
Underwriters shall have received from Pillsbury Madison & Sutro LLP a favorable
opinion, addressed to the Representatives and dated such Closing Date, with
respect to the Shares, the Registration Statement and the Prospectus, and such
other related matters, as the Representatives may reasonably request, and the
Company shall have furnished to Pillsbury Madison & Sutro LLP such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(h) If the Shares have been qualified for sale in Florida, the
Representatives shall have received on each Closing Date certificates, addressed
to the Representatives, and dated such Closing Date, of an executive officer of
the Company, to the effect that the signer of such certificate has reviewed and
understands the provisions of Section 517.075 of the Florida Statutes, and
-17-
represents that the Company has complied, and at all times will comply, with all
provisions of Section 517.075 and further, that as of such Closing Date, neither
the Company nor any of its affiliates does business with the government of Cuba
or with any person located in Cuba.
(i) The Representatives shall have received copies of the Lock-up
Agreements executed by each entity or person described in Section 4(n).
(j) The Company shall have furnished or caused to be furnished to the
Representatives such further certificates or documents as the Representatives
shall have reasonably requested.
(k) The Representatives shall have received on each Closing Date from Xxx
Xx Law Offices, counsel for AltiGen Communications (Shanghai), Ltd. (the
"Subsidiary"), an opinion, addressed to the Representatives and dated such
Closing Date, in substantially the form attached as Exhibit A.
(l) The Representatives shall have received on each Closing Date from
Xxxxxxxx and Xxxxxxxx and Crew LLP, intellectual property counsel for the
Company, an opinion, addressed to the Representatives and dated such Closing
Date, and stating in effect the matters set forth in Exhibit B.
6. Covenants of the Company.
------------------------
(a) The Company covenants and agrees as follows:
(i) The Company shall prepare the Prospectus in a form approved by
the Representatives and file such Prospectus pursuant to Rule 424(b) under
the Securities 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 Securities Act.
(ii) The Company shall promptly advise the Representatives in writing
(A) when any amendment to the Registration Statement shall have become
effective, (B) of any request by the Commission for any amendment of the
Registration Statement or the Prospectus or for any additional information,
(C) of the prevention or suspension of the use of any preliminary
prospectus or the Prospectus or of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
the institution or threatening of any proceeding for that purpose and (D)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The
Company shall not file any amendment of the Registration Statement or
supplement to the Prospectus unless the Company has furnished the
Representatives a copy for its review prior to filing and shall not file
any such proposed amendment or supplement to which the Representatives
reasonably object. The Company shall use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
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(iii) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Securities Act and the Rules, any event
occurs as a result of which the Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall be
necessary to amend or supplement the Prospectus to comply with the
Securities Act or the Rules, the Company promptly shall prepare and file
with the Commission, subject to the second sentence of paragraph (ii) of
this Section 7(a), an amendment or supplement which shall correct such
statement or omission or an amendment which shall effect such compliance.
(iv) The Company shall make generally available to its security
holders and to the Representatives as soon as practicable, but not later
than 45 days after the end of the 12-month period beginning at the end of
the fiscal quarter of the Company during which the Effective Date occurs
(or 90 days if such 12-month period coincides with the Company's fiscal
year), an earning statement (which need not be audited) of the Company,
covering such 12-month period, which shall satisfy the provisions of
Section 11(a) of the Securities Act or Rule 158 of the Rules.
(v) The Company shall furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Registration
Statement (including all exhibits thereto and amendments thereof) and to
each other Underwriter a copy of the Registration Statement (without
exhibits thereto) and all amendments thereof and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Securities
Act or the Rules, as many copies of any preliminary prospectus and the
Prospectus and any amendments thereof and supplements thereto as the
Representatives may reasonably request.
(vi) The Company shall cooperate with the Representatives and their
counsel in endeavoring to qualify the Shares for offer and sale in
connection with the offering under the laws of such jurisdictions as the
Representatives may designate and shall maintain such qualifications in
effect so long as required for the distribution of the Shares; provided,
however, that the Company shall not be required in connection therewith, as
a condition thereof, to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction or subject itself
to taxation as doing business in any jurisdiction.
(vii) For a period of five years after the date of this Agreement,
the Company shall supply to the Representatives, and to each other
Underwriter who may so request in writing, copies of such financial
statements and other periodic and special reports as the Company may from
time to time distribute generally to the holders of any class of its
capital stock and to furnish to the Representatives a copy of each annual
or other report it shall be required to file with the Commission.
