UNDERWRITING AGREEMENT
September 24, 0000
XxxxXxxxxx Xxxxxxxxx Xxxxxxxx Inc.
Xxxxxxxxx & Xxxxx LLC
Xxxx Xxxxxxxx Xxxxxxx, a division of Xxxx Xxxxxxxx Incorporated
As Representatives of the several Underwriters
c/o BancBoston Xxxxxxxxx Xxxxxxxx Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
INTRODUCTORY. Keynote Systems, Inc., a California corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
SCHEDULE A (the "Underwriters") an aggregate of 3,875,000 shares of its
Common Stock, par value $0.001 per share (the "Common Shares"); and the
shareholder of the Company named in SCHEDULE B (the "Selling Shareholder")
proposes to sell to the Underwriters an aggregate of 125,000 Common Shares.
The 3,875,000 Common Shares to be sold by the Company and the 125,000 shares
of Common Shares to be sold by the Selling Shareholder are collectively
called the "Firm Shares". In addition, the Company has granted to the
Underwriters an option to purchase up to an additional 600,000 Common Shares
(the "Option Shares"), as provided in Section 2. The Firm Shares and, if and
to the extent such option is exercised, the Option Shares, are collectively
called the "Shares". BancBoston Xxxxxxxxx Xxxxxxxx Inc., Xxxxxxxxx & Xxxxx
LLC and Xxxx Xxxxxxxx Xxxxxxx, a division of Xxxx Xxxxxxxx Incorporated, have
agreed to act as representatives of the several Underwriters (in such
capacity, the "Representatives") in connection with the offering and sale of
the Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-82781), which contains a form of prospectus to be used in connection with
the public offering and sale of the Shares. Such registration statement, as
amended, including the financial statements, exhibits and schedules thereto,
in the form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be
a part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434
under the Securities Act, is called the "Registration Statement". Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement", and from
and after the date and time of filing of the Rule 462(b) Registration
Statement the term
"Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the "Prospectus"; provided, however,
if the Company has, with the consent of BancBoston Xxxxxxxxx Xxxxxxxx Inc.,
elected to rely upon Rule 434 under the Securities Act, the term "Prospectus"
shall mean the Company's prospectus subject to completion (each, a
"preliminary prospectus") dated September 3, 1999 (such preliminary
prospectus is called the "Rule 434 preliminary prospectus"), together with
the applicable term sheet (the "Term Sheet") prepared and filed by the
Company with the Commission under Rules 434 and 424(b) under the Securities
Act and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet. All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, a preliminary
prospectus, the Prospectus or the Term Sheet, or any amendments or
supplements to any of the foregoing, shall include any copy thereof filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval System ("XXXXX").
The Company and the Selling Shareholder hereby confirms its agreements
with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDER. The Company and the Selling Shareholder hereby represent,
warrant and covenant to each Underwriter as follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has
complied to the Commission's satisfaction with all requests of the Commission
for additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been
instituted or are pending or, to the best knowledge of the Company, are
contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied
in all material respects with the Securities Act and, if filed by electronic
transmission pursuant to XXXXX (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares.
Each of the Registration Statement, any Rule 462(b) Registration Statement
and any post-effective amendment thereto, at the time it became effective and
at all subsequent times, complied and will comply in all material respects
with the Securities Act and did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, as of its date and at all subsequent
times, did not and will not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties set forth in the two
immediately preceding sentences do not apply to statements in or omissions
from the Registration Statement, any Rule 462(b) Registration Statement, or
any post-effective amendment thereto, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by the
Representatives expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or filed
as required.
2
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company has
delivered to each Representative one complete conformed copy of the
Registration Statement and of each consent and certificate of experts filed
as a part thereof, and conformed copies of the Registration Statement
(without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(e) AUTHORIZATION OF THE SHARES. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. The Common Shares to be purchased by the Underwriters from
the Selling Shareholder, when issued, were validly issued, fully paid and
nonassessable.
(f) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included
in the offering contemplated by this Agreement, except for such rights as
have been duly waived.
(g) NO MATERIAL ADVERSE CHANGE. Subsequent to the respective dates as
of which information is given in the Prospectus: (i) there has been no
material adverse change, or any development that could reasonably be expected
to result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether or
not arising from transactions in the ordinary course of business, of the
Company and its subsidiaries, considered as one entity (any such change or
effect, where the context so requires, is called a "Material Adverse Change"
or a "Material Adverse Effect"); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except for
dividends paid to the Company or other subsidiaries, any of its subsidiaries
on any class of capital stock or repurchase or redemption by the Company or
any of its subsidiaries of any class of capital stock.
(h) INDEPENDENT ACCOUNTANTS. KPMG LLP, who have expressed their
opinion with respect to the financial statements (which term as used in this
Agreement includes the related notes thereto) and supporting schedules filed
with the Commission as a part of the Registration Statement and included in
the Prospectus, are independent public or certified public accountants as
required by the Securities Act.
3
(i) PREPARATION OF THE FINANCIAL STATEMENTS. The financial statements
filed with the Commission as a part of the Registration Statement and
included in the Prospectus present fairly the financial position of the
Company (or the consolidated financial position of the Company and its
subsidiaries, as the case may be) as of and at the dates indicated and the
results of their operations and cash flows for the periods specified. The
supporting schedules included in the Registration Statement present fairly
the information required to be stated therein. Such financial statements and
supporting schedules have been prepared in conformity with generally accepted
accounting principles as applied in the United States applied on a consistent
basis throughout the periods involved, except as may be expressly stated in
the related notes thereto. No other financial statements or supporting
schedules are required to be included in the Registration Statement. The
financial data set forth in the Prospectus under the captions
"Summary--Summary Selected Financial Data", "Selected Financial Data" and
"Capitalization" fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Registration Statement.
(j) COMPANY'S ACCOUNTING SYSTEM. The Company and each of its
subsidiaries maintain a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles as applied in the
United States and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(k) SUBSIDIARIES OF THE COMPANY. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other
than the subsidiaries, if any, listed in Exhibit 21 to the Registration
Statement.
(l) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES. Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation or limited liability
company, as the case may be, in good standing under the laws of the
jurisdiction in which it is organized with full corporate power and authority
to own its properties and conduct its business as described in the
prospectus, and is duly qualified to do business as a foreign corporation,
except for qualification in jurisdictions in which the failure to qualify as
a foreign corporation could not reasonably be expected to result in a
Material Adverse Effect, and is in good standing under the laws of each
jurisdiction which requires such qualification.
(m) CAPITALIZATION OF THE SUBSIDIARIES. All the outstanding shares of
capital stock of each subsidiary, if any, have been duly and validly
authorized and issued and are fully paid and nonassessable, and, except as
otherwise set forth in the Prospectus, all outstanding shares of capital
stock of the subsidiaries are owned by the Company either directly or through
wholly owned subsidiaries free and clear of any security interests, claims,
liens or encumbrances.
(n) NO PROHIBITION ON SUBSIDIARIES FROM PAYING DIVIDENDS OR MAKING
OTHER DISTRIBUTIONS. No subsidiary of the Company, if any, is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary's property or assets to
the Company or any other subsidiary of the Company, except as described in or
contemplated by the Prospectus.
4
(o) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in
the Prospectus). The Common Shares (including the Shares) conform in all
material respects to the description thereof contained in the Prospectus.
All of the issued and outstanding Common Shares have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. None of the outstanding
Common Shares were issued in violation of any preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase securities
of the Company. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable
for, any capital stock of the Company or any of its subsidiaries other than
those accurately described in the Prospectus. The description of the
Company's stock option, stock bonus and other stock plans or arrangements,
and the options or other rights granted thereunder, set forth in the
Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
(p) STOCK EXCHANGE LISTING. The Shares have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(q) NO CONSENTS, APPROVALS OR AUTHORIZATIONS REQUIRED. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares
by the Underwriters in the manner contemplated here and in the Prospectus,
(ii) by the National Association of Securities Dealers, LLC and (iii) by the
federal and provincial laws of Canada.
