1
EXHIBIT 1.1
Draft Dated 10/29/96
2,100,000 Shares(1)
BITSTREAM INC.
Common Stock
UNDERWRITING AGREEMENT
October , 1996
Xxxxx, Xxxxx & Company
Advest, Inc.
As Representatives of the Several Underwriters
c/o Xxxxx, Xxxxx & Company
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Dear Sirs and Madams:
Bitstream Inc., a Delaware corporation (the "Company"), proposes to issue
and sell 2,100,000 shares (the "Firm Shares") of its authorized but unissued
Class A Common Stock, $.01 par value (the "Common Stock"). The Company proposes
to grant to the Underwriters (as defined below) an option to purchase up to
315,000 additional shares of Common Stock (the "Optional Shares" and, with the
Firm Shares, collectively, the "Shares"). The Common Stock is more fully
described in the Registration Statement and the Prospectus hereinafter
mentioned.
The Company hereby confirms the agreements made with respect to the
purchase of the shares by the several underwriters, for whom you are acting,
named in Schedule I hereto (collectively, the "Underwriters," which term shall
also include any underwriter purchasing Common Stock pursuant to Section 2(b)
hereof). You represent and warrant that you have been authorized by each of
the other Underwriters to enter into this Agreement on its behalf and to act
for it in the manner herein provided.
Xxxx Xxxxxxxx, C. Xxxxxxx Xxxxxx, Xxxxx X. Xxxx, Xxxxx X. Xxxxxxx and
Xxxxxx X. Xxxxxxx are hereinafter collectively referred to as the "Principal
Securityholders."
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1 Plus an option to purchase from the Company up to 315,000 additional shares
to cover over-allotments.
2
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
SECURITYHOLDERS. The Company and each of the Principal Securityholders hereby
represent and warrant to the several Underwriters as of the date hereof and as
of each Closing Date (as defined below) that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No.
333-11519), including the related preliminary prospectus, for the registration
under the Securities Act of 1933, as amended (the "Securities Act") of the
Shares. Copies of such registration statement and of each amendment thereto, if
any, including the related preliminary prospectus (meeting the requirements of
Rule 430A of the rules and regulations of the Commission) heretofore filed by
the Company with the Commission have been delivered to you and are identical to
the electronically transmitted copies thereof filed with the Commission pursuant
to the Commission's Electronic Data Gathering, Analysis and Retrieval ("XXXXX"),
except to the extent permitted by Regulation S-T.
The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Shares (a "Rule 462(b)
registration statement"), and, in the event of any amendment thereto after the
effective date of such registration statement (the "Effective Date"), shall also
mean (from and after the effectiveness of such amendment) such registration
statement as so amended (including any Rule 462(b) registration statement). The
term Prospectus as used in this Agreement shall mean the prospectus relating to
the Shares first filed with the Commission pursuant to Rule 424(b) and Rule 430A
of the rules and regulations of the Commission (or if no such filing is
required, as included in the Registration Statement) and, in the event of any
supplement or amendment to such prospectus after the Effective Date, shall also
mean (from and after the filing with the Commission of such supplement or the
effectiveness of such amendment) such prospectus as so supplemented or amended.
The term Preliminary Prospectus as used in this Agreement shall mean each
preliminary prospectus included in such registration statement prior to the time
it becomes effective. For purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
applicable copy filed with the Commission pursuant to XXXXX.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
(b) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has full corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement and the Prospectus and as being conducted, and
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is duly qualified as a foreign corporation and in good standing in all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary (except
where the failure to be so qualified would not have a material adverse effect on
the business, business prospects, properties, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, taken as a whole
(a "Material Adverse Effect")).
(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 21 to the Registration Statement. Except as
described in the Prospectus, the Company owns all of the outstanding capital
stock of its subsidiaries free and clear of all claims, liens, charges and
encumbrances. The Company and each of its subsidiaries are in possession of and
operating in compliance with all material authorizations, licenses, permits,
consents, certificates and orders ("Permits") material to the conduct of their
respective businesses as described in the Prospectus, all of which are valid and
in full force and effect, except for any such Permits the absence of which or
the noncompliance with which or the failure to be valid and in full force and
effect could not reasonably be expected to result in a Material Adverse Effect.
(d) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
materially adverse change in the business, business prospects, properties,
condition (financial or otherwise) or results of operations of the Company and
its subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, other than as set forth in the Registration
Statement and the Prospectus, and since such dates, except in the ordinary
course of business, neither the Company nor any of its subsidiaries has entered
into any material transaction not referred to in the Registration Statement and
the Prospectus.
(e) The Registration Statement and the Prospectus comply, and
on the Closing Date (as hereinafter defined) and any later date on which
Optional Shares are to be purchased, the Prospectus will comply, in all material
respects, with the provisions of the Securities Act and the rules and
regulations of the Commission thereunder; on the Effective Date, the
Registration Statement did not contain any untrue statement of a material fact
and did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and, on the
Effective Date the Prospectus did not and, on the Closing Date and any later
date on which Optional Shares are to be purchased, will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that none of the
representations and warranties in this subparagraph (e) shall apply to
statements in, or omissions from, the Registration Statement or the Prospectus
made in reliance upon and in conformity with information herein or otherwise
furnished in writing to the Company by or on behalf of the Underwriters for use
in the Registration Statement or the Prospectus.
(f) The Company has authorized and outstanding capital stock as
set forth under the heading "Capitalization" in the Prospectus. The issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable, have been
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issued in compliance with all federal and state securities laws, and were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities which rights were not waived in writing at
the time of issuance. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company and the related notes
thereto included in the Prospectus, neither the Company nor any subsidiary has
any outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus accurately and fairly presents the information
required by the Securities Act and the rules and regulations of the Commission
thereunder to be shown with respect to such plans, arrangements, options and
rights.
(g) The Shares are duly authorized, are (or, in the case of
Shares to be sold by the Company, will be, when issued and sold to the
Underwriters against payment therefor, as provided herein) validly issued, fully
paid and nonassessable and conform to the description thereof in the Prospectus.
No further approval or authority of the stockholders or the Board of Directors
of the Company will be required for the issuance and sale of the Shares to be
sold by the Company as contemplated herein.
(h) The Shares to be issued and sold by the Company will be
authorized for listing on the Nasdaq National Market upon official notice of
issuance.
(i) The Shares to be sold by the Company will be sold free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest, and will conform to the description thereof contained in the
Prospectus. No preemptive right, co-sale right, right of first refusal or other
similar right to subscribe for or purchase securities of the Company which has
not been waived in writing exists with respect to the issuance and sale of the
Shares by the Company pursuant to this Agreement. No stockholder of the Company
has any right which has not been waived, or complied with, to require the
Company to register the sale of any shares owned by such stockholder under the
Securities Act in the public offering contemplated by this Agreement.