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(viii) Without the prior written consent of CIBC World Markets Corp.,
for a period of 180 days after the date of this Agreement, the Company and
each of its individual directors and executive officers shall not issue,
sell or register with the Commission (other than on Form S-8 or on any
successor form), or otherwise dispose of, directly or indirectly, any
equity securities of the Company (or any securities convertible into,
exercisable for or exchangeable for equity securities of the Company),
except for the issuance of the Shares pursuant to the Registration
Statement and the issuance of shares pursuant to the Company's existing
stock option plan or bonus plan as described in the Registration Statement
and the Prospectus. In the event that during this period, (A) any shares
are issued pursuant to the Company's existing stock option plan or bonus
plan that are exercisable during such 180 day period or (B) any
registration is effected on Form S-8 or on any successor form relating to
shares that are exercisable during such 180 period, the Company shall
obtain the written agreement of such grantee or purchaser or holder of such
registered securities that, for a period of 180 days after the date of this
Agreement, such person will not, without the prior written consent of CIBC
World Markets Corp., offer for sale, sell, distribute, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, or exercise
any registration rights with respect to, any shares of Common Stock (or any
securities convertible into, exercisable for, or exchangeable for any
shares of Common Stock) owned by such person.
(ix) On or before completion of this offering, the Company shall make
all filings required under applicable securities laws and by the Nasdaq
National Market (including any required registration under the Exchange
Act).
(x) The Company will apply the net proceeds from the offering of the
Shares in the manner set forth under "Use of Proceeds" in the Prospectus.
(b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the public offering of the Shares and the performance of the obligations of the
Company under this Agreement including those relating to: (i) the preparation,
printing, filing and distribution of the Registration Statement including all
exhibits thereto, each preliminary prospectus, the Prospectus, all amendments
and supplements to the Registration Statement and the Prospectus, and the
printing, filing and distribution of this Agreement; (ii) the preparation and
delivery of certificates for the Shares to the Underwriters to the
Representatives; (iii) the registration or qualification of the Shares for offer
and sale under the securities or Blue Sky laws of the various jurisdictions
referred to in Section 7(a)(vi), including the reasonable fees and disbursements
of counsel for the Underwriters in connection with such registration and
qualification and the preparation, printing, distribution and shipment of
preliminary and supplementary Blue Sky memoranda; (iv) the furnishing (including
costs of shipping and mailing) to the Representatives and to the Underwriters of
copies of each preliminary prospectus, the Prospectus and all amendments or
supplements to the Prospectus, and of the several documents required by this
Section to be so furnished, as may be reasonably requested for use in connection
with the offering and sale of the Shares by the Underwriters or by dealers to
whom Shares may be sold; (v) the filing fees of the NASD in connection with its
review of the terms of the public
-20-
offering and reasonable fees and disbursements of counsel for the Underwriters
in connection with such review; (vi) the furnishing (including costs of shipping
and mailing) to the Representatives and to the Underwriters of copies of all
reports and information required by Section 7(a)(vii); (vii) inclusion of the
Shares for quotation on the Nasdaq National Market; (viii) all transfer taxes,
if any, with respect to the sale and delivery of the Shares by the Company to
the Underwriters; and (ix) the offer and sale of the Directed Shares by the
Underwriters. Subject to the provisions of Section 10, the Underwriters agree to
pay, whether or not the transactions contemplated hereby are consummated or this
Agreement is terminated, all costs and expenses incident to the performance of
the obligations of the Underwriters under this Agreement not payable by the
Company pursuant to the preceding sentence, including, without limitation, the
fees and disbursements of counsel for the Underwriters.