(r) NON-CONTRAVENTION OF EXISTING INSTRUMENTS AGREEMENTS. Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, (i) the charter or by-laws of the Company or
any of its subsidiaries, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which the Company or any of
its subsidiaries is a party or bound or to which its or their property is
subject or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or any of its
subsidiaries or any of its or their properties.
(s) NO DEFAULTS OR VIOLATIONS. Neither the Company nor any subsidiary is
in violation or default of (i) any provision of its charter or by-laws, (ii) the
terms of any material indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such subsidiary or any
of its properties, as applicable, except any such violation or default which
would not, singly or in the aggregate, result in a Material Adverse Change
except as otherwise disclosed in the Prospectus.
5
(t) NO ACTIONS, SUITS OR PROCEEDINGS. Except to the extent described
in the Prospectus, no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries or its or their property is pending or, to
the best knowledge of the Company, threatened that (i) could reasonably be
expected to have a Material Adverse Effect on the performance of this
Agreement or the consummation of any of the transactions contemplated hereby
or (ii) could reasonably be expected to result in a Material Adverse Effect.
(u) ALL NECESSARY PERMITS, ETC. Except to the extent described in the
Prospectus, the Company and each subsidiary possess such valid and current
certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct their
respective businesses, and neither the Company nor any subsidiary has
received any notice of proceedings relating to the revocation or modification
of, or non-compliance with, any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could result in a Material Adverse Change.
(v) TITLE TO PROPERTIES. Except to the extent described in the
Prospectus, the Company and its subsidiaries have good and marketable title
to all the properties and assets reflected as owned in the financial
statements referred to in Section 1(i) above (or elsewhere in the
Prospectus), in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, claims and other defects, except
such as do not materially and adversely affect the value of such property and
do not materially interfere with the use made or proposed to be made of such
property by the Company or such subsidiary. The real property, improvements,
equipment and personal property held under lease by the Company or any
subsidiary are held under valid and enforceable leases, with such exceptions
as are not material and do not materially interfere with the use made or
proposed to be made of such real property, improvements, equipment or
personal property by the Company or such subsidiary.
(w) TAX LAW COMPLIANCE. Each of the Company and its subsidiaries has
filed all necessary federal, state and foreign income and franchise tax
returns or has properly requested extensions thereof and has paid all taxes
required to be paid by it, and, if due and payable, any related or similar
assessment, fine or penalty levied against it. The Company has made adequate
charges, accruals and reserves in the applicable financial statements
referred to in Section 1(i) above in respect of all federal, state and
foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its subsidiaries has not been finally
determined. The Company is not aware of any tax deficiency that has been or
might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(x) INTELLECTUAL PROPERTY RIGHTS. Each of the Company and its
subsidiaries owns or possesses adequate rights to use all patents, patent
rights or licenses, inventions, collaborative research agreements, trade
secrets, know-how, trademarks, service marks, trade names and copyrights
which are necessary to conduct its businesses as described in the
Registration Statement and Prospectus; the expiration of any patents, patent
rights, trade secrets, trademarks, service marks, trade names or copyrights
would not result in a Material Adverse Change that is not otherwise disclosed
in the Prospectus; except to the extent described in the Prospectus, the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others
with respect to any patent, patent
6
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights; and the Company has not received any notice of, and has
no knowledge of, any infringement of or conflict with asserted rights of
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a Material Adverse Change. There is no claim being made
against the Company regarding patents, patent rights or licenses, inventions,
collaborative research, trade secrets, know-how, trademarks, service marks,
trade names or copyrights. The Company and its subsidiaries do not in the
conduct of their business as now or proposed to be conducted as described in
the Prospectus infringe or conflict with any right or patent of any third
party, or any discovery, invention, product or process which is the subject
of a patent application filed by any third party, known to the Company or any
of its subsidiaries, which such infringement or conflict is reasonably likely
to result in a Material Adverse Change.
(y) YEAR 2000 PREPAREDNESS. There are no issues related to the
Company's, or any of its subsidiaries', 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 Securities 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 or that
might materially affect their properties, assets or rights. Except to the
extent otherwise described in the Prospectus, all internal computer systems
and each Constituent Component (as defined below) of those systems and all
computer-related products and each Constituent Component (as defined below)
of those products of the Company and each of its subsidiaries fully comply
with Year 2000 Qualification Requirements. "Year 2000 Qualifications
Requirements" means that the internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related
products and each Constituent Component (as defined below) of those products
of the Company and each of its Subsidiaries (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.
(z) NO TRANSFER TAXES OR OTHER FEES. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or
any political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the
Company of the Shares.
(aa) COMPANY NOT AN "INVESTMENT COMPANY". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after
receipt of payment for the Shares will not be, an "investment company" or an
entity "controlled" by an "investment company" within the meaning of the
Investment Company Act and will conduct its business in a manner so that it
will not become subject to the Investment Company Act.
7
(bb) INSURANCE. Each of the Company and its subsidiaries is insured by
recognized, financially sound and reputable institutions with policies in
such amounts and with such deductibles and covering such risks as are
generally deemed adequate and customary for businesses in their industry
including, but not limited to, policies covering real and personal property
owned or leased by the Company and its subsidiaries against theft, damage,
destruction, acts of vandalism and earthquakes, general liability and
Directors and Officers liability. The Company has no reason to believe that
it or any subsidiary will not be able (i) to renew its existing insurance
coverage as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to
conduct its business as now conducted and at a cost that would not result in
a Material Adverse Change. Neither the Company nor any subsidiary has been
denied any insurance coverage which it has sought or for which it has applied.
(cc) LABOR MATTERS. To the best of the Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists
or is imminent; and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its principal suppliers,
resellers, subcontractors, authorized dealers or distributors that might
reasonably be expected to result in a Material Adverse Change.
(dd) NO PRICE STABILIZATION OR MANIPULATION. The Company has not taken
and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or
resale of the Shares.
(ee) LOCK-UP AGREEMENTS. Each officer and director of the company and
each beneficial owner of one or more percent of the outstanding issued share
capital of the Company has agreed to sign an agreement substantially in the
form attached hereto as EXHIBIT A (the "Lock-up Agreements"). The Company
has provided to counsel for the Underwriters a complete and accurate list of
all securityholders of the Company and the number and type of securities held
by each securityholder. The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the Lock-up
Agreements presently in effect or effected hereby. The Company hereby
represents and warrants and agrees that it will not release any of its
officers, directors or other securityholders from any Lock-up Agreements
currently existing or hereafter effected without the prior written consent of
BancBoston Xxxxxxxxx Xxxxxxxx Inc.
(ff) RELATED PARTY TRANSACTIONS. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.
(gg) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution
or other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(hh) ENVIRONMENTAL LAWS. (i) The Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to its business, except where the
failure to comply would not result in a Material Adverse Change, (ii) the
Company has received no notice from any governmental authority or third party
of an asserted claim under Environmental Laws, which claim is required to be
disclosed in the
8
Registration Statement and the Prospectus, (iii) the Company will not be
required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and 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.
(ii) ERISA COMPLIANCE. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained
by the Company, its subsidiaries or their "ERISA Affiliates" (as defined
below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company or a subsidiary, any member of
any group of organizations described in Sections 414(b),(c),(m) or (o) of the
Internal Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company or such
subsidiary is a member. No "reportable event" (as defined under ERISA) has
occurred or is reasonably expected to occur with respect to any "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates. No "employee benefit plan" established or
maintained by the Company, its subsidiaries or any of their ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfunded benefit liabilities" (as defined under ERISA). Neither the Company,
its subsidiaries nor any of their ERISA Affiliates has incurred or reasonably
expects to incur any liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "employee benefit plan" or (ii)
Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their
ERISA Affiliates that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or failure
to act, which would cause the loss of such qualification.