(j) The Company has full corporate power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms, except as enforceability may be limited by general
equitable principles, bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium laws affecting creditors' rights generally and except as
to those provisions relating to indemnity or contribution for liabilities
arising under federal and state securities laws. The making
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and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby (i) will not violate any provisions of the
Certificate of Incorporation, Bylaws or other organizational documents of the
Company or any of its subsidiaries, and (ii) will not conflict with, result in a
material breach or material violation of, or constitute, either by itself or
upon notice or the passage of time or both, a material default under (A) any
agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of their respective
properties may be bound or affected, or (B) any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
any of its subsidiaries or any of their respective properties. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body that has not already been
obtained is required for the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated by
this Agreement, except for compliance with the Securities Act, state Blue Sky
laws applicable to the public offering of the Shares by the several Underwriters
and the clearance of such offering with the NASD.
(k) The consolidated financial statements and schedules of the
Company and the related notes thereto included in the Registration Statement and
the Prospectus present fairly on a consolidated basis the financial position of
the Company and its subsidiaries as of the respective dates of such financial
statements and schedules, and the results of operations and cash flows of the
Company and its subsidiaries for the respective periods covered thereby. Such
statements, schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods specified, as certified by the independent accountants
named in subsection 1(ac). No other financial statements or schedules are
required to be included in the Registration Statement. The selected financial
data set forth in the Prospectus under the captions "Capitalization" and
"Selected Consolidated Financial Information" fairly present the information set
forth therein on the basis stated in the Registration Statement.
(l) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance in all material respects with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance in all material respects 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. The
representations and warranties given by the Company and its officers to its
independent public accountants for the purpose of supporting the letters
referred to in Section 9(f) are true and correct in all material respects.
(m) Neither the Company nor any of its subsidiaries is (i) in
violation or default of any provision of its Certificate of Incorporation,
Bylaws or other organizational documents, or (ii) in a breach of or default with
respect to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which it is a party or by which it or any of its properties are bound; and
there does not exist any
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state of facts which, with notice or lapse of time or both would constitute such
a breach or default on the part of the Company and its subsidiaries, taken as a
whole, except in the case of clause (ii) for such breaches or defaults which
individually or in the aggregate would not have a Material Adverse Effect.
(n) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and Regulations of
the Commission thereunder which have not been described or filed as required.
The contracts so described in the Prospectus are in full force and effect on the
date hereof.
(o) Except as disclosed in the Prospectus, there are no legal
or governmental actions, suits or proceedings pending or, to the knowledge of
the Company, threatened to which the Company or any of its subsidiaries is or,
to the knowledge of the Company, is threatened to be made a party or of which
property owned or leased by the Company or any of its subsidiaries is or, to the
knowledge of the Company, is threatened to be made the subject, which actions,
suits or proceedings could, if determined adversely to the Company or any of its
subsidiaries, individually or in the aggregate, prevent or adversely affect the
transactions contemplated by this Agreement or result in a material adverse
change in the business, business prospects, properties, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries taken
as a whole; and no labor disturbance by the employees of the Company or any of
its subsidiaries exists or, to the knowledge of the Company, is imminent which
could materially adversely affect the business, business prospects, properties,
condition (financial or otherwise), or results of operations of the Company and
its subsidiaries taken as a whole. Neither the Company nor any of its
subsidiaries is a party or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other governmental body. Except as disclosed in the Prospectus, there are no
material legal or governmental actions, suits or proceedings pending or, to the
Company's and the Principal Securityholders' knowledge, threatened against any
executive officers or directors of the Company.
(p) The Company or the applicable subsidiary has good and
marketable title to all the properties and assets reflected as owned in the
financial statements hereinabove described (or elsewhere in the Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
(i) those, if any, reflected in such financial statements (or elsewhere in the
Prospectus), (ii) liens to be satisfied or discharged upon repayment of
indebtedness with the proceeds of the Offering as disclosed in the Prospectus
under the caption "Use of Proceeds," or (iii) those which could not reasonably
be expected to have a Material Adverse Effect, and do not materially adversely
affect the use made and proposed to be made of such property by the Company or
its subsidiaries. The Company or the applicable subsidiary holds its leased
properties under valid and binding leases except where the failure of a lease to
be valid and binding could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as disclosed in the
Prospectus, the Company owns or leases all such properties as are materially
necessary to its operations as now conducted or as proposed to be conducted.
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(q) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not (A) incurred any material liabilities or obligations,
indirect, direct or contingent, or (B) entered into any oral or written
agreement or other transaction, which in the case of (A) or (B) is not in the
ordinary course of business; (ii) the Company and its subsidiaries have not
sustained any material loss or interference with their respective businesses or
properties from fire, flood, windstorm, accident or other calamity, whether or
not covered by insurance; (iii) the Company and its subsidiaries have not paid
or declared any dividends or other distributions with respect to their
respective capital stock and the Company and its subsidiaries are not in default
in the payment of principal or interest on any outstanding debt obligations
which default could have a Material Adverse Effect; (iv) there has not been any
change in the capital stock of the Company or its subsidiaries (other than upon
the sale of the Shares hereunder or upon the exercise of any options or warrants
or conversion of any convertible securities disclosed in the Prospectus); (v)
there has not been any material increase in the short- or long-term debt of the
Company and its subsidiaries; and (vi) there has not been any material adverse
change or any development involving or which may reasonably be expected to
involve a prospective material adverse change, in the business, business
prospects, condition (financial or otherwise), properties, or results of
operations of the Company and its subsidiaries taken as a whole.
(r) The Company is and its subsidiaries are conducting business
in compliance with all applicable laws, rules and regulations of the
jurisdictions in which they are conducting business, except where the failure to
be so in compliance would not have a material adverse effect on the business,
business prospects, properties, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries taken as a whole.
(s) The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns required to have
been filed as of the date hereof, and all such tax returns are complete and
correct in all material respects, and the Company and its subsidiaries have not
failed to pay any taxes which were payable pursuant to said returns or any
assessments with respect thereto other than those being contested in good faith
and for which adequate reserves have been provided or those currently payable
without penalty or interest. The Company has no knowledge of any material tax
deficiency which has been or is likely to be threatened or asserted against the
Company or its subsidiaries.
(t) The Company has not distributed, and will not distribute
prior to the later to occur of (i) completion of the distribution of the Shares,
or (ii) the expiration of any time period within which a dealer is required
under the Securities Act to deliver a prospectus relating to the Shares, any
offering material in connection with the offering and sale of the Shares other
than the Prospectus, the Registration Statement and any other materials
permitted by the Securities Act and consented to by the Underwriters.
(u) Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, directors' and officers' insurance,
insurance covering real and personal property owned or leased by the
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Company and its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect. The Company has not been refused any
insurance coverage sought or applied for, and the Company has no reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
adversely affect the business, business prospects, properties, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries taken as a whole.
(v) Neither the Company nor any of its subsidiaries nor, to the
best of the Company's or the Principal Securityholders' knowledge, any of their
employees or agents has at any time during the last five years (i) made any
unlawful contribution to any candidate for foreign office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
foreign, federal or state governmental officer or official or other person
charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof.
(w) 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.