7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act against any and all
losses, claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other Federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto, or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) in whole or in part upon any breach
of the representations and warranties set forth in Section 4 hereof, or (iii) in
whole or in part upon any failure of the Company to perform any of its
obligations hereunder or under law; provided, however, that such indemnity shall
not inure to the benefit of any Underwriter (or any person controlling such
Underwriter) on account of any losses, claims, damages or liabilities arising
from the sale of the Shares to any person by such Underwriter if such untrue
statement or omission or alleged untrue statement or omission (x) was made in
such preliminary prospectus, the Registration Statement or the Prospectus, or
such amendment or supplement, in reliance upon and in conformity with
information furnished in writing to the Company by the Representatives on behalf
of any Underwriter specifically for use therein or (y) results solely from an
untrue statement of a material fact contained in, or the omission of a material
fact from, such preliminary prospectus, which untrue statement or omission was
completely corrected in the Prospectus (as then amended or supplemented) if the
Company shall sustain the burden of proving that the Underwriters sold Shares to
the person alleging such loss, claim, damage or liability without sending or
giving, at or prior to the written confirmation of such sale, a copy of the
Prospectus (as then amended or supplemented) if the Company had previously
furnished copies thereof to the Underwriters within a reasonable amount of time
prior to such sale or such confirmation, and the Underwriters failed to deliver
the corrected Prospectus, if required by law to have so delivered it and if
delivered would have been a complete defense against the person
-21-
asserting such loss, claim, damage or liability. This indemnity agreement will
be in addition to any liability that the Company may otherwise have.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, each director of the Company, and each officer of the Company who
signs the Registration Statement, to the same extent as the foregoing indemnity
from the Company to each Underwriter, but only insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which was made in any
preliminary prospectus, the Registration Statement or the Prospectus, or any
amendment thereof or supplement thereto, contained in the last paragraph of the
cover page, in the paragraph relating to stabilization on the inside front cover
page of the Prospectus and the statements contained under the caption
"Underwriting" in the Prospectus; provided, however, that the obligation of each
Underwriter to indemnify the Company (including any controlling person, director
or officer thereof) shall be limited to the net proceeds received by the Company
from such Underwriter.
(c) The Company agrees to indemnify and hold harmless CIBC World Markets
Corp. ("CIBC") and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(the "CIBC Entities") against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation, legal and
other expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which they, or any
of them, may become subject under the Securities Act, the Exchange Act or other
Federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in any
material prepared by or with the consent of the Company for distribution to
Participants in connection with the Directed Share Program, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) caused by the failure of any Participant to pay for and accept
delivery of Directed Shares that the Participant agreed to purchase; or (iii)
related to, or arising out of, or in connection with the Directed Share Program,
other than losses, claims, damages and liabilities that are finally judicially
determined to have resulted from the bad faith or gross negligence of the CIBC
Entities.
(d) Any party that proposes to assert the right to be indemnified under
this Section will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section, notify each
such indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. No indemnification provided for in
Section 7(a), 7(b) or 7(c) shall be available to any party who shall fail to
give notice as provided in this Section 7(d) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related and
was prejudiced by the failure to give such notice but the omission so to notify
such indemnifying party of any such action, suit or proceeding shall not relieve
it from any liability that it may have to any indemnified party for contribution
or
-22-
otherwise than under this Section. In case any such action, suit or proceeding
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 in, and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and the approval by the indemnified party of such
counsel, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses, except as provided below and except for the
reasonable costs of investigation subsequently incurred by such indemnified
party in connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in writing
by the indemnifying party, (ii) the indemnified party shall have reasonably
concluded that there may be a conflict of interest between the indemnifying
parties and the indemnified party in the conduct of the defense of such action
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party) or (iii) the
indemnifying parties shall not have employed counsel to assume the defense of
such action within a reasonable time after notice of the commencement thereof,
in each of which cases the fees and expenses of counsel shall be at the expense
of the indemnifying parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its written
consent, which consent shall not be unreasonably withheld or delayed.
8. Contribution.
------------
(a) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 7(a) or 7(b)
is due in accordance with its terms but for any reason is held to be unavailable
to or insufficient to hold harmless an indemnified party under Section 7(a) or
7(b), then each indemnifying party shall contribute to the aggregate losses,
claims, damages and liabilities (including any investigation, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting any contribution received by any person entitled hereunder to
contribution from any person who may be liable for contribution) to which the
indemnified party may be subject 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 or, if such allocation
is not permitted by applicable law or indemnification is not available as a
result of the indemnifying party not having received notice as provided in
Section 7 hereof, in such proportion as is appropriate to reflect not only the
relative benefits referred to above but also the relative fault of the Company
on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Underwriters shall be
deemed to be in the same proportion as (x) the total proceeds from the offering
(net of underwriting discounts but before deducting expenses) received by the
Company, as set forth in the table on the cover page of the Prospectus, bear to
(y) the underwriting discounts received by the Underwriters, as set
-23-
forth in the table on the cover page of the Prospectus. The relative fault of
the Company or the Underwriters shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
related to information supplied by the Company or the Underwriters 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 contribution pursuant to this
Section 8 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.