(jj) Any certificate signed by an executive officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter
as to the matters set forth therein.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER. The
Selling Shareholder represents, warrants and covenants to each Underwriter as
follows:
(a) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by or on behalf of the Selling Shareholder
and is a valid and binding agreement of the Selling Shareholder, enforceable
in accordance with its terms, except as rights to indemnification hereunder
may be limited by applicable law and except as the enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or
by general equitable principles.
(b) THE POWER OF ATTORNEY. The Power of Attorney appointing certain
individuals named therein as the Selling Shareholder's attorneys-in-fact
(each, an "Attorney-in-Fact") to the extent set forth therein relating to the
transactions contemplated hereby and by the Prospectus (the "Power of
Attorney"), of the Selling Shareholder has been duly authorized, executed and
delivered by the Selling Shareholder and is a valid and binding agreement of
the Selling Shareholder, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by applicable law and
except as the enforcement thereof may be
9
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or
by general equitable principles.
(c) TITLE TO SHARES TO BE SOLD. The Selling Shareholder is the lawful
owner of the Shares to be sold by the Selling Shareholder hereunder and upon
sale and delivery of, and payment for, such Shares, as provided herein, the
Selling Shareholder will convey good and marketable title to such Shares,
free and clear of all liens, encumbrances, equities and claims whatsoever.
(d) ALL AUTHORIZATIONS OBTAINED. The Selling Shareholder has, and on
the First Closing Date and the Second Closing Date (as defined below) will
have, good and valid title to all of the Company Shares which may be sold by
the Selling Shareholder pursuant to this Agreement on such date and the legal
right and power, and all authorizations and approvals required by law to
enter into this Agreement and its Custody Agreement and Power of Attorney, to
sell, transfer and deliver all of the Shares which may be sold by the Selling
Shareholder pursuant to this Agreement and to comply with its other
obligations hereunder and thereunder.
(e) NO FURTHER CONSENTS, AUTHORIZATION OR APPROVALS. No consent,
approval, authorization or order of any court or governmental agency or body
is required for the consummation by the Selling Shareholder of the
transactions contemplated herein, except such as may have been obtained under
the Securities Act and such as may be required under the federal and
provincial securities laws of Canada or the blue sky laws or any jurisdiction
in connection with the purchase and distribution of the Shares by the
Underwriters and such other approvals as have been obtained.
(f) NON-CONTRAVENTION. Neither the sale of the Shares being sold by
the Selling Shareholder nor the consummation of any other of the transactions
herein contemplated by the Selling Shareholder or the fulfillment of the
terms hereof by the Selling Shareholder will conflict with, result in a
breach or violation of, or constitute a default under any law or the terms of
any indenture or other agreement or instrument to which the Selling
Shareholder is party or bound, any judgment, order or decree applicable to
the Selling Shareholder or any court or regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over the Selling
Shareholder.
(g) NO REGISTRATION OR OTHER SIMILAR RIGHTS. The Selling Shareholder
does not have any registration or other similar rights to have any equity or
debt securities registered for sale by the Company under the Registration
Statement or included in the offering contemplated by this Agreement, except
for such rights as are described in the Prospectus under "Shares Eligible for
Future Sale".
(h) NO PREEMPTIVE, CO-SALE OR OTHER RIGHTS. The Selling Shareholder
does not have, or has waived prior to the date hereof, any preemptive right,
co-sale right or right of first refusal or other similar right to purchase
any of the Shares that are to be sold by the Company to the Underwriters
pursuant to this Agreement; and the Selling Shareholder does not own any
warrants, options or similar rights to acquire, and does not have any right
or arrangement to acquire, any capital stock, right, warrants, options or
other securities from the Company, other than those described in the
Registration Statement and the Prospectus.
(i) DISCLOSURE MADE BY THE SELLING SHAREHOLDER IN THE PROSPECTUS. All
information furnished by or on behalf of the Selling Shareholder in writing
expressly for use in the Registration Statement and Prospectus is, and on the
First Closing Date and the Second
10
Closing Date (as defined below) will be, true, correct, and complete in all
material respects, and does not, and on the First Closing Date and the Second
Closing Date will not, contain any untrue statement of a material fact or
omit to state any material fact necessary to make such information not
misleading. The Selling Shareholder confirms as accurate the number of
shares of Company Shares set forth opposite the Selling Shareholder's name in
the Prospectus under the caption "Principal and Selling Shareholders" (both
prior to and after giving effect to the sale of the Shares).
(j) NO PRICE STABILIZATION OR MANIPULATION. The Selling Shareholder
has not taken and will not take, directly or indirectly, any action designed
to or that might be reasonably expected to cause or result in stabilization
or manipulation of the price of the Common Stock to facilitate the sale or
resale of the Shares.
(k) NO TRANSFER TAXES OR OTHER FEES. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or
any political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the sale by the Selling
Shareholder of the Shares.
(l) DISTRIBUTION OF OFFERING MATERIALS BY THE SELLING SHAREHOLDER. The
Selling Shareholder has not distributed and will not distribute, prior to the
later of the Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Shares, any offering material in connection
with the offering and sale of the Shares by the Selling Shareholder other
than a preliminary prospectus, the Prospectus or the Registration Statement.
(m) CONFIRMATION OF COMPANY REPRESENTATIONS AND WARRANTIES. The
Selling Shareholder has no reason to believe that the representations and
warranties of the Company contained in Section 1(A) hereof are not true and
correct, is familiar with the Registration Statement and the Prospectus and
has no knowledge of any material fact, condition or information not disclosed
in the Registration Statement or the Prospectus which has had or may result
in a Material Adverse Change, whether or not arising from transactions in the
ordinary course of business of the Company and its subsidiaries, considered
as one entity, and is not prompted to sell the Shares to be sold by the
Selling Shareholder by any information concerning the Company which is not
set forth in the Registration Statement and the Prospectus.
Any certificate signed by or on behalf of the Selling Shareholder
and delivered to the Representatives or to counsel for the Underwriters shall
be deemed to be a representation and warranty by the Selling Shareholder to
each Underwriter as to the matters covered thereby.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) THE FIRM SHARES. Upon the terms herein set forth, (i) the Company
agrees to issue and sell to the several Underwriters an aggregate of
3,875,000 Firm Shares and (ii) the Selling Shareholder agrees to sell to the
several Underwriters an aggregate of 125,000 Firm Shares. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company and the Selling
Shareholder the respective number of Firm Shares set forth opposite their
names on SCHEDULES A AND B. The purchase price per Firm Share to be paid by
the several Underwriters to the Company and the Selling Shareholder shall be
$13.02 per share.
11
(b) THE FIRST CLOSING DATE. Delivery of the Firm Shares to be
purchased by the Underwriters and payment therefor shall be made by the
Company and the Representatives at 6:00 a.m. San Francisco time, at the
offices of Fenwick & West LLP, Two Xxxx Xxxx Xxxxxx, Xxxx Xxxx, XX 00000 (or
at such other place as may be agreed upon among the Representatives and the
Company), (i) on the third (3rd) full business day following the first day
that Shares are traded, (ii) if this Agreement is executed and delivered
after 1:30 P.M., San Francisco time, the fourth (4th) full business day
following the day that this Agreement is executed and delivered or (iii) at
such other time and date not later that seven (7) full business days
following the first day that Shares are traded as the Representatives and the
Company may determine (or at such time and date to which payment and delivery
shall have been postponed pursuant to Section 8 hereof), such time and date
of payment and delivery being herein called the "Closing Date;" provided,
however, that if the Company has not made available to the Representatives
copies of the Prospectus within the time provided in Section 2(f) and 3(e)
hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following
delivery of copies of the Prospectus to the Representatives.