(x) The Company has caused (i) each of its executive officers
and directors as set forth in the Prospectus and (ii) the holders of Common
Stock (including shares issuable upon the exercise or conversion of any option,
warrant or other security) listed on Schedule II hereto, to furnish to Xxxxx,
Xxxxx & Company as a representative of the Underwriters an agreement in form and
substance satisfactory to Xxxxx, Xxxxx & Company pursuant to which each such
party has agreed that without the prior written approval of Xxxxx, Xxxxx &
Company, such party will not during the period of one hundred eighty (180) days
after the date the Registration Statement becomes effective (A) offer, sell,
contract to sell, make any short sale (including without limitation a short
against the box), pledge or otherwise dispose of, directly or indirectly, any
shares of the Company's Common Stock, or Class B Common Stock, $.01 par value
per share ("Class B Common Stock"), options to acquire Common Stock or Class B
Common Stock or securities convertible into or exchangeable for, or any other
rights to purchase or acquire, the Company's Common Stock or Class B Common
Stock beneficially owned by such persons (as determined in accordance with the
rules and regulations of the Commission) (collectively "Restricted Securities")
or (B) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of Common Stock or Class B
Common Stock, whether any such transaction described in (A) or (B) is to be
settled by delivery of Common Stock or Class B Common Stock or such other
securities, in cash or otherwise. The lock-up restriction of the foregoing
sentence shall not apply to (i) the sale of shares purchased in the open market
after the date the Registration Statement becomes effective or (ii) the
exercise or conversion of outstanding options, warrants or convertible
securities during any such period (but such lock-up restrictions do apply to any
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subsequent sale of shares received upon such exercise or conversion). The
foregoing lock-up restriction is expressly agreed to preclude the holder of
Restricted Securities from engaging in any hedging or other transaction that is
designed to or could reasonably be expected to lead to, or result in, a
disposition of Restricted Securities during the applicable lock-up period even
if such Restricted Securities would be disposed of by the holder subsequent to
the applicable lock-up period or by someone other than the original holder.
Notwithstanding the foregoing, any transfer of Restricted Securities which
either (i) constitutes a pro rata distribution of a partnership or a corporation
to its partners or its stockholders, respectively, or (ii) constitutes a bona
fide gift of such shares, will not require the consent of Xxxxx, Xxxxx &
Company; provided, that the transferee enters into a lock-up agreement in
substantially this form covering the remainder of such lock-up period.
(y) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba.
(z) The Company owns or has the right to utilize, pursuant to a
license, a sublicense, an agreement, written permission or otherwise, all
Intellectual Property (as defined below) used in or necessary to conduct its
business as presently conducted and as presently proposed to be conducted in all
material respects; moreover, each item of Intellectual Property owned or used by
the Company in its business as presently conducted or presently proposed to be
conducted, will be owned or available to the Company on identical terms and
conditions immediately subsequent to the closing of the sale of the Shares. The
Company has taken all commercially reasonable action to maintain and protect
each material item of Intellectual Property that the Company owns or uses. As
far as the Company can reasonably foresee, the expiration of any Intellectual
Property or governmental authorizations would not have a Material Adverse
Effect, except that early termination or revocation of, or failure to renew, the
license rights granted from Novell, Inc. could have a Material Adverse Effect on
the Company. Neither the Company nor any Principal Securityholder has any
knowledge of an infringement or misappropriation by the Company or its
subsidiaries of any Intellectual Property rights of third parties. Neither the
Company nor any Principal Securityholder have any knowledge that the continued
operation of the business of the Company as presently conducted or presently
proposed to be conducted, would interfere with, infringe upon or misappropriate
any Intellectual Property rights of third parties; and no claims, charges,
complaints, or notices have been received by the Company or, to the knowledge of
the Company, are threatened against the Company or its subsidiaries regarding
any Intellectual Property rights of any third party. All copyright registrations
material to the Company in conducting its present business and presently
proposed business are valid, in full force and effect except for such instances
as would not have a Material Adverse Effect; all trademark applications and
registrations material to the Company in conducting its present business and
presently proposed business are valid, in full force and effect and the
description of the goods and services specified in such applications and
registrations reflect in all material respects the goods and services provided
by and/or sold by the Company in connection with its use of the applicable
Intellectual Property; all issued patents material to the Company in conducting
its present business and presently proposed business are valid and enforceable;
and all patent, trademark and copyright related
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ownership documents which purport to have been duly recorded have been duly
recorded at and by the appropriate patent, trademark and copyright offices; no
pending patent or trademark application in respect of any patent or trademark
material to the Company is subject to any governmental proceeding regarding
ownership rights, all applicable taxes, annuities and maintenance fees relevant
to the Company's material Intellectual Property have been or can be timely paid.
As used in this Agreement, the term "Intellectual Property"
means (a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, reissues, revisions, extensions
and reexaminations thereof in any jurisdiction, (b) all trademarks, service
marks, trade dress, logos, trade names, corporate names, together with all
translations, adaptations, derivations and combinations thereof and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all registration applications,
registrations and renewals in connection therewith, (d) all mask works and all
applications, registrations and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, discoveries, know-how, formulas, source code, data structures, font
designs, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(f) all proprietary computer software (including data and related documentation)
except over the counter software, (g) all other proprietary rights, (h) all
copies and tangible embodiments thereof (in whatever form or medium) and all
licenses or agreements in connection with the foregoing.
(aa) Except as disclosed in the Prospectus and except as could not,
singly or in the aggregate, reasonably be expected to have a Material Adverse
Effect, (i) the Company and its subsidiaries are in compliance in all material
respects 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 their business, (ii)
neither the Company nor any of its subsidiaries has received any written notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, (iii) no facts currently exist that will require the Company
or any of its subsidiaries to make future material capital expenditures to
comply with Environmental Laws, and (iv) to the knowledge of the Company and the
Principal Securityholders, no property which is or has been owned, leased or
occupied by the Company or any of its subsidiaries has been designated as a
Superfund site pursuant to the Comprehensive Environmental 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.
(ab) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(ac) Xxxxxx Xxxxxxxx LLP, which has certified the consolidated
financial statements of the Company filed with the Commission as part of the
Registration Statement, are independent public accountants with respect to the
Company within the meaning of the Securities Act and the applicable published
rules and regulations thereunder.