Notwithstanding the provisions of this Section 8, (i) in no case shall any
Underwriter (except as may be provided in the Agreement Among Underwriters) be
liable or responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder; and (ii) the
Company shall be liable and responsible for any amount in excess of such
underwriting discount; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of the Section 15 of the Securities Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i) and
(ii) in the immediately preceding sentence of this Section 8. Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent. The Underwriter's
obligations to contribute pursuant to this Section 8 are several in proportion
to their respective underwriting commitments and not joint.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 7(c) is due
in accordance with its terms but for any reason is held to be unavailable to or
insufficient to hold harmless a CIBC Entity under Section 7(c), then the Company
shall contribute to the aggregate losses, claims, damages and liabilities
(including any investigation, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted), but after deducting any contribution
received by any to which a CIBC Entity may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the CIBC Entities on the other from the offering of the Directed Shares
or, if such allocation is not permitted by applicable law or indemnification is
not available as a result of the Company not having received notice as provided
in Section 7 hereof, in such proportion as is appropriate to reflect not only
the relative benefits referred to above but also the relative fault of the
Company on the one hand and the CIBC Entities on the other in connection with
the state-
-24-
ments or omissions which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the CIBC Entities shall be deemed
to be in the same proportion as the total proceeds from the offering of the
Directed Shares (net of underwriting discounts but before deducting expenses)
received by the Company and the underwriting discounts received by the CIBC
Entities for the Directed Shares, bear to the total price to the public of the
Directed Shares. The relative fault of the Company or the CIBC Entities shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact related to information supplied by the
Company or the CIBC Entities 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 contribution pursuant to this Section 8(b) were determined by pro rata
allocation (even if the CIBC Entities 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. Notwithstanding the provisions of
this Section 8(b), (i) in no case shall any CIBC Entity be liable or responsible
for any amount in excess of the underwriting discount applicable to the Directed
Shares distributed to the public. For purposes of this Section 8(b), each
person, if any, who controls a CIBC Entity within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act shall have the same
rights to contribution as such CIBC Entity, and each person, if any, who
controls the Company within the meaning of the Section 15 of the Securities Act
or Section 20(a) of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) in the immediately preceding sentence of this Section 9. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
Section, notify such party or parties from whom contribution may be sought, but
the omission so to notify such party or parties from whom contribution may be
sought shall not relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have hereunder or otherwise than
under this Section. No party shall be liable for contribution with respect to
any action, suit, proceeding or claim settled without its written consent.
9. Termination. This Agreement may be terminated with respect to the
-----------
Shares to be purchased on a Closing Date by the Representatives by notifying the
Company.
(a) in the absolute discretion of the Representatives at or before any
Closing Date: (i) if on or prior to such date, any domestic or international
event or act or occurrence has materially disrupted, or in the opinion of the
Representatives will in the future materially disrupt, the securities markets;
(ii) if there has occurred any new outbreak or material escalation of
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in the judgment of the
Representatives, inadvisable to proceed with the offering; (iii) if there shall
be such a material adverse change in general financial, political or economic
conditions or the effect of international conditions on the financial markets in
the United States is such as to make it, in the judgment of the Representatives,
inadvisable or impracticable to market the Shares; (iv) if trading in the Shares
has been suspended by the
-25-
Commission or trading generally on the New York Stock Exchange, Inc., on the
American Stock Exchange, Inc. or the Nasdaq National Market has been suspended
or limited, or minimum or maximum ranges for prices for securities shall have
been fixed, or maximum ranges for prices for securities have been required, by
said exchanges or by order of the Commission, the National Association of
Securities Dealers, Inc., or any other governmental or regulatory authority; or
(v) if a banking moratorium has been declared by any state or Federal authority;
or (vi) if, in the judgment of the Representatives, there has occurred a
Material Adverse Effect, or
(b) at or before any Closing Date, that any of the conditions specified in
Section 6 shall not have been fulfilled when and as required by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the
Company shall not be under any liability to any Underwriter, and no Underwriter
shall be under any liability to the Company, except that (y) if this Agreement
is terminated by the Representatives or the Underwriters because of any failure,
refusal or inability on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the reasonable fees and
disbursements of their counsel) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder and (z) no Underwriter who shall have failed or refused to
purchase the Shares agreed to be purchased by it under this Agreement, without
some reason sufficient hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability to the Company
or to the other Underwriters for damages occasioned by its failure or refusal.
