[Draft]
SonicWALL, Inc.
3,500,000 Shares of Common Stock
UNDERWRITING AGREEMENT
March ___, 2000
BEAR, XXXXXXX & CO. INC.
X.X. XXXXXX SECURITIES INC.
CHASE SECURITIES INC.
XXXXXX XXXXXX PARTNERS LLC
PACIFIC GROWTH EQUITIES, INC.
3,500,000 Shares of Common Stock
SonicWALL, Inc.
UNDERWRITING AGREEMENT
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March ___, 2000
Bear, Xxxxxxx & Co. Inc.
X.X. Xxxxxx Securities Inc.
Chase Securities Inc.
Xxxxxx Xxxxxx Partners LLC and
Pacific Growth Equities, Inc.
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
SonicWALL, Inc., a corporation organized and existing under the laws
of California (the "Company"), proposes, subject to the terms and conditions
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stated herein, to issue and sell to Bear, Xxxxxxx & Co. Inc. ("Bear Xxxxxxx"),
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X.X. Xxxxxx Securities Inc., Chase Securities Inc., Xxxxxx Xxxxxx Partners LLC
and Pacific Growth Equities, Inc., as representatives of the several
underwriters (collectively, the "Underwriters"), an aggregate of 1,750,000
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shares (the "Company Firm Shares"); and certain individuals identified on
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Schedule II hereto (each a "Selling Shareholder" and together the "Selling
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Shareholders") propose, subject to the terms and conditions stated herein, to
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sell to the Underwriters an aggregate of 1,750,000 shares (the "Selling
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Shareholder Firm Shares" and together with the Company Firm Shares, the "Firm
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Shares") of the Company's common stock, no par value per share (the "Common
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Stock"). In addition, for the sole purpose of covering over-allotments in
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connection with the sale of the Firm Shares, the Company proposes, at the option
of the Underwriters, to sell to the Underwriters, up to 250,000 shares (the
"Company Additional Shares") and certain of the Selling Shareholders propose, at
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the option of the Underwriters, to sell to the Underwriters, up to an aggregate
of 275,000 shares owned by such Selling Shareholders (the "Selling Shareholder
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Additional Shares" and together with the Company Additional Shares, the
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"Additional Shares") of Common Stock. The Company Firm Shares and the Company
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Additional Shares are collectively referred to herein as the "Company Shares,"
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and the Selling Shareholder Firm Shares and the Selling Shareholder Additional
Shares are collectively referred to herein as the "Selling Shareholder Shares."
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The Firm Shares
and any Additional Shares purchased by the Underwriters are referred to herein
as the "Shares". The Shares are more fully described in the Registration
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Statement referred to below.
1. Representations and Warranties of the Company and the Selling
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Shareholders.
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(a) The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(i) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1 (No. 333-30912), and any
amendments thereto, and related preliminary prospectuses for the registration
under the Securities Act of 1933 (the "Securities Act") of shares of common
stock, which registration statement, as so amended, has been declared effective
by the Commission and copies of which have heretofore been delivered to the
Underwriters. Such registration statement (and any registration statement
increasing the size of the offering (a "Rule 462(b) Registration Statement")
filed pursuant to Rule 462(b) under the Securities Act), in the respective forms
in which they were declared effective, as amended, including all exhibits
thereto, are each hereinafter referred to as the "Registration Statement". Other
than a Rule 462(b) Registration Statement, which became effective upon filing,
no other document with respect to the Registration Statement has heretofore been
filed with the Commission (other than prospectuses filed pursuant to Rule 424(b)
of the rules and regulations of the Commission under the Securities Act (the
"Securities Act Regulations"), each in the form heretofore delivered to the
Underwriters). No stop order suspending the effectiveness of either the
Registration Statement or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or, to the
Company's knowledge, threatened by the Commission. The Company, if required by
the Securities Act Regulations, proposes to file the Prospectus with the
Commission pursuant to Rule 424(b) of the Securities Act Regulations. The
Prospectus, in the form in which it is to be filed with the Commission pursuant
to Rule 424(b) of the Securities Act Regulations, is hereinafter referred to as
the "Prospectus", except that if any revised prospectus or prospectus supplement
shall be provided to the Underwriters by the Company for use in connection with
the offering and sale of the Shares (the "Offering") which differs from the
Prospectus (whether or not such revised prospectus or prospectus supplement is
required to be filed by the Company pursuant to Rule 424(b) of the Securities
Act Regulations), the term "Prospectus" shall refer to such revised prospectus
or prospectus supplement, as the case may be, from and after the time it is
first provided to the Underwriters for such use. Any preliminary prospectus or
prospectus subject to completion included in the Registration Statement or filed
with the Commission pursuant to Rule 424 under the Securities Act is hereafter
called a "Preliminary Prospectus". All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, a Preliminary
Prospectus and the Prospectus, or any amendments or supplements to any of the
foregoing, shall be deemed to include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
("XXXXX").