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SECTION 2. PURCHASE OF THE SHARES BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
2,100,000 of the Firm Shares to the several Underwriters, and each of the
Underwriters agrees to purchase from the Company the respective aggregate number
of Firm Shares set forth opposite its name in Schedule I. The price at which
such Firm Shares shall be sold by the Company and purchased by the several
Underwriters shall be $___ per share. The obligation of each Underwriter to the
Company shall be to purchase from the Company that number of Firm Shares which
represents the same proportion of the total number of Firm Shares to be sold by
the Company pursuant to this Agreement as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto represents of the
total number of shares of the Firm Shares to be purchased by all Underwriters
pursuant to this Agreement, as adjusted by you in such manner as you deem
advisable to avoid fractional shares. In making this Agreement, each Underwriter
is contracting severally and not jointly; except as provided in paragraphs (b)
and (c) of this Section 2, the agreement of each Underwriter is to purchase only
the respective number of shares of the Firm Shares specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of Shares agreed to be purchased by such Underwriter or
Underwriters, the Company shall immediately give notice thereof to you, and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by you of such notice to purchase, or procure one or more other
Underwriters to purchase, in such proportions as may be agreed upon between you
and such purchasing Underwriter or Underwriters and upon the terms herein set
forth, all or any part of Shares which such defaulting Underwriter or
Underwriters agreed to purchase. If the non-defaulting Underwriters fail so to
make such arrangements with respect to all such shares and portion, the number
of Shares which each non-defaulting Underwriter is otherwise obligated to
purchase under this Agreement shall be automatically increased on a pro rata
basis to absorb the remaining shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase; provided, however, that the
non-defaulting Underwriters shall not be obligated to purchase the portion which
the defaulting Underwriter or Underwriters agreed to purchase if the aggregate
number of such Shares exceeds 10% of the total number of Shares which all
Underwriters agreed to purchase hereunder. If the total number of Shares which
the defaulting Underwriter or Underwriters agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such Shares and portion on the terms herein
set forth. In any
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such case, either you or the Company shall have the right to postpone the
Closing Date determined as provided in Section 4 hereof for not more than seven
business days after the date originally fixed as the Closing Date pursuant to
Section 5 in order that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If neither the
non-defaulting Underwriters nor the Company shall make arrangements within the
24-hour periods stated above for the purchase of all of the Shares which the
defaulting Underwriter or Underwriters agreed to purchase hereunder, this
Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter and
without any liability on the part of any non-defaulting Underwriter to the
Company. Nothing in this paragraph (b), and no action taken hereunder, shall
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company grants an option to the several Underwriters to purchase, severally and
not jointly, up to 315,000 Optional Shares from the Company at the same price
per share as the Underwriters shall pay for the Firm Shares. Said option may be
exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time on or before
the thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of Optional
Shares as to which the several Underwriters are exercising the option. Delivery
of certificates for the Optional Shares, and payment therefor, shall be made as
provided in Section 4 hereof. The number of Optional Shares to be purchased by
each Underwriter shall be the same percentage of the total number of Optional
Shares to be purchased by the several Underwriters as such Underwriter is
purchasing of the Firm Shares, as adjusted by you in such manner as you deem
advisable to avoid fractional shares.
SECTION 3. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of
the Shares to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) The information (insofar as such information relates to the
Underwriters) set forth in the last paragraph on the front cover page and under
"Underwriting" in the Registration Statement, any Preliminary Prospectus and the
Prospectus relating to the Shares constitutes the only information furnished by
the Underwriters to the Company for inclusion in the Registration Statement, any
Preliminary Prospectus, and the Prospectus, and you on behalf of the respective
Underwriters represent and warrant to the Company that the statements made
therein are correct.
SECTION 4. DELIVERY OF AND PAYMENT FOR THE SHARES.
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(a) Delivery of certificates for the Firm Shares and the Optional
Shares (if the option granted by Section 2(c) hereof shall have been exercised
not later than 7:00 A.M., San Francisco time, on the date two business days
preceding the Closing Date), and payment therefor, shall be made at the offices
of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, High Street Tower, 000 Xxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, at 10:00 a.m., Boston, Massachusetts time, on the [fourth]
business day after the date of this Agreement, or at such time on such other
day, not later than seven full business days after such [fourth] business day,
as shall be agreed upon in writing by the Company, the Selling Securityholders
and you. The date and hour of such delivery and payment (which may be postponed
as provided in Section 2(b) hereof) are herein called the "Closing Date".
(b) If the option granted by Section 2(c) hereof shall be exercised
after 7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Optional Shares, and
payment therefor, shall be made at the office of Xxxxx, Xxxxxxx & Xxxxxxxxx,
LLP, High Street Tower, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, at 10:00
a.m., Boston, Massachusetts time, on the third business day after the exercise
of such option.
(c) Payment for the shares purchased from the Company shall be made to
the Company or its order by (i) one or more certified or official bank check or
checks in next day funds (and the Company agrees not to deposit any such check
in the bank on which drawn until the day following the date of its delivery to
the Company or (ii) federal funds wire transfer. Such payment shall be made upon
delivery of certificates for the shares to you for the respective accounts of
the several Underwriters (including without limitation by "full-fast" electronic
transfer by Depository Trust Company) against receipt therefor signed by you.
Certificates for the shares to be delivered to you shall be registered in such
name or names and shall be in such denominations as you may request at least one
business day before the Closing Date, in the case of Firm Shares, and at least
one business day prior to the purchase thereof, in the case of the Optional
Shares. Such certificates will be made available to the Underwriters for
inspection, checking and packaging at the offices of the agent of Xxxxx, Xxxxx &
Company's clearing agent, Bear Xxxxxxx Securities Corp., on the business day
prior to the Closing Date or, in the case of the Optional Shares, by 3:00 p.m.,
New York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date or any later date on which Optional Shares
are purchased for the account of such Underwriter. Any such payment by you shall
not relieve such Underwriter from any of its obligations hereunder.
SECTION 5. COVENANTS OF THE COMPANY. The Company covenants and agrees as
follows:
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(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A and
(ii) not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the event of
(i) the request by the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company will
make every reasonable effort to prevent the issuance of such a stop order and,
if such an order shall at any time be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you
a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act. The
copies of the Registration Statement, any Preliminary Prospectus and the
Prospectus and any amendments or supplements to any of the foregoing furnished
or to be furnished to the Underwriters were or will be, as the case may be,
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to XXXXX, except to the extent otherwise permitted by
Regulation S-T.
(d) If at any time during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the shares,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the
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Prospectus as so supplemented or amended will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the time
such Prospectus is delivered to such purchaser, not misleading. If, after the
initial public offering of the shares by the Underwriters and during such
period, the Underwriters shall propose to vary the terms of offering thereof by
reason of changes in general market conditions or otherwise, you will advise the
Company in writing of the proposed variation, and, if in the opinion either of
counsel for the Company or of counsel for the Underwriters such proposed
variation requires that the Prospectus be supplemented or amended, the Company
will forthwith prepare and file with the Commission a supplement to the
Prospectus or an amended prospectus setting forth such variation. The Company
authorizes the Underwriters and all dealers to whom any of the shares may be
sold by the several Underwriters to use the Prospectus, as from time to time
amended or supplemented, in connection with the sale of the shares in accordance
with the applicable provisions of the Securities Act and the applicable rules
and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the shares for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified or where it would become
subject to taxation as a foreign corporation solely by virtue of such filing.
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 you may reasonably request for distribution of
the shares.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission (including the Report on Form SR required by Rule 463 of the
Commission under the Securities Act). If applicable, any such document furnished
to you will be identical to the electronically transmitted copy thereof filed
with the Commission pursuant to XXXXX, except to the extent permitted by
Regulation S-T.
(h) Not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the Effective Date, the
Company will make generally available to its security holders an earnings
statement in accordance with Section 11(a) of the Securities Act and Rule 158
thereunder.