10. Substitution of Underwriters. If one or more of the Underwriters
----------------------------
shall fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 10) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representatives may find one or more substitute underwriters
to purchase such Shares or make such other arrangements as the Representatives
may deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,
(a) if the number of Shares to be purchased by the defaulting Underwriters
on such Closing Date shall not exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, then each of the
nondefaulting Underwriters shall be obligated to purchase such Shares on the
terms herein set forth in proportion to their respective obligations hereunder;
provided, that in no event shall the maximum number of Shares that any
Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant
to this Section 11 by more than one-ninth of such number of Shares without the
written consent of such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting Underwriters
on such Closing Date shall exceed 10% of the Shares that all the Underwriters
are obligated to purchase on such Closing Date, then the Company shall be
entitled to one additional business day within
-26-
which it may, but is not obligated to, find one or more substitute underwriters
reasonably satisfactory to the Representatives to purchase such Shares upon the
terms set forth in this Agreement.
In any such case, either the Representatives or the Company shall have the
right to postpone the applicable Closing Date for a period of not more than five
business days in order that necessary changes and arrangements (including any
necessary amendments or supplements to the Registration Statement or Prospectus)
may be effected by the Representatives and the Company. If the number of Shares
to be purchased on such Closing Date by such defaulting Underwriter or
Underwriters shall exceed 10% of the Shares that all the Underwriters are
obligated to purchase on such Closing Date, and none of the nondefaulting
Underwriters or the Company shall make arrangements pursuant to this Section
within the period stated for the purchase of the Shares that the defaulting
Underwriters agreed to purchase, this Agreement shall terminate with respect to
the Shares to be purchased on such Closing Date without liability on the part of
any nondefaulting Underwriter to the Company and without liability on the part
of the Company, except in both cases as provided in Sections 7(b), 8, 9 and 10.
The provisions of this Section shall not in any way affect the liability of any
defaulting Underwriter to the Company or the nondefaulting Underwriters arising
out of such default. A substitute underwriter hereunder shall become an
Underwriter for all purposes of this Agreement.
11. Miscellaneous. The respective agreements, representations,
-------------
warranties, indemnities and other statements of the Company or its officers and
of the Underwriters set forth in or made pursuant to this Agreement shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Sections 8 and 9 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 7(b), 8, 9
and 10 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the Underwriters,
the Company and their respective successors and assigns, and, to the extent
expressed herein, for the benefit of persons controlling any of the
Underwriters, or the Company, and directors and officers of the Company, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.
All notices and communications hereunder shall be in writing and mailed or
delivered or by telephone or telegraph if subsequently confirmed in writing, (a)
if to the Representatives, c/o CIBC World Markets Corp., World Financial Center,
New York, New York 10281 Attention: Xxxxxxxx Xxxxxxx, Esq., with a copy to
Xxxxx del Xxxxx, Esq., Pillsbury Madison & Sutro LLP, 0000 Xxxxxxx Xxxxxx, Xxxx
Xxxx, Xxxxxxxxxx 00000 and (b) if to the Company, to its agent for service as
such agent's address appears on the cover page of the Registration Statement
with a copy to Xxxxxx Xxxxx, Esq., Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx
Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000.
-27-
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflict of laws.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
Please confirm that the foregoing correctly sets forth the agreement among
us.
Very truly yours,
ALTIGEN COMMUNICATIONS, INC.
By
-------------------------------------
Title:
---------------------------------
Confirmed:
CIBC WORLD MARKETS CORP.
-----------------------------------------
Acting severally on behalf of itself
and as representative of the several
Underwriters named in Schedule I annexed
hereto.
By CIBC WORLD MARKETS CORP.
By
---------------------------------------
Title:
-----------------------------------
-28-
SCHEDULE I
Name Number of Firm Shares to
Be Purchased
---------------------------------------------- -----------------------------
CIBC World Markets Corp.
Xxxx Xxxxxxxx Xxxxxxx
First Albany Corporation
Total
EXHIBIT A
CIBC World Markets Corp.
Xxxx Xxxxxxxx Xxxxxxx, a division of Xxxx Xxxxxxxx Incorporated
FAC/Equities, a division of First Albany Corporation
c/o CIBC World Markets Corp.
World Financial Center
Xxx Xxxx, Xxx Xxxx 00000
Re: AltiGen Communications (Shanghai), Ltd.
Dear Sirs:
We are lawyers in the People's Republic of China ("PRC") and are qualified
to issue legal opinions with regard to the laws of the PRC. We have been asked
to provide this legal opinion in connection with AltiGen Communications
(Shanghai), Ltd. (the "Company"), a wholly foreign owned enterprise established
in Shanghai of the PRC by AltiGen Communications, Inc. ("AltiGen"), a company
organized under the laws of the State of Delaware, United States of America.