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(ii) The Registration Statement and the Prospectus, at the time the
Registration Statement became effective and as of the Closing Date referred to
in Section 2 hereof, complied and comply in all material respects with the
requirements of the Securities Act and the Securities Act Regulations, and did
not and as of the Closing Date do not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. The Prospectus, as of the date
hereof (unless the term "Prospectus" refers to a prospectus that has been
provided to the Underwriters by the Company for use in connection with the
offering of the Shares which differs from the Prospectus filed with the
Commission pursuant to Rule 424(b) of the Securities Act Regulations, in which
case at the time it is first provided to the Underwriters for such use) and on
the Closing Date, does not and will not include an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties in this
Section 1(ii) shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in conformity
with information relating to any Underwriter furnished to the Company in writing
by any Underwriter expressly for use in the Registration Statement or the
Prospectus. When the related Preliminary Prospectus, as described in Rule 430 of
the Securities Act Regulations, dated February 29, 2000 or thereafter filed with
the Commission (whether filed as part of the Registration Statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
of the Securities Act Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof or supplements thereto complied in all material respects with
the applicable provisions of the Securities Act and the Securities Act
Regulations and did not contain an 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, in light of the circumstances under
which they were made, not misleading. Each Preliminary Prospectus and Prospectus
filed as part of the Registration Statement, as part of any amendment thereto or
pursuant to Rule 424 under the Securities Act Regulations, if filed by
electronic transmission pursuant to XXXXX (except as may be permitted by
Regulation S-T under the Securities Act) was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sales of
the Shares. There are no contracts or other documents required to be described
in the Prospectus or to be filed as exhibits to the Registration Statement under
the Securities Act that have not been described or filed therein as required,
and there are no business relationships or related-party transactions involving
the Company or any subsidiary or any other person required to be described in
the Prospectus that have not been described therein as required.
(iii) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus. Each of the Company and each subsidiary is duly
qualified as a foreign corporation to transact business and is in good standing
in the State of California and each other jurisdiction in which such
qualification
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is required, whether by reason of the ownership or leasing of property or the
conduct of business, except for such jurisdictions (other than the State of
California) where the failure to so qualify or to be in good standing would not,
individually or in the aggregate, result in a material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the business, operations
or prospects, whether or not arising from transactions in the ordinary course of
business, of the Company and its subsidiaries, considered as one entity (any
such change is called a "Material Adverse Change"). Except for Sonic Systems
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International, Inc., the Company does not own or control, directly or
indirectly, any corporation, association or other entity.
(iv) All of the outstanding shares of capital stock of the Company
have been duly authorized, validly issued, and are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights. The
Company Shares, when issued, delivered and sold in accordance with this
Agreement, will be duly authorized and validly issued, fully paid and
nonassessable, and will not have been issued in violation of or subject to any
preemptive or similar rights. At December 31, 1999, after giving effect to the
issuance and sale of the Company Shares pursuant hereto and the application of
the net proceeds from the sale thereof, the Company had the pro forma
consolidated capitalization as set forth in the Prospectus under the caption
"Capitalization".
(v) All of the outstanding capital stock of each subsidiary of the
Company is owned, directly or indirectly, by the Company, free and clear of any
security interest, claim, lien, limitation on voting rights or encumbrance; and
all such securities have been duly authorized, validly issued, and are fully
paid and nonassessable