(i) The Company agrees to pay, or cause to be paid, all costs and
expenses
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incident to the performance of their obligations under this Agreement, including
all costs and expenses incident to (i) the preparation, printing and filing with
the Commission and the National Association of Securities Dealers, Inc. ("NASD")
of the Registration Statement, any Preliminary Prospectus and the Prospectus,
(ii) the furnishing to the Underwriters and the persons designated by them of
copies of any Preliminary Prospectus and of the several documents required by
paragraph (c) of this Section 6 to be so furnished, (iii) the printing of this
Agreement and related documents delivered to the Underwriters, (iv) the
preparation, printing and filing of all supplements and amendments to the
Prospectus referred to in paragraph (d) of this Section 5, (v) the furnishing to
you and the Underwriters of the reports and information referred to in paragraph
(g) of this Section 5 and (vi) the printing and issuance of stock certificates,
including the transfer agent's fees.
(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements (including
reasonable counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel in
qualifying the shares under state securities or blue sky laws and in the review
of the offering by the NASD.
(k) The Company hereby agrees that, without the prior written approval
of Xxxxx, Xxxxx & Company, the Company will not during the period of one hundred
eighty (180) days after the date the Registration Statement becomes effective
(A) offer, sell, contract to sell, make any short sale (including without
limitation a short against the box), pledge or otherwise dispose of, directly or
indirectly, any shares of the Company's Common Stock, Class B Common Stock,
options to acquire Common Stock or Class B Common Stock or securities
convertible into or exchangeable for, or any other rights to purchase or
acquire, the Company's Common Stock or Class B Common Stock or (B) enter into
any swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of Common Stock or Class B Common Stock,
whether any such transaction described in (A) or (B) is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
lock-up restriction of the foregoing sentence shall not apply to (i) the shares
to be sold to the Underwriters pursuant to this Agreement (including without
limitation, the Optional Shares), (ii) the sale of shares purchased in the open
market after the date the Registration Statement becomes effective, (iii) the
issuance
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of options or warrants issued under currently existing plans or (iv) the
issuance of shares upon the exercise or conversion of outstanding options,
warrants or convertible securities during any such period. The foregoing lock-up
restriction is expressly agreed to preclude the Company from engaging in any
hedging or other transaction that is designed to or could reasonably be expected
to lead to, or result in, a disposition of Restricted Securities during the
applicable lock-up period even if such Restricted Securities would be disposed
of by the Company subsequent to the applicable lock-up period or by someone
other than the Company.
(l) If at any time during the 25-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 for the 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.
(m) The Company is familiar with the Investment Company Act of 1940,
as amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(n) The Company agrees to maintain directors' and officers' insurance
in amounts customary for the size and nature of the Company's business for a
period of two years from the date of this Agreement.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person (including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or the common law or otherwise (including in settlement of any litigation,
if such settlement is effected with the prior written consent of the Company),
and the Company agrees to reimburse each such Underwriter and controlling person
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration
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Statement (including the Prospectus as part thereof and any Rule 462(b)
registration statement) or any post-effective amendment thereto (including any
Rule 462(b) registration statement), or 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, (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) or the omission
or alleged omission to state therein 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) 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 or liability arising out of or
based upon matters covered by clause (i) or (ii) above; provided, however, that
(1) the indemnity agreement of the Company contained in this paragraph (a) shall
not apply to any such losses, claims, damages, liabilities or expenses if such
statement or omission was made in reliance upon and in conformity with
information furnished as herein stated or otherwise furnished in writing to the
Company by or on behalf of any Underwriter for use in any Preliminary Prospectus
or the Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, and (2) the indemnity agreement contained in this paragraph
(a) with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the shares which is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 5 hereof. The indemnity agreement of
the Company contained in this paragraph (a) and the representations and
warranties of the Company contained in Section 1 hereof shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any indemnified party and shall survive the delivery of and payment
for the shares.
(b) Each Underwriter severally and not jointly agrees to indemnify and
hold harmless the Company, each of its officers who signs the Registration
Statement on his own behalf or pursuant to a power of attorney, each of its
directors, each other Underwriter, and each person (including each partner or
officer thereof) who controls the Company, any such other Underwriter within the
meaning of Section 15 of the Securities Act, from and against any and all
losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the prior written consent of
each Underwriter) and to reimburse each of them for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against,
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the respective indemnified parties, in each case arising out of or based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) registration statement) or any post-effective
amendment thereto (including any Rule 462(b) registration statement) or 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 or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto) or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, if
such statement or omission was made in reliance upon and in conformity with
information furnished as herein stated or otherwise furnished in writing to the
Company by or on behalf of such indemnifying Underwriter for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment thereof or supplement thereto. The indemnity agreement of each
Underwriter contained in this paragraph (b) shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Shares.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 6 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (the "Notice") of such service
or notification to the party or parties from whom indemnification may be sought
hereunder. No indemnification provided for in such paragraphs shall be available
to any party who shall fail so to give the Notice if the party to whom such
Notice was not given was unaware of the action, suit, investigation, inquiry or
proceeding to which the Notice would have related and was prejudiced by the
failure to give the Notice, but the omission so to notify such indemnifying
party or parties of any such service or notification shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of such
indemnity agreement. Any indemnifying party shall be entitled at its own expense
to participate in the defense of any action, suit or proceeding against, or
investigation or inquiry of, an indemnified party. Any indemnifying party shall
be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (the "Notice of Defense") to the indemnified
party, to assume (alone or in conjunction with any other indemnifying party or
parties) the entire defense of such action, suit, investigation, inquiry or
proceeding, in which event such defense shall be conducted, at the expense of
the indemnifying party or parties, by counsel chosen by such indemnifying party
or parties and reasonably satisfactory to the indemnified party or parties;
provided, however, that (i) if the indemnified party or parties reasonably
determine that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses available to such indemnified party or parties different
from or in addition to those available to the indemnifying party or parties,
then counsel for the indemnified party or parties shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be necessary
to protect
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the interests of the indemnified party or parties and (ii) in any event, the
indemnified party or parties shall be entitled to have counsel chosen by such
indemnified party or parties participate in, but not conduct, the defense. If,
within a reasonable time after receipt of the Notice, an indemnifying party
gives a Notice of Defense and the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a) through
(c) of this Section 6 for any legal or other expenses subsequently incurred by
the indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding, except that (A) the indemnifying
party or parties shall bear the reasonable legal and other expenses incurred in
connection with the conduct of the defense as referred to in clause (i) of the
proviso to the preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel) and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time after receipt of the Notice, no
Notice of Defense has been given, the indemnifying party or parties shall be
responsible for any reasonable legal or other expenses incurred by the
indemnified party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 6, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 6 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same respective proportions as the total net proceeds from the
offering of the Shares received by the Company and the total underwriting
discount received by the Underwriters, as set forth in the table on the cover
page of the Prospectus, bear to the aggregate public offering price of the
Shares. 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 each indemnifying party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be 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 into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation,
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preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter. 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 paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 6).
(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or proceeding.
(f) Notwithstanding anything to the contrary contained in this
Agreement, the Principal Securityholders shall not be liable for any breach of
the representations and warranties contained in Section 1 hereof.
SECTION 7. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 6 of this Agreement, the Company hereby agrees to
reimburse on a monthly basis the Underwriters for all reasonable legal and other
expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 6 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 7 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be
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improper, the persons receiving such payments shall promptly refund them and
(ii) such persons shall provide to the Company, upon request, reasonable
assurances of their ability to effect any refund, when and if due.