For purposes of this opinion, we have reviewed copies of the documents
identified in Annex I hereto (the "Documents") and we have also made such
inquires and have reviewed such matters of law and such other documents and
materials as we have deemed necessary in connection with the rendering of the
opinions as expressed below. Terms used herein and not otherwise defined shall
have the same meanings as ascribed to them in Annex I.
In our examination of the Documents, we have assumed without independent
investigation and inquiry that:
(i) all signatures, seals and chops are genuine, all natural persons
have the necessary legal capacity, all Documents submitted to us as
originals are authentic, and all Documents submitted to us as certified or
photostatted copies conform to the originals;
(ii) no amendments, revisions, modifications or other changes have
been made with respect to any of the Documents to the date of this opinion
after they were submitted to us for purposes of this legal opinion;
(iii) each of the parties to the Documents, other than those
organized and existing under the laws of the PRC, is duly organized and is
validly existing in good standing under the laws of its jurisdiction of
organization and/or incorporation; and
(iv) each of the PRC parties to the Documents whose business license
and other constitutional documents are not listed in Annex I has been duly
established under the laws of the PRC and has been duly approved and
authorized by the competent
A-1
governmental authorities of the PRC to carry on its business and to perform
its obligations under the Documents to which it is a party.
Based on and in reliance of the foregoing and subject to the further
qualifications and conditions as set forth below, we are of the opinion that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the PRC. To the best of our
knowledge, the Company has no subsidiary and does not control, directly or
indirectly, any corporation, partnership, joint venture, association or
other business organization. The Company is duly qualified and in good
standing as a wholly foreign owned enterprise in the PRC in which the
character or location of its assets or properties (owned, leased or
licensed) or the nature of its businesses makes such qualification
necessary, except to the extent that the failure to so qualify would not
have a material adverse effect;
(v) The Company has all requisite corporate power and authority to
owe, lease and license its assets and properties and conduct its business
as now being conducted and as described in the Registration Statement and
the Prospectus and has, to our knowledge after due inquiry, obtained all
necessary consents, authorizations, approvals, orders, licenses,
certificates, and permits of and from, and declarations and filings with,
all PRC governmental authorities or other PRC authorities necessary to own
or hold its properties and conduct its business;
(vi) All registered capital of the Company required to be paid by
AltiGen has been fully paid, and one hundred percent (100%) equity interest
of the Company is owned by AltiGen, free and clear of any perfected
security interest or, to the best of our knowledge, any other security
interests, liens, encumbrances, equities or claims.
(vii) There are no preemptive rights or any restriction upon the
voting or transfer of any equity interest of the Company pursuant to the
Company's organizational documents or other governing documents or any
other instrument to which the Company is a party or by which it may be
bound. To the best of our knowledge, there is no outstanding option,
warrant or other right calling for the issuance of, and no commitment, plan
or arrangement to issue, any share of stock of the Company or any security
convertible into, exercisable for, or exchangeable for stock of the
Company;
(viii) All leases to which the Company is a party are valid and
binding, and no default has occurred or is continuing thereunder which
might result in a material adverse effect on the Company or AltiGen, and
the Company enjoys peaceful and undisturbed possession under all such
leases to which the Company is a party as lessee;
(ix) No consent, approval, authorization or order of any court or
governmental agency or regulatory body having jurisdiction over the Company
is required for the consummation of the transactions contemplated by the
Underwriting Agreement;
A-2
(x) Neither the execution, delivery and performance of the
Underwriting Agreement by AltiGen nor the consummation of any of the
transactions contemplated thereby (including, without limitation, the
issuance and sale by AltiGen of its shares) will give rise to a right to
terminate or accelerate the due date of any payment due under, or conflict
with or result in the breach of any term or provision of, or constitute a
default (or any event which with notice or lapse of time, or both, would
constitute a default) under, or require consent or waiver under, or result
in the execution or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company pursuant to the terms of any indenture,
mortgage, dead trust, note or other agreement or instrument of which we are
aware and to which the Company is a party or by which either the Company or
any of its properties or businesses is bound, or any franchise, license,
permit, judgment, decree, order, statute, rule or regulation of which we
are aware or violate any provision of the organizational or other governing
documents of the Company;
(xi) The Company is not in violation of any term or provision of its
organizational or other governing documents or any franchise, license,
permit, judgment, decree, order, statute, rule or regulation, where the
consequences of such violation would have a material Adverse effect;
(xii) To the best of our knowledge, there is no litigation or
governmental or other proceeding or investigation, before any court or
before or by any public body or board pending or threatened against, or
involving the assets, properties or businesses of, the Company which would
have a material adverse effect;
(xiii) The Assignment Agreement executed by and between the Company
and AltiGen (the "Assignment Agreement") has been duly and validly
authorized, executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. There are no United States or foreign
patents known to us which the Company infringes by its present activities
or has infringed by its past activities, or which would preclude the
pursuit of its business. There is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others that the
Company has infringed, misappropriated or otherwise violated, or is
infringing, misappropriating or violating, any rights of others in
intellectual property;
(xiv) The statements in the Prospectus under the heading "Business--
Facilities" do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein
with regard to the Company, in light of the circumstances under which they
were made, not misleading; and
(xv) The statements in the Prospectus under the heading "Business
Facilities" insofar as such statements constitute summary descriptions of
the documents referred to therein with regard to the Company, fairly
present the information called for with respect to such documents.