(c) THE OPTION SHARES; THE SECOND CLOSING DATE. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally
and not jointly, up to an aggregate of 600,000 Option Shares from the Company
at the purchase price per share to be paid by the Underwriters for the Firm
Shares. The option granted hereunder is for use by the Underwriters solely
in covering any over-allotments in connection with the sale and distribution
of the Firm Shares. The option granted hereunder may be exercised at any
time upon notice by the Representatives to the Company, which notice may be
given at any time within 30 days from the date of this Agreement. The time
and date of delivery of the Option Shares, if subsequent to the First Closing
Date, is called the "Second Closing Date" and shall be determined by the
Representatives and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Option
Shares are to be purchased, each Underwriter agrees, severally and not
jointly, to purchase the number of Option Shares (subject to such adjustments
to eliminate fractional shares as the Representatives may determine) that
bears the same proportion to the total number of Option Shares to be
purchased as the number of Firm Shares set forth on SCHEDULE A opposite the
name of such Underwriter bears to the total number of Firm Shares. The
Representatives may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
(d) PUBLIC OFFERING OF THE SHARES. The Representatives hereby advise
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has
been declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
(e) PAYMENT FOR THE SHARES. Payment for the Shares to be sold by the
Company shall be made at the First Closing Date (and, if applicable, at the
Second Closing Date) by wire transfer of immediately available funds to the
order of the Company. Payment for the Shares to be sold by the Selling
Shareholder shall be made at the First Closing Date (and, if applicable, at
the Second Closing Date) by wire transfer of immediately available funds to
the order of the Custodian.
12
It is understood that the Representatives have been authorized, for
their own accounts and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
BancBoston Xxxxxxxxx Xxxxxxxx Inc., individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Shares to be purchased by any Underwriter whose funds shall
not have been received by the Representatives by the First Closing Date or
the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any
of its obligations under this Agreement.
The Selling Shareholder hereby agrees that (i) it will pay all
stock transfer taxes, stamp duties and other similar taxes, if any, payable
upon the sale or delivery of the Shares to be sold by the Selling Shareholder
to the several Underwriters, or otherwise in connection with the performance
of the Selling Shareholder's obligations hereunder and (ii) the Custodian is
authorized to deduct for such payment any such amounts from the proceeds to
the Selling Shareholder hereunder and to hold such amounts for the account of
the Selling Shareholder with the Custodian under the Custody Agreement.
(f) DELIVERY OF THE SHARES. The Company and the Selling Shareholder
shall deliver, or cause to be delivered a credit representing the Firm Shares
to an account or accounts at The Depository Trust Company as designated by
the Representatives for the accounts of the Representatives and the several
Underwriters at the First Closing Date, against the irrevocable release of a
wire transfer of immediately available funds for the amount of the purchase
price therefor. The Company and the Selling Shareholder shall also deliver,
or cause to be delivered a credit representing the Option Shares to an
account or accounts at The Depository Trust Company as designated by the
Representatives for the accounts of the Representatives and the several
Underwriters, at the First Closing Date or the Second Closing Date, as the
case may be, against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price therefor.
Time shall be of the essence, and delivery at the time and place specified in
this Agreement is a further condition to the obligations of the Underwriters.
(g) DELIVERY OF PROSPECTUS TO THE UNDERWRITERS. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause
to be delivered copies of the Prospectus in such quantities and at such
places as the Representatives shall request.
SECTION 3. COVENANTS OF THE COMPANY. The Company further covenants
and agrees with each Underwriter as follows:
(a) REGISTRATION STATEMENT MATTERS. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934
(the "Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b)
under the Securities Act a Prospectus in a form approved by the
Representatives containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Securities Act and (iii) not file any amendment to the Registration Statement
or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing
13
or which is not in compliance with the Securities Act. If the Company elects
to rely on Rule 462(b) under the Securities Act, the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) under the Securities Act prior to the time confirmations are sent
or given, as specified by Rule 462(b)(2) under the Securities Act, and shall
pay the applicable fees in accordance with Rule 111 under the Securities Act.
(b) SECURITIES ACT COMPLIANCE. The Company will advise the
Representatives promptly (i) when the Registration Statement or any
post-effective amendment thereto shall have become effective, (ii) of receipt
of any comments from the Commission, (iii) of any request of the Commission
for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use
of the Prospectus and to obtain as soon as possible the lifting thereof, if
issued.
(c) BLUE SKY COMPLIANCE. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify
the Shares for sale under the securities laws of such jurisdictions (both
national and foreign) as the Representatives may reasonably have designated
in writing and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction where it is not
now so qualified or required to file such a consent. The Company will, from
time to time, prepare and file such statements, reports and other documents,
as are or may be required to continue such qualifications in effect for so
long a period as the Representatives may reasonably request for distribution
of the Shares.
(d) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER SECURITIES
ACT MATTERS. The Company will comply with the Securities Act and the
Exchange Act, and the rules and regulations of the Commission thereunder, so
as to permit the completion of the distribution of the Shares as contemplated
in this Agreement and the Prospectus. If during the period in which a
prospectus is required by law to be delivered by an Underwriter or dealer,
any event shall occur as a result of which, in the judgment of the Company or
in the reasonable opinion of the Representatives or counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not
misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission, and furnish at its own expense to the Underwriters and
to dealers, an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(e) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS. The
Company agrees to furnish the Representatives, without charge, during the
period beginning on the date hereof and ending on the later of the First
Closing Date or such date, as in the opinion of counsel for the Underwriters,
the Prospectus is no longer required by law to be delivered in connection
with sales by an Underwriter or dealer (the "Prospectus Delivery Period"), as
many copies of the Prospectus and any amendments and supplements thereto as
the Representatives may request.
14
(f) INSURANCE. The Company shall obtain Directors and Officers liability
insurance in the minimum amount of $10 million which shall apply to the offering
contemplated hereby.
(g) NOTICE OF SUBSEQUENT EVENTS. If at any time during the ninety
(90) day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) USE OF PROCEEDS. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(i) TRANSFER AGENT. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) EARNINGS STATEMENT. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [the date of the end of the first quarter ending one year following the
effective date] that satisfies the provisions of Section 11(a) of the Securities
Act.
(k) PERIODIC REPORTING OBLIGATIONS. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Exchange Act.
(l) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. The Company will
not, without the prior written consent of BancBoston Xxxxxxxxx Xxxxxxxx Inc.,
for a period of 180 days following the date of the Prospectus, offer, sell or
contract to sell, or otherwise dispose of or enter into any transaction which is
designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other Common Shares or any
securities convertible into, or exchangeable for, Common Shares; provided,
however, that the Company may (i) issue and sell Common Shares pursuant to any
director or employee stock option plan, stock ownership plan, stock purchase
plan or dividend reinvestment plan of the Company in effect at the date of the
Prospectus and described in the Prospectus so long as none of those shares may
be transferred on during the period of 180 days from the date that the
Registration Statement is declared effective (the "Lock-Up Period") and the
Company shall enter stop transfer instructions with its transfer agent and
registrar against the transfer of any such Common Shares and (ii) the Company
may issue Common Shares issuable upon the conversion of securities or the
exercise of warrants outstanding at the date of the Prospectus and described in
the Prospectus.
(m) FUTURE REPORTS TO THE REPRESENTATIVEs. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the
15
Company as of the close of such fiscal year and statements of income,
Shareholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public or certified public accountants;
(ii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the Commission,
the National Association of Securities Dealers, LLC or any securities
exchange; and (iii) as soon as available, copies of any report or
communication of the Company mailed generally to holders of its capital stock.