SECTION 8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company pursuant to
the provisions of Section 9 and in accordance with Section 12, or if after the
date of this Agreement trading in the Common Stock shall have been suspended, or
if there shall have occurred (i) the engagement in hostilities or an escalation
of major hostilities by the United States or the declaration of war or a
national emergency by the United States on or after the date hereof, (ii) any
outbreak of hostilities or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
calamity, crisis or change in economic or political conditions in the financial
markets of the United States or the Company's industry sector would, in the
Underwriters' reasonable judgment, make the offering or delivery of the Shares
impracticable, (iii) suspension of trading in securities generally or a material
adverse decline in value of securities generally on the New York Stock Exchange,
the American Stock Exchange, or The Nasdaq Stock Market, or limitations on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such exchange or system, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of, or commencement of any proceeding or investigation by, any court,
legislative body, agency or other governmental authority which in the
Underwriters' reasonable opinion materially and adversely affects or will
materially or adversely affect the business or operations of the Company, (v)
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
Underwriters' reasonable opinion has a material adverse effect on the securities
markets in the United States. If this Agreement shall be terminated pursuant to
this Section 8, there shall be no liability of the Company to the Underwriters
and no liability of the Underwriters to the Company; provided, however, that in
the event of any such termination the Company agrees to indemnify and hold
harmless the Underwriters from all costs or expenses incident to the performance
of the obligations of the Company under this Agreement, including all costs and
expenses referred to in paragraphs (i) and (j) of Section 5 hereof.
SECTION 9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the shares shall be subject to the
performance by the Company of its respective obligations to be performed
hereunder at or prior to the Closing Date or any later date on which Optional
Shares are to be purchased, as the case may be, and to the following further
conditions:
(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the shares hereunder
and the validity and form of the certificates representing the shares, all
corporate proceedings and other legal
-22-
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matters incident to the foregoing, and the form of the Registration Statement
and of the Prospectus (except as to the financial statements contained therein),
shall have been approved at or prior to the Closing Date by Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP, counsel for the Underwriters.
(c) You shall have received from Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx,
counsel for the Company, and from Xxxxxx & Associates, patent counsel for the
Company, opinions, addressed to the Underwriters and dated the Closing Date,
covering the matters set forth in Annex A and Annex B hereto, respectively, and
if Optional Shares are purchased at any date after the Closing Date, additional
opinions from each such counsel, addressed to the Underwriters and dated such
later date, confirming that the statements expressed as of the Closing Date in
such opinions remain valid as of such later date.
(d) You shall be satisfied in your reasonable judgment that (i) as of
the Effective Date, the statements made in the Registration Statement and the
Prospectus were true and correct, and neither the Registration Statement nor the
Prospectus omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, respectively, not misleading;
(ii) since the Effective Date, no event has occurred which should have been set
forth in a supplement or amendment to the Prospectus which has not been set
forth in such a supplement or amendment; (iii) since the respective dates as of
which information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein; (iv) the
Commission has not issued any order preventing or suspending the use of the
Prospectus or any Preliminary Prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending the effectiveness
of the Registration Statement has been issued; and to the best knowledge of the
respective signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act; (v) neither the Company nor
any of its subsidiaries has any material contingent obligations which are not
disclosed in the Registration Statement and the Prospectus; (vi) there are not
any pending or known threatened legal proceedings to which the Company or any of
its subsidiaries is a party or of which property of the Company or any of its
subsidiaries is the subject which are material and which are not disclosed in
the Registration Statement and the Prospectus; (vii) there are not any
franchises, contracts, leases or other documents which are required to be filed
as exhibits to the Registration Statement which have not been filed as required;
and (viii) the representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later date on
which Optional Shares are to be purchased, as the case may be.
(e) You shall have received on the Closing Date and on any later date
on which Optional Shares are purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that
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the respective signers of said certificate have carefully examined the
Registration Statement in the form in which it originally became effective and
the Prospectus contained therein and any supplements or amendments thereto, and
that the statements included in clauses (i) through (viii) of paragraph (d) of
this Section 9 are true and correct.
(f) You shall have received from Xxxxxx Xxxxxxxx LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date, covering the
matters set forth in Annex C hereto, and any later date on which Optional Shares
are purchased, confirming that they are independent public accountants with
respect to the Company within the meaning of the Securities Act and the
applicable published rules and regulations thereunder and based upon the
procedures described in their letter delivered to you concurrently with the
execution of this Agreement (the "Original Letter"), but carried out to a date
not more than three business days prior to the Closing Date or such later date
on which Optional Shares are purchased (i) confirming, to the extent true, that
the statements and conclusions set forth in the Original Letter are accurate as
of the Closing Date or such later 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 the Original Letter or to
reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company or any of its subsidiaries which, in your sole judgment, makes it
impractical or inadvisable to proceed with the public offering of the shares or
the purchase of the Optional Shares as contemplated by the Prospectus.
(g) You shall have received from Xxxxxx Xxxxxxxx LLP a letter 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 at December 31, 1995, did not disclose
any weakness in internal controls that they considered to be material
weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 5 hereof.
(i) Prior to the Closing Date, the shares to be issued and sold by the
Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have received from all
parties listed on Schedule II attached hereto the agreement referred to in
Section 1(x).
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, counsel for the
Underwriters, shall be satisfied that they comply in form and scope.
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In case any of the conditions specified in this Section 9 shall not
be fulfilled, this Agreement may be terminated by you by giving written notice
to the Company. Any such termination shall be without liability of the Company
to the Underwriters and without liability of the Underwriters to the Company
provided, however, that in the event of such termination, the Company agrees
(i) to indemnify and hold harmless the Underwriters from all reasonable costs
or expenses incident to the performance of the obligations of the Company
under this Agreement, including all reasonable costs and expenses referred to
in paragraphs (i) and (j) of Section 5 hereof, and (ii) unless this Agreement
is terminated by reason of a default of any of the Underwriters, to reimburse
the Underwriters severally upon demand for all reasonable out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the transactions contemplated
hereby.
SECTION 10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation
of the Company to deliver the Shares shall be subject to the conditions that
(a) the Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall
not be fulfilled, this Agreement may be terminated by the Company by giving
written notice to you. Any such termination shall be without liability of the
Company to the Underwriters and without liability of the Underwriters to the
Company; provided, however, that in the event of any such termination the
Company agrees to indemnify and hold harmless the Underwriters from all
reasonable costs or expenses incident to the performance of the obligations of
the Company under this Agreement, including all reasonable costs and expenses
referred to in paragraphs (i) and (j) of Section 5 hereof.
SECTION 11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company, and the several Underwriters and, with
respect to the provisions of Section 6 hereof, the several parties (in addition
to the Company, and the several Underwriters) indemnified under the provisions
of said Section 6, and their respective personal representatives, successors
and assigns. Nothing in this Agreement is intended or shall be construed to
give to any other person, firm or corporation any legal or equitable remedy or
claim under or in respect of this Agreement or any provision herein contained.
The term "successors and assigns" as herein used shall not include any
purchaser, as such purchaser, of any of the shares from any of the several
Underwriters.