A-3
This opinion is limited to the PRC law of general application at the date
of this opinion and is given on the basis that it will be governed by, and
construed in accordance with, the laws of the PRC. We have made no
investigation of, and do not express or imply any views on, the laws of any
country other then the PRC.
The PRC laws and regulations referred to herein are laws and regulations
currently in force on the date of the opinion and there is no guarantee that any
of such laws and regulations will not be changed, amended, replaced in the
immediate future or in the longer term with or without retrospective effect.
This opinion is addressed to you for your own benefit only and solely for
the purposes of the initial public offering of the shares by AltiGen. It is
strictly limited to the matters stated herein and is not to be read as extending
by implication to any other matter. Further, it is not to be transmitted to any
other person nor is it to be relied upon by any other person or quoted or
referred to in any public document or filed with any governmental or other
regulatory authority or agency or any other person other than you and your legal
counsels without our written consent.
Yours faithfully,
__________________________________________
For and on behalf of XXX XX LAW OFFICE
A-4
ANNEX I
DOCUMENTS REVIEWED
For purposes of the opinion, we have reviewed the copies of the following
documents submitted to us:
2. Establishment of the Company
(b) Project Proposal for the establishment of the Company.
(c) Feasibility Study Report for the establishment of the Company dated
September 22, 1998.
(d) Official Reply on the Project Proposal by the Shanghai Foreign
Investment Commission dated September 23, 1998,
(e) Article of Association of thc Company dated September 22, 1999.
(f) Approval Letter for Feasibility Study Report and Article of
Associations numbered Xx Xxx Zi Wei Pi Zi (98) 1317 issued by the Shanghai
Foreign Investment Commission dated October 27, 1998.
(g) Certificate of Approval on Foreign Investment Enterprise numbered Wai
Xxxx Xxx Hu Du Zi Zi No.[1998] 1444 (the "Approval Certificate"), issued by the
People's Government of Shanghai Municipality dated November 3, 1998.
(h) Business License of the Company numbered Qi Du Xx Xxxxx Fu Zi No.
025517 (the "Business License") issued by the State Administration for Industry
and Commerce dated November 17, 1998.
(i) Verification Report of Capital Contribution numbered Hu Xxxxx Xxxx Bio
Zi (98) 4163 issued by Shanghai Zhongzhou Certified Public Accounts dated
December 29, 1998.
(j) Revision of Article 8 of Articles of Associations of the Company dated
May 14, 1999 (the "Revision").
(k) Approval Letter on the Revision numbered Xx Xxx Zi Wei Pi Zi'(99) 536
issued by the Shanghai Foreign Investment Commission dated May 26,1999.
12. Leased Housing Property
(a) Lease Contract on Housing by and between the Company and Xxx Xxxx
Investment LTD. dated September 15, 1998.
(b) Invoice of the payment for leased housing in May 1999 dated May 21,
1999.
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(c) Lease Permit for the Lease Housing numbered Xx Xxxx Zu Xxxxx Xx Zi
(99) 99 issued by Shanghai Administration of Real Estate dated February 12,
1999.
13. Tax and Customs
(a) Certificate of Tax Registration numbered Fuo Shui Fu Zi No.
310104607399396 by Shanghai Taxation Administration dated December 15, 1999.
(b) Certificate of Customs Registration numbered Xx Xxxx Zi No. 310494397
by Shanghai Customs dated December 25, 1999.
14. Foreign Exchange
(a) Certificate of Foreign Exchange Registration numbered 15354 issued by
State Administration of foreign Exchange dated November 24, 1998.