B. COVENANTS OF THE SELLING SHAREHOLDER. The Selling Shareholder
further covenants and agrees with each Underwriter:
(a) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. The Selling
Shareholder will not, during the Lock-Up Period, make a disposition of
Securities (as defined in Exhibit A hereto) now owned or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) as a bona fide gift or
gifts, provided the donee or donees thereof agree in writing to be bound by this
restriction, (ii) as a distribution to partners or shareholders of such person,
provided that the distributees thereof agree in writing to be bound by the terms
of this restriction, (iii) with respect to dispositions of Common Shares
acquired on the open market or (iv) with the prior written consent of BancBoston
Xxxxxxxxx Xxxxxxxx Inc. The foregoing restriction has been expressly agreed to
preclude the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a disposition of Securities during the Lock-Up Period, even if such Securities
would be disposed of by someone other than such holder. Such prohibited hedging
or other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction.
(b) DELIVERY OF FORMS W-8 AND W-9. To deliver to the Representatives
prior to the First Closing Date a properly completed and executed United States
Treasury Department Form W-8 (if the Selling Shareholder is a non-United States
person) or Form W-9 (if the Selling Shareholder is a United States Person).
(c) NOTIFICATION OF UNTRUE STATEMENTS, ETC. If, at any time prior to the
date on which the distribution of the Common Shares as contemplated herein and
in the Prospectus has been completed, as determined by the Representatives, the
Selling Shareholder has knowledge of the occurrence of any event as a result of
which the Prospectus or the Registration Statement, in each case as then amended
or supplemented, would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the Selling
Shareholder will promptly notify the Company and the Representatives.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in
16
Section 1 hereof as of the date hereof and as of the First Closing Date as
though then made and, with respect to the Option Shares, as of the Second
Closing Date as though then made, to the timely performance by the Company of
its covenants and other obligations hereunder, and to each of the following
additional conditions:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER; NO OBJECTION
FROM THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, LLC. The Registration
Statement shall have become effective prior to the execution of this Agreement,
or at such later date as shall be consented to in writing by you; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel; and the National Association of
Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) CORPORATE PROCEEDINGS. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) NO MATERIAL ADVERSE CHANGE. Subsequent to the execution and delivery
of this Agreement and prior to the First Closing Date, or the Second Closing
Date, as the case may be, there shall not have been any Material Adverse Change
in the condition (financial or otherwise), earnings, operations, business or
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus;
(d) OPINION OF COUNSEL FOR THE COMPANY. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Fenwick & West LLP counsel for the Company substantially in the form of
Exhibit B attached hereto, dated the First Closing Date, or the Second Closing
Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in EXHIBIT B may rely as to
questions of law not involving the laws of the United States, the State of New
York or the State of California or general corporate laws of the State of
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, and of government
officials, in which case their opinion is to state that they are so relying and
that they have no knowledge of any material misstatement or inaccuracy in any
such opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(e) OPINION OF COUNSEL FOR THE UNDERWRITERS. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, substantially in the form of
EXHIBIT C hereto. The Company shall have
17
furnished to such counsel such documents as they may have requested for the
purpose of enabling them to pass upon such matters.
(f) ACCOUNTANTS' COMFORT LETTER. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
KPMG LLP addressed to the Underwriters, dated the First Closing Date or the
Second Closing Date, as the case may be, confirming that they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the applicable published Rules and Regulations and based upon the
procedures described in such letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to a date not more than four (4) business days prior to the First Closing
Date or the Second Closing Date, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the First Closing Date or the Second Closing Date, as
the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus. The Original Letter from KPMG
LLP shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheet of the Company as of September 30, 1998 and
related consolidated statements of operations, shareholders' equity, and cash
flows for the twelve (12) months ended September 30, 1998, (iii) state that KPMG
LLP has performed the procedures set out in Statement on Auditing Standards
No. 71 ("SAS 71") for a review of interim financial information and providing
the report of KPMG LLP as described in SAS 71 on the financial statements for
each of the quarters in the three-quarter period ended June 30, 1999 (the
"Quarterly Financial Statements"), (iv) state that in the course of such review,
nothing came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial Statements in
order for them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented, and (v) address other matters
agreed upon by KPMG LLP and you. In addition, you shall have received from KPMG
LLP a letter addressed to the Company and made available to you for the use of
the Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's financial statements as of
September 30, 1998, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(g) OFFICERS' CERTIFICATE. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the First Closing
Date or the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and
18
satisfied all the conditions on its part to be performed or satisfied at
or prior to the First Closing Date or the Second Closing Date, as the
case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the Registration
Statement and the Prospectus, and any amendments or supplements thereto
contained all material information required to be included therein by the
Securities Act and in all material respects conformed to the requirements
of the Securities Act, the Registration Statement and the Prospectus, and
any amendments or supplements thereto, did not and does not include any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been
(a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or prospects of the Company and its
subsidiaries considered as one enterprise, (b) any transaction that is
material to the Company and its subsidiaries considered as one enterprise,
except transactions entered into in the ordinary course of business,
(c) any obligation, direct or contingent, that is material to the Company
and its subsidiaries considered as one enterprise, incurred by the Company
or its subsidiaries, except obligations incurred in the ordinary course of
business, (d) any change in the capital stock or outstanding indebtedness
of the Company or any of its subsidiaries that is material to the Company
and its subsidiaries considered as one enterprise, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its subsidiaries, or (f) any loss or damage (whether or
not insured) to the property of the Company or any of its subsidiaries
which has been sustained or will have been sustained which has a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or prospects of the Company and its subsidiaries
considered as one enterprise.
(h) LOCK-UP AGREEMENT FROM CERTAIN SHAREHOLDERS OF THE COMPANY. The
Company shall have obtained and delivered to you an agreement substantially in
the form of EXHIBIT A attached hereto from each officer and director of the
Company, the Selling Shareholder, and each beneficial owner of one or more
percent of the outstanding issued share capital of the Company.
(i) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDER. You shall have
received on the First Closing Date and the Second Closing Date, as the case may
be, the following opinion of Fenwick & West LLP, counsel for the Selling
Shareholder substantially in the form of EXHIBIT D attached hereto, dated as of
such Closing Date, addressed to the Underwriters and with reproduced copies or
signed counterparts thereof for each of the Underwriters.
In rendering such opinion, such counsel may rely as to questions
of law not involving the laws of the United States or State of California upon
opinions of local counsel and
19
as to questions of fact upon representations or certificates of the Selling
Shareholder, and of governmental officials, in which case their opinion is to
state that they are so relying and that they have no knowledge of any
material misstatement or inaccuracy of any material misstatement or
inaccuracy in any such opinion, representation or certificate so relied upon
shall be delivered to you, as Representatives of the Underwriters, and to
Underwriters' Counsel.
(j) SELLING SHAREHOLDER'S CERTIFICATE. On each of the First Closing
Date and the Second Closing Date, as the case may be, the Representatives shall
received a written certificate executed by the Attorney-in-Fact of the Selling
Shareholder, dated as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of the Selling
Shareholder set forth in Section 1(B) of this Agreement are true and
correct with the same force and effect as though expressly made by the
Selling Shareholder on and as of such Closing Date; and
(ii) the Selling Shareholder has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to such Closing Date.
(k) SELLING SHAREHOLDER'S DOCUMENTS. At least three business days
prior to the date hereof, the Company and the Selling Shareholder shall have
furnished for review by the Representatives copies of the Powers of Attorney and
Custody Agreements executed by the Selling Shareholder and such further
information, certificates and documents as the Representatives may reasonably
request.
(l) STOCK EXCHANGE LISTING. The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(m) COMPLIANCE WITH PROSPECTUS DELIVERY REQUIREMENTS. The Company
shall have complied with the provisions of Sections 2(g) and 3(e) hereof with
respect to the furnishing of Prospectuses.