SECTION 12. NOTICES. Except as otherwise provided herein, all
communications hereunder shall be in writing or by telegraph and, if to the
Underwriters, shall be mailed, telegraphed or delivered to Xxxxx, Xxxxx &
Company, Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxx Xxxxxxxx; and if to the Company, shall be mailed,
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27
telegraphed or delivered to it at its office, Bitstream Inc., 000 Xxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx 00000, Attention: C. Xxxxxxx Xxxxxx, President and
Chief Executive Officer. All notices given by telegraph shall be promptly
confirmed by letter.
SECTION 13. MISCELLANEOUS. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or its directors or officers, and (c) delivery and
payment for the shares under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of the lock-
up agreements referred to in Section l(x) hereof and the provisions of
paragraphs (k) and (l) of Section 5 hereof shall be of no further force or
effect.
SECTION 14. 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 15. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 16. GENERAL. 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 several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company.
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29
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company and the several Underwriters,
including you, all in accordance with its terms.
Very truly yours,
BITSTREAM INC.
By:_____________________________________
Name:
Title:
PRINCIPAL SECURITYHOLDERS
By:_____________________________________
C. Xxxxxxx Xxxxxx
The foregoing Underwriting
Agreement is hereby confirmed By:____________________________________
San Francisco, California as of Xxxxxx X. Xxxxxxx
the date first above written.
XXXXX, XXXXX & COMPANY By:____________________________________
ADVEST, INC. Xxxxx X. Xxxx
Acting for ourselves and as
Representatives of the several By:____________________________________
Underwriters named in the Xxxx Xxxxxxxx
attached Schedule I
BY: XXXXX, XXXXX & COMPANY By:____________________________________
Xxxxx X. Xxxxxxx
By:_________________________________
Name:
Title:
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30
SCHEDULE I
UNDERWRITERS
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
----------------------------------------------------------------------
Xxxxx, Xxxxx & Company .............................
Advest, Inc. .......................................
Total ..................................... 2,100,000
=========
I-1
31
SCHEDULE II
SIGNATORIES OF 180-DAY LOCK-UP LETTER
Xxxxxx Xxxxx
BancBoston Ventures
BVB Grantor Retained Income Trust
Xxxxxx X. Xxxxxxx
Xxx Xxxxxx
Xxxx Xxxxxxx
Xxxx & Xxxxxx Xxxxxxx
Xxxxxxxx Xxxxxxxxx
Xxxx Xxxx
Xxxxxx Xxxxxx
Xxxx Xxxxxxxxx
Xxxxxx X. Xxxxxxx
Xxxxx Xxxxx
Xxxxx X. Xxxx
Xxxxx Held
Interfid Ltd.
X.X. Xxxxxx Capital Corp.
JHI Development Capital
Xxxx Xxxxxxxx
Xxxxxxx Xxxx
Xxxxx Xxxxx
Xxxxx X. Xxxxxxx
Xxx Xxxxx
Xxxxx Xxxxxx
Privest I, N.V.
Privest II, N.V.
Xxxxxxx Xxxxx
Xxxxx Xxxxxx
Xxxx Xxxxxx
Xxxxx X. Sole
Xxxxxxx X. Xxxxxxxx
Xxxxx Xxxxxxx
Xxxxx Xxx Xxxxx
Xxxxx Xxxxx
Xxxxxx Xxxxxxx
Xxx Xxxxxxxx
XX-1
32
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF
XXXXX XXXX XXXXX CONSTANT & XXXXXXXX
COUNSEL FOR THE COMPANY
AND THE SELLING SECURITYHOLDERS
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified as a foreign
corporation and in good standing in each state of the United States of America
in which the nature of its business or its ownership or leasing of property
requires such qualification (except where the failure to be so qualified would
not have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole (a "Material Adverse Effect")), and has full corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement; all of the issued and outstanding capital stock
of each of the subsidiaries of the Company (other than subsidiaries incorporated
under the laws of a foreign country) has been duly authorized and validly issued
and is fully paid and nonassessable, and, to the best of such counsel's
knowledge, is owned by the Company free and clear of all liens, encumbrances and
security interests, and to the best of such counsel's knowledge, no options,
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligations into shares of capital stock or
ownership interests in such subsidiaries are outstanding;
(ii) the authorized capital stock of the Company consists of
[_____________ shares of _____________ Stock, $_____ par value, of which there
are outstanding _____________ shares; all of such outstanding shares of capital
stock (including the Firm Shares and the Optional Shares issued, if any) have
been duly authorized and validly issued and are fully paid and nonassessable;
any Optional Shares purchased after the Closing Date have been duly authorized
and, when issued and delivered to, and paid for by, the Underwriters as provided
in the Underwriting Agreement, will be validly issued and fully paid and
nonassessable; and no preemptive rights of, or rights of refusal in favor of,
stockholders exist with respect to the Shares, or the issue and sale thereof,
pursuant to the Certificate of Incorporation or Bylaws of the Company or any
other instrument known to such counsel and, to the knowledge of such counsel,
there are no contractual preemptive rights that have not been waived, rights of
first refusal or rights of co-sale which exist with respect to the issue and
sale of the Shares by the Company;
(iii) the Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus is in effect and no proceedings for that
purpose have been instituted or are pending or contemplated by the Commission;
A-1
33
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply or complied as to form
in all material respects with the requirements of the Securities Act, and with
the rules and regulations of the Commission thereunder (in passing upon the
compliance as to the form of the Registration Statement and the Prospectus only
and without in anyway limiting the opinion of such counsel under paragraph (v)
below, such counsel may assume that all of the statements set forth in the
Registration Statement and the Prospectus are complete, true and correct in all
respects);
(v) such counsel have no reason to believe that the Registration
Statement (except as to the financial statements and schedules and other
financial data contained therein, as to which such counsel need not express any
opinion or belief) at the Effective Date contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus (except as to the financial statements and schedules and other
financial data contained therein, as to which such counsel need not express any
opinion or belief) as of its date or at the Closing Date (or any later date on
which Optional Shares are purchased), contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(vi) the information required to be set forth in the Registration
Statement in answer to Items 9, 10 (insofar as it relates to such counsel) and
11(c) of Form S-1 is to the best of such counsel's knowledge accurately and
adequately set forth therein in all material respects or no response is required
with respect to such Items and the description of the Company's stock option
plans and the options granted and which may be granted thereunder and the
options granted otherwise than under such plans set forth in the Prospectus
accurately and fairly presents in all material respects the information required
to be shown with respect to said plans and options to the extent required by the
Securities Act and the rules and regulations of the Commission thereunder;
(vii) to the best of such counsel's knowledge there are no franchises,
contracts, leases, documents or legal proceedings, pending or threatened, which
in the opinion of such counsel are of a character required to be described in
the Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not described or referred to therein or filed
as required;
(viii) the Underwriting Agreement has been duly authorized, executed
and delivered by the Company;
A-2
34
(ix) the Company has full corporate power and authority to enter into
the Underwriting Agreement and to sell and deliver the Shares to be sold by it
to the several Underwriters; the Underwriting Agreement is a valid and binding
agreement of the Company enforceable in accordance with its terms (such counsel
being entitled to assume the due execution and delivery of the Underwriting
Agreement by the Underwriters), except as enforceability may be limited by
general equitable principles, bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally and
except as to those provisions relating to indemnity or contribution for
liabilities arising under federal and state securities laws (as to which no
opinion need be expressed);
(x) the issue and sale by the Company of the Shares sold by the
Company as contemplated by the Underwriting Agreement will not conflict with, or
result in a breach of, or constitute a default under the Certificate of
Incorporation or Bylaws of the Company or any of its subsidiaries or any
agreement or instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which any of its properties may be bound or any
applicable law or regulation, or so far as is known to such counsel, any order,
writ, injunction or decree, of any jurisdiction, court or governmental
instrumentality applicable to the Company;
(xi) all holders of securities of the Company representing more than
1% of the outstanding shares of Common Stock having rights to the registration
of shares of Common Stock, or other securities, because of the filing of the
Registration Statement by the Company of which such counsel is aware have 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;
A-3
35
(xii) good and marketable title to the Shares under the Underwriting
Agreement, free and clear of all liens, encumbrances, equities, security
interests and claims, has been transferred to the Underwriters who have
severally purchased such Shares under the Underwriting Agreement, assuming for
the purpose of this opinion that the Underwriters purchased the same in good
faith without notice of any adverse claims;
(xiii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company
of the transactions contemplated in the Underwriting Agreement, except such as
have been obtained under the Securities Act and such as may be required under
state or foreign securities or blue sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the clearance of the offering
with the NASD; and
(xiv) the Shares issued and sold by the Company will be duly
authorized for listing by the Nasdaq National Market upon official notice of
issuance.