15. Labor Management
(a) Employment Plan of the Company.
(b) Standard Contract of Employment.
(c) Standard Confidential Agreement of Employee.
16. Intellectual Property
(a) Standard Confidential Information and Invention Assignment Agreement.
(b) Assignment Agreement executed by and between AltiGen and the Company
dated __________, 1999 (the "Assignment Agreement").
17. Assets of the Company
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EXHIBIT B
(i) Such counsel have no reason to believe that the Registration
Statement, as of the Effective Date, and the Prospectus as of its date and
as of the applicable Closing Date: (A) contained or contain any untrue
statements of material fact with respect to (1) patents, patent rights,
licenses, inventions, copyrights, technology, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade names and trade dress rights (collectively, "Intellectual
Property") of the Company, (2) any claim or allegation that the Company is
infringing, misappropriating or violating, or has infringed,
misappropriated or violated, any Intellectual Property of any other person
or entity or (3) any lawsuit, arbitration or other legal proceedings with
respect to Intellectual Property to which the Company is a party; or (B)
omitted or omit to state any material fact that relates to any Intellectual
Property used, owned, possessed or licensed by the Company or any legal
proceeding with respect thereto and that is required to be stated in the
Registration Statement or the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) To the best of such counsel's knowledge, the statements in the
Prospectus under the captions "Risk Factors--We may face infringement
issues that could harm our business by requiring us to license technology
on unfavorable terms or temporarily or permanently cease sales of key
products," and "--Any failure by us to protect our intellectual property
could harm our business and competitive position" and "Business--
Intellectual Property" and "--Legal Proceedings" contain accurate
descriptions of the Company's Intellectual Property and, insofar as such
statements constitute summaries of documents or matters of law or legal
conclusions, are accurate and fairly present such summaries, matters of law
and legal conclusions;
(iii) Such counsel have reviewed the Company's patent applications
("Applications"), which Applications are listed on Schedule I to such
opinion, and to the best of such counsel's knowledge, the Applications were
properly prepared and filed, are being diligently pursued by the Company,
and are held either by the Company as the sole assignee of record or have
listed inventors who have an obligation to assign to the Company, and such
counsel are not aware of others who have asserted any ownership rights in
such Applications other than as described in the Prospectus;
(iv) [Such counsel are not aware that any issued patent held by the
Company, all of which are listed on Schedule I to such opinion, is invalid
or unenforceable, and are not aware of any person or entity other than the
Company who has asserted any ownership rights in such patents];
(v) To the best of such counsel's knowledge, except as specifically
set forth in the Prospectus under the captions "Risk Factors--We face
infringement issues that could harm our business," and "--Any failure by us
to protect our intellectual property could harm our business and
competitive position" under the caption "Business--Legal
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Proceedings," there are no legal or governmental proceedings (other than
the patent application proceedings themselves) pending or, to the best
knowledge of such counsel, threatened against the Company relating to any
Intellectual Property owned or licensed by the Company;
(vi) Except as specifically set forth in the Prospectus, to the best
of such counsel's knowledge the Company has not received any notice of
infringement with respect to any patent or any notice challenging the
validity, scope or enforceability of any of the patents, trademarks or
service marks owned by or licensed to the Company, and to the best of such
counsel's knowledge, the Company is not infringing, misappropriating or
otherwise violating any Intellectual Property (as defined above) of any
other person or entity (including any patent or right which is the subject
of any patent application known to such counsel) or any license of
Intellectual Property to which the Company is a party; and such counsel is
unaware of any infringements, misappropriations or violations by others of
the Company's Intellectual Property which, in the judgment of such counsel,
could materially and adversely affect the Company's rights in such
Intellectual Property;
(vii) All claims of U.S. Patent No. 5,875,234 issued in the names of
Xxxxxxx et al. are either invalid or are not infringed by any of the
Company's current services, products, systems or business processes; and
(viii) To the best of such counsel's knowledge, the Company has the
full and exclusive worldwide right, title and interest to the inventions of
all the Applications as described in such Applications, and all
continuations, divisions, reissues and substitutes of such Applications,
together with the right of priority under the International Convention for
the Protection of Industrial Property, Inter-American Convention Relating
to Patents, Designs and Industrial Models, and any other international
agreements to which the United States of America adheres. To the best of
such counsel's knowledge, no third parties have any rights in the United
States or in any foreign country to such Applications, nor to any
continuations, divisions, reissues or substitutes of such Applications.
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