(n) ADDITIONAL DOCUMENTS. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when
and as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its
obligations hereunder and in
20
connection with the transactions contemplated hereby, including without
limitation (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Shares to the Underwriters, (iv) all fees and
expenses of the Company's counsel, independent public or certified public
accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution
of the Registration Statement (including financial statements, exhibits,
schedules, consents and certificates of experts), each preliminary prospectus
and the Prospectus, and all amendments and supplements thereto, and this
Agreement, (vi) all filing fees, attorneys' fees and expenses incurred by the
Company or the Underwriters in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any
part of the Shares for offer and sale under the state securities or blue sky
laws or the provincial securities laws of Canada or any other country, and,
if requested by the Representatives, preparing and printing a "Blue Sky
Survey", an "International Blue Sky Survey" or other memorandum, and any
supplements thereto, advising the Underwriters of such qualifications,
registrations and exemptions, (vii) the filing fees incident to, and the
reasonable fees and expenses of counsel for the Underwriters in connection
with, the National Association of Securities Dealers, LLC review and approval
of the Underwriters' participation in the offering and distribution of the
Common Shares, (viii) the fees and expenses associated with including the
Common Shares on the Nasdaq National Market, (ix) all costs and expenses
incident to the preparation and undertaking of "road show" preparations to be
made to prospective investors, and (x) all other fees, costs and expenses
referred to in Item 13 of Part II of the Registration Statement. Except as
provided in this Section 5, Section 6, and Section 7 hereof, the Underwriters
shall pay their own expenses, including the fees and disbursements of their
counsel.
The Selling Shareholder further agrees with each Underwriter to
pay (directly or by reimbursement) all fees and expenses incident to the
performance of his obligations under this Agreement which are not otherwise
specifically provided for herein, including but not limited to (i) fees and
expenses of counsel and other advisors for the Selling Shareholder, and
(ii) expenses and taxes incident to the sale and delivery of the Common Shares
to be sold by the Selling Shareholder to the Underwriters hereunder (which
taxes, if any, may be deducted by the Custodian under the provisions of
Section 2 of this Agreement).
This Section 5 shall not affect or modify any separate, valid
agreement relating to the allocation of payment of expenses between the Company,
on the one hand, and the Selling Shareholder, on the other hand.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement
is terminated by the Representatives pursuant to Section 4, Section 7,
Section 8, Section 9, or if the sale to the Underwriters of the Shares on the
First Closing Date is not consummated because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or to
comply with any provision hereof, the Company agrees to reimburse the
Representatives and the other Underwriters (or such Underwriters as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by
the Representatives and the Underwriters in connection with the proposed
purchase and the offering and sale of the Shares, including but not limited
to fees and disbursements of counsel, printing expenses, travel expenses,
postage, facsimile and telephone charges.
21
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION OF THE UNDERWRITERS. Each of the Company and the
Selling Shareholder, jointly and severally agree to indemnify and hold harmless
each Underwriter, its officers and employees, and each person, if any, who
controls any Underwriter within the meaning of the Securities Act and the
Exchange Act against any loss, claim, damage, liability or expense, as incurred,
to which such Underwriter or such controlling person may become subject, under
the Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A or Rule 434 under the Securities Act, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading; or (ii) upon
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
or the Selling Shareholder contained herein; or (iv) in whole or in part upon
any failure of the Company or the Selling Shareholder to perform their
respective obligations hereunder or under law; or (v) any act or failure to act
or any alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated hereby, and
which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon any matter covered by
clause (i), (ii), (iii) or (iv) above, provided that the Company and the Selling
Shareholder shall not be liable under this clause (v) to the extent that a court
of competent jurisdiction shall have determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its bad faith or willful misconduct; and to reimburse each Underwriter and each
such controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by BancBoston Xxxxxxxxx Xxxxxxxx Inc.) as such
expenses are reasonably incurred by such Underwriter or such controlling person
in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, however,
that the foregoing indemnity agreement shall not apply to any loss, claim,
damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company and the Selling Shareholder by the
Representatives expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); and
provided, further, that with respect to any preliminary prospectus, the
foregoing indemnity agreement shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage, liability or expense
purchased Shares, or any person controlling such Underwriter, if copies of the
Prospectus were timely delivered to the Underwriter pursuant to Section 2 and a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or
22
expense. The indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that the Company and the Selling Shareholder may
otherwise have. Notwithstanding the foregoing, (A) any amounts to be paid by an
indemnifying party shall be offset by any amounts actually paid to the
indemnified parties pursuant to the insurance described in Section 3(f) hereof,
and (B) the indemnity and contribution obligations of the Selling Shareholder
under this Section 7(a) and Section 7(f) shall not exceed the product of the
number of Firm Shares sold by the Selling Shareholder and the initial public
offering price as set forth in the Prospectus.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement, the Selling Shareholder, and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act, against any loss, claim, damage, liability or expense, as incurred, to
which the Company, or any such director, officer, Selling Shareholder or
controlling person may become subject, under the Securities Act, the Exchange
Act, or other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company and the
Selling Shareholder by the Representatives expressly for use therein; and to
reimburse the Company, or any such director, officer, Selling Shareholder or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer, Selling Shareholder or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damag, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have. Notwithstanding the foregoing, any
amounts to be paid by an indemnifying party shall be offset by any amounts paid
to the indemnified parties pursuant to the insurance described in Section 3(f)
hereof.
(c) INFORMATION PROVIDED BY THE UNDERWRITERS. The Company and the
Selling Shareholder hereby acknowledge that the only information that the
Underwriters have furnished to the Company and the Selling Shareholder expressly
for use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) are the statements set forth
in the table in the first paragraph and the seventh paragraph and the tenth
paragraph under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct.
(d) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES. Promptly
after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement
23
contained in this Section 7 or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought against
any indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be entitled
to participate in, and, to the extent that it shall elect, jointly with all
other indemnifying parties similarly notified, by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants
in any such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded on advice of
counsel that a conflict may arise between the positions of the indemnifying
party and the indemnified party in conducting the defense of any such action
or that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of such indemnifying party's election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the indemnifying
party (BancBoston Xxxxxxxxx Xxxxxxxx Inc. in the case of Section 7(b) and
Section 8), representing the indemnified parties who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(e) SETTLEMENTS. The indemnifying party under this Section 7 shall
not be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
24
(f) CONTRIBUTION. If the indemnification provided for in this
Section 7 is unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or (b) above in respect of any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, (or actions or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriter on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bears to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 7(f) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim after taking into account
amounts paid pursuant to the insurance described in Section 3(f).
Notwithstanding the provisions of this subsection (f), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 7(f) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(g) TIMING OF ANY PAYMENTS OF INDEMNIFICATION. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days following the date of invoice to the indemnifying party.