------------------------------------
Counsel rendering the foregoing opinion may rely as to factual matters
on certificates of officers of the Company and of government officials and the
representations and warranties of the Company contained in the Underwriting
Agreement provided, that such counsel shall state that they believe that both
they and the Underwriters are justified in relying upon such certificates,
representations and warranties.
In giving such opinion with respect to the matters covered by clause
(v) such counsel may state that their opinion is based upon their participation
in the preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto and review and discussion of the contents
thereof, but are without independent check or verification except as specified.
Counsel rendering the foregoing opinion may rely on an opinion or opinions of
other counsel retained by them, or the Company provided that (1) each such
counsel is acceptable to the Representatives, (2) such reliance and reliance
by the Representatives is expressly authorized by each opinion so relied upon,
and (3) each such opinion is in form and scope satisfactory to counsel for the
Underwriters. Copies of any opinions so relied upon shall be delivered to the
Representatives and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such counsel.
A-4
36
ANNEX B
MATTERS TO BE COVERED IN THE OPINION OF ___________
PATENT COUNSEL FOR THE COMPANY
Such counsel are familiar with the TrueDoc technology used by the Company
in its business and have read the Registration Statement and the Prospectus,
including particularly the portions of the Registration Statement and the
Prospectus referring to patents, copyrights, trade secrets, trademarks, service
marks and other proprietary information or materials and:
(i) such counsel have no reason to believe that the Registration Statement
or the Prospectus (A) contains any untrue statement of a material fact with
respect to any intellectual property including patents, copyrights, trade
secrets, trademarks, service marks or other proprietary information or materials
owned, licensed or used by the Company, or the manner of its use thereof, or any
allegation on the part of any person that the Company is infringing or has
misappropriated any patent rights, copyrights, trade secrets, trademarks,
service marks or other rights in proprietary information or materials or (B)
omits to state any material fact relating to patents, copyrights, trade secrets,
trademarks, service marks or other proprietary information or materials owned,
licensed or used by the Company, or the manner of its use thereof, that is
required to be stated in the Registration Statement or the Prospectus or is
necessary to make the statements therein not misleading;
OR
[(i) The statements in the Registration Statement and the Prospectus under
the caption[s] ["Intellectual Property and Proprietary Rights" and "Intellectual
Property,"] to the best of such counsel's knowledge and belief, are accurate and
complete statements or summaries of the matters therein set forth and nothing
has come to such counsel's attention that causes such counsel to believe that
the above-described portions of the Registration Statement and the Prospectus
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, in
light of the circumstances under which they were made, not misleading;]
(ii) to the best of such counsel's knowledge and except for patent
applications in examination before the United States, or a foreign, Patent
Office and as set forth in the Prospectus under the caption "_______________,"
there are no legal or governmental proceedings pending relating to the patent
rights, copyrights, trade secrets, trademarks, service marks or other
proprietary information or materials of the Company, and to the best of such
counsel's knowledge no such proceedings are threatened or contemplated by
governmental authorities or others;
(iii) such counsel do not know of any contracts or other documents,
relating to the Company's patents, copyrights, trade secrets, trademarks,
service marks or other proprietary
B-1
37
information or materials of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the Registration
Statement or the Prospectus that are not filed or described as required;
(iv) to the best of such counsel's knowledge, the Company is not
infringing or otherwise violating any patents, copyrights, trade secrets,
trademarks, service marks or other proprietary information or materials, of
others, and, except as set forth in the Prospectus, to the best of such
counsel's knowledge there are no infringements by others of any of the Company's
patents, copyrights, trade secrets, trademarks, service marks or other
proprietary information or materials of the Company except for a possible
infringement of TrueDoc by Ares Software Corp.; and
(v) to the best of such counsel's knowledge, the Company owns or possesses
sufficient licenses or other rights to use all patents, copyrights, trade
secrets, trademarks, service marks or other proprietary information or materials
necessary to conduct the business now being or proposed to be conducted by the
Company as described in the Prospectus.
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ANNEX C
Pursuant to Section 9(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its Subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of
the Act and the related published rules and regulations thereunder and
they have performed procedures specified in accordance with standards
specified by the American Institute of Certified Public Accountants
Statement No. 71 of the unaudited consolidated interim financial
statements, selected financial data and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been furnished to the representatives of the Underwriters (the
"Representatives");
(iii) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus
agrees with the corresponding amounts (after restatements where
applicable) in the audited consolidated financial statements for such five
fiscal years;
(iv) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believed that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder, or
are not in conformity with generally accepted accounting principles
applied on a basis substantially consistent with the basis for the
audited consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Prospectus;
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39
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any such
unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included in
the Prospectus;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived any unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included in
the Prospectus and referred to in Clause (B) were not determined on
a basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in
all material respects with the applicable accounting requirements of
the Act and the published rules and regulations thereunder or the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
(E) as of a specified date not more than three days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and upon conversions of convertible
securities, in each case which were outstanding on the date of the
latest financial statements included in the Prospectus) or any
increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
net assets or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with amounts shown in the latest balance sheet
included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred
or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net
revenues or operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
decreases or increases which the Prospectus discloses have occurred
or may occur or which are described in such letter; and
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40
(v) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of
minute books, inquiries and other procedures referred to in paragraphs
(iii) and (iv) above, they have carried out certain specified procedures,
not constituting an examination in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives, which are derived
from the general accounting records of the Company and its subsidiaries,
which appear in the Prospectus, or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the Representatives,
and have compared certain of such amounts, percentages and financial
information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
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