(h) SURVIVAL. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor
25
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(i) ACKNOWLEDGEMENTS OF PARTIES. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase does not exceed 10% of the aggregate
number of the Shares to be purchased on such date, the other Underwriters
shall be obligated, severally, in the proportions that the number of Firm
Common Shares set forth opposite their respective names on SCHEDULE A bears
to the aggregate number of Firm Shares set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on
the First Closing Date or the Second Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares and
the aggregate number of Shares with respect to which such default occurs
exceeds 10% of the aggregate number of Shares to be purchased on such date,
and arrangements satisfactory to the Representatives and the Company for the
purchase of such Shares are not made within 48 hours after such default, this
Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 4, and Section 7 shall at all times be
effective and shall survive such termination. In any such case either the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, but in no event
for longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed
to include any person substituted for a defaulting Underwriter under this
Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date, this Agreement may be terminated by the Representatives by notice given
to the Company and the Selling Shareholder if at any time (i) trading or
quotation in any of the Company's securities shall have been suspended or
limited by the Commission or by the Nasdaq Stock Market, or trading in
securities generally on either the Nasdaq Stock Market or the New York Stock
Exchange shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the
Commission or the National Association of Securities Dealers, LLC; (ii) a
general banking moratorium shall have been
26
declared by any of federal, New York or California authorities; (iii) there
shall have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any change in the United States or
international financial markets, or any substantial change or development
involving a prospective change in United States' or international political,
financial or economic conditions, as in the judgment of the Representatives
is material and adverse and makes it impracticable or inadvisable to market
the Common Shares in the manner and on the terms described in the Prospectus
or to enforce contracts for the sale of securities; (iv) in the judgment of
the Representatives there shall have occurred any Material Adverse Change; or
(v) the Company shall have sustained a loss by strike, fire, flood,
earthquake, accident or other calamity of such character as in the judgment
of the Representatives may interfere materially with the conduct of the
business and operations of the Company regardless of whether or not such loss
shall have been insured. Any termination pursuant to this Section 9 shall be
without liability on the part of (a) the Company to any Underwriter, except
that the Company shall be obligated to reimburse the expenses of the
Representatives and the Underwriters pursuant to Sections 5 and 6 hereof, (b)
any Underwriter to the Company, or (c) of any party hereto to any other party
except that the provisions of Section 7 shall at all times be effective and
shall survive such termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholder and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or
on behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person as the case may be, and will
survive delivery of and payment for the Shares sold hereunder and any
termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the
parties hereto as follows:
If to the Representatives:
BANCBOSTON XXXXXXXXX XXXXXXXX INC.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Counsel
If to the Company or the Selling Shareholder:
Keynote Systems, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
With a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
27
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 9 hereof, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the
Shares as such from any of the Underwriters merely by reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision
hereof. If any Section, paragraph or provision of this Agreement is for any
reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(a) GOVERNING LAW. This agreement shall be governed by and construed
in accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) CONSENT TO JURISDICTION. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 00 Xxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
(c) WAIVER OF IMMUNITY. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related
28
Judgment, including, without limitation, any immunity pursuant to the United
States Foreign Sovereign Immunities Act of 1976, as amended.
SECTION 15. FAILURE OF THE SELLING SHAREHOLDER TO SELL AND DELIVER
COMMON SHARES. If the Selling Shareholder shall fail to sell and deliver to
the Underwriters the Shares to be sold and delivered by the Selling
Shareholder at the First Closing Date pursuant to this Agreement, then the
Underwriters may at their option, by written notice from the Representatives
to the Company and the Selling Shareholder, either (i) terminate this
Agreement without any liability on the part of any Underwriter or, except as
provided in Sections 5, 6, and 7 hereof, the Company or the Selling
Shareholder, or (ii) purchase the shares which the Company and other Selling
Shareholder have agreed to sell and deliver in accordance with the terms
hereof. If Selling Shareholder shall fail to sell and deliver to the
Underwriters the Shares to be sold and delivered by the Selling Shareholder
pursuant to this Agreement at the First Closing Date, then the Underwriters
shall have the right, by written notice from the Representative[s] to the
Company and the Selling Shareholder, to postpone the First Closing Date but
in no event for longer than seven days in order that the required changes, if
any, to the Registration Statement and the Prospectus or any other documents
or arrangements may be effected.
SECTION 16. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written
or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may
be executed in two or more counterparts, each one of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement may not be amended or modified
unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party
whom the condition is meant to benefit. The Table of Contents and the
Section headings herein are for the convenience of the parties only and shall
not affect the construction or interpretation of this Agreement.
[The remainder of this page has been intentionally left blank.]
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
KEYNOTE SYSTEMS INC.
By: /s/ Xxxxx Xxxxx
------------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
SELLING SHAREHOLDER
/s/ Xxxxx Xxxxx
------------------------------
Xxxxx Xxxxx
The foregoing Underwriting Agreement is hereby confirmed and
accepted by the Representatives as of the date first above written.
BANCBOSTON XXXXXXXXX XXXXXXXX INC.
XXXXXXXXX & XXXXX LLC
XXXX XXXXXXXX XXXXXXX, A DIVISION OF XXXX XXXXXXXX INC.
On their behalf and on behalf of each of the several underwriters named in
SCHEDULE A hereto.
By BANCBOSTON XXXXXXXXX XXXXXXXX INC.
By: /s/ G. Xxxxxxxx Xxxxxxxxx
_______________________________________
NAME: G. Xxxxxxxx Xxxxxxxxx
Title: Managing Director
30
SCHEDULE A
UNDERWRITERS NUMBER OF FIRM COMMON
SHARES TO BE PURCHASED
----------------------------------------------------------------- ----------------------
BANCBOSTON XXXXXXXXX XXXXXXXX INC. . . . . . . . . . . . . . . . 1,620,000
XXXXXXXXX & XXXXX LLC . . . . . . . . . . . . . . . . . . . . . . 1,080,000
XXXX XXXXXXXX XXXXXXX, a division of Xxxx Xxxxxxxx Incorporated . 900,000
E*TRADE SECURITIES, INC. . . . . . . . . . . . . . . . . . . . . 200,000
SURETRADE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000
EXHIBIT A
LOCK-UP AGREEMENT
A-1
LOCK-UP AGREEMENT
__________________, 1999
BancBoston Xxxxxxxxx Xxxxxxxx
[___________________]
[___________________]
As Representatives of the Several Underwriters
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the
several underwriters (the "Underwriters"), propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") with Keynote Systems,
Inc. (the "Company") providing for the initial public offering (the "Public
Offering") by the Underwriters, including yourselves, of Common Stock of the
Company (the "Common Stock") pursuant to the Company's Registration Statement
on Form S-1 to be filed with the Securities and Exchange Commission on or
about [________], 1999 (the "Registration Statement").
In consideration of the Underwriters' agreement to purchase and
make the Public Offering of the Common Stock, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned
hereby agrees, for a period of 180 days after the effective date of the
Registration Statement (the "Lock-Up Period"), not to offer to sell, contract
to sell or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to (collectively, a "Disposition") any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock or any securities
convertible into or exchangeable for shares of Common Stock (collectively,
"Securities"), now owned or hereafter acquired directly by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, otherwise than (i) as a bona fide gift or gifts, provided the
donee or donees thereof agree to be bound by this Lock-Up Agreement, (ii) as
a distribution to limited partners or shareholders of the undersigned,
provided that the distributees thereof agree in writing to be bound by the
terms of this Lock-Up Agreement or (iii) with the prior written consent of
BancBoston Xxxxxxxxx Xxxxxxxx. The foregoing restriction is expressly agreed
to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-Up Period even if such
Securities would be disposed of by someone other than the undersigned. Such
prohibited hedging or other transactions would include without limitation any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including without limitation any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from Securities. Notwithstanding the foregoing, this
Lock-Up Agreement does not prohibit the sale of shares of the Common Stock by
the undersigned to the Underwriters in the Public Offering.
Furthermore, the undersigned hereby agrees and consents to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of the Securities held by the undersigned except in compliance
with this Lock-Up Agreement. In the event that
A-2
the Registration Statement shall not have been declared effective on or
before September 30, 1999 this Lock-Up Agreement shall be of no further force
or effect.
Very truly yours,
_______________________________
(signature)
Name: ________________________
Address:
______________________
______________________
Accepted as of the date
first set forth above:
BancBoston Xxxxxxxxx Xxxxxxxx
[_______________]
[_______________]
As Representatives of the
Several Underwriters
BancBoston Xxxxxxxxx Xxxxxxxx
By:_________________________
Name:_______________________
The Company requests that this Lock-Up Agreement be completed an delivered to
underwriters' counsel, Xxxxxxx, Phleger & Xxxxxxxx LLP, Attn: Xxxxxxx X.
Xxxxx.
A-3
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company and each Significant Subsidiary (as that term is
defined in Regulation S-X of the Act) has been duly incorporated and is
validly existing as corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where
the failure to be so qualified or be in good standing would not have a
Material Adverse Effect. To such counsel's knowledge, the Company does not
own or control, directly or indirectly, any corporation, association or
other entity other than [list subsidiaries];
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and outstanding
shares of capital stock of the Company have been duly and validly issued
and are fully paid and nonassessable, and, to such counsel's knowledge,
will not have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or other
similar right;
(v) All issued and outstanding shares of capital stock of each
Significant Subsidiary of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and, to such counsel's
knowledge, have not been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal
or other similar right and are owned by the Company free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest;
(vi) The Firm Shares or the Option Shares, as the case may be, to be
issued by the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully
paid and nonassessable, and will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right, right
of first refusal or other similar right.
(vii) The Company has the corporate power and authority to enter into
this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery by
you, is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder
may be limited by applicable law and except as enforceability
B-1
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally or by
general equitable principles;
(ix) The Registration Statement has become effective under the Act and,
to such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Securities Act;
(x) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Firm Shares
or the Option Shares have been validly registered under the Securities Act
and the Rules and Regulations of the Exchange Act and the applicable rules
and regulations of the Commission thereunder;
(xi) The Registration Statement and the Prospectus, and each amendment
or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects with
the requirements of the Act and the applicable Rules and Regulations;
(xii) The information in the Prospectus under the caption "Description
of Capital Stock," to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is a fair summary
of such matters and conclusions; and the forms of certificates evidencing
the Common Stock and filed as exhibits to the Registration Statement comply
with California law;
(xiii) The description in the Registration Statement and the Prospectus
of the charter and bylaws of the Company and of statutes are accurate and
fairly present the information required to be presented by the Securities
Act;
(xiv) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character required
to be described or referred to in the Registration Statement or Prospectus
or to be filed as an exhibit to the Registration Statement which are not
described or referred to therein or filed as required;
(xv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default
under, any bond, debenture, note or other evidence of indebtedness, or any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument known to such counsel to which the
Company is a party or by which its properties are bound, or any applicable
statute, rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court, government or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries, or over any of their properties or operations;
(xvi) No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body having
jurisdiction over the Company or
B-2
any of its subsidiaries, or over any of their properties or operations
is necessary in connection with the consummation by the Company of the
transactions herein contemplated, except (i) such as have been obtained
under the Securities Act, (ii) such as may be required under state or
other securities or Blue Sky laws in connection with the purchase and
the distribution of the Shares by the Underwriters, (iii) such as may be
required by the National Association of Securities Dealers, LLC and (iv)
such as may be required under the federal or provincial laws of Canada;
(xvii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Securities Act, other than those
described therein;
(xviii) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable statute,
rule or regulation known to such counsel or, to such counsel's knowledge,
any order, writ or decree of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries, or over
any of their properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus no holders of Company Shares or other
securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company having
rights known to such counsel to registration of such shares of Company
Shares or other securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering contemplated
thereby, waived such rights or such rights have expired by reason of lapse
of time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration
Statement pursuant to the exercise of and in full satisfaction of such
rights.
(xx) The Company is not and, after giving effect to the offering and
the sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(xxi) To such counsel's knowledge, the Company owns or possesses
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
business as now conducted; and the expected expiration of any such
Intellectual Property Rights would not result in a Material Adverse
Effect. The Company has not received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision,
would result in a Material Adverse Effect. To such counsel's knowledge,
the Company's discoveries, inventions, products, or processes referred
to in the Registration Statement or Prospectus do not infringe or
conflict with any right or patent which is the subject of a patent
application known to the Company.
(xxii) In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public
B-3
accountants of the Company, at which such conferences the contents of
the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or
completeness of the statements contained in the Registration Statement
or the Prospectus, nothing has come to the attention of such counsel
which leads them to believe that, at the time the Registration Statement
became effective and at all times subsequent thereto up to and on the
First Closing Date or Second Closing Date, as the case may be, the
Registration Statement and any amendment or supplement thereto (other
than the financial statements including supporting schedules and other
financial and statistical information derived therefrom, as to which
such counsel need express no comment) contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or at the First Closing Date or the Second Closing Date, as
the case may be, the Registration Statement, the Prospectus and any
amendment or supplement thereto (except as aforesaid) contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
B-4
EXHIBIT C
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Firm Shares have been duly authorized and, upon issuance and
delivery and payment therefor in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and
non-assessable.
(ii) The Registration Statement complied as to form in all material
respects with the requirements of the Act; the Registration Statement has
become effective under the Act and, to such counsel's knowledge, no stop
order proceedings with respect thereto have been instituted or threatened
or are pending under the Securities Act.
(iii) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; and
the Firm Shares or the Option Shares have been validly registered under
the Securities Act and the Rules and Regulations of the Exchange Act and
the applicable rules and regulations of the Commission thereunder;
(iv) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
Such counsel shall state that such counsel has reviewed the
opinions addressed to the Representatives from Fenwick & West, LLP, each
dated the date hereof, and furnished to you in accordance with the provisions
of the Underwriting Agreement. Such opinion appears on its face to be
appropriately responsive to the requirements of the Underwriting Agreement.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters
were discussed, and although they have not verified the accuracy or
completeness of the statements contained in the Registration Statement or the
Prospectus, nothing has come to the attention of such counsel which leads
them to believe that, at the time the Registration Statement became effective
and at all times subsequent thereto up to and on the First Closing Date or
Second Closing Date, as the case may be, the Registration Statement and any
amendment or supplement thereto (other than the financial statements
including supporting schedules and other financial and statistical
information derived therefrom, as to which such counsel need express no
comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement, the Prospectus
and any amendment or supplement thereto (except as aforesaid) contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
C-1
EXHIBIT D
MATTERS TO BE COVERED IN THE OPINION OF SELLING SHAREHOLDER COUNSEL
(i) The Underwriting Agreement has been duly authorized, executed
and delivered by or on behalf of, and is a valid and binding agreement
of, the Selling Shareholder, enforceable in accordance with its terms,
except as rights to indemnification thereunder may be limited by
applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles.
(ii) The execution and delivery by the Selling Shareholder of, and
the performance by the Selling Shareholder of its obligations under, the
Underwriting Agreement and its Custody Agreement and its Power of
Attorney will not contravene or conflict with, result in a breach of, or
constitute a default under, the charter or by-laws, partnership
agreement, trust agreement or other organization documents, as the case
may be, of the Selling Shareholder, or, to the best of such counsel's
knowledge, violate, result in a breach of or constitute a default under
the terms of any other agreement or instrument to which the Selling
Shareholder is a party or by which it is bound, or any judgement, order
or decree applicable to the Selling Shareholder of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over the Selling Shareholder.
(iii) The Selling Shareholder has good and valid title to all of the
Common Shares which may be sold by the Selling Shareholder under the
Underwriting Agreement and has the legal right and power, and all
authorization and approvals required to enter into the Underwriting
Agreement and its Custody Agreement and its Power of Attorney, to sell,
transfer and deliver all of the Common Shares which may be sold by the
Selling Shareholder under the Underwriting Agreement and to comply with its
other obligations under the Underwriting Agreement, its Custody Agreement
and its Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of the
Selling Shareholder has been duly authorized, executed and delivered by
the Selling Shareholder and is a valid and binding agreement of the
Selling Shareholder, enforceable in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
(v) Assuming that the Underwriters purchase the Shares which are
sold by the Selling Shareholder pursuant to the Underwriting Agreement
for value, in good faith and without notice of any adverse claims, the
delivery of such Shares pursuant to the Underwriting Agreement will pass
good and valid title to such Shares, free and clear of any security
interest, mortgage, pledge, lieu encumbrance or other claim.
(vi) To the best of such counsel's knowledge, no consent, approval,
authorization or other order of, or registration or filing with, any
court or governmental authority or agency, is required for the
consummation by the Selling Shareholder of the transactions contemplated
in the Underwriting Agreement, except as required under the Securities
Act, applicable state securities or blue sky laws, and from the National
Association of Securities Dealers, LLC.
D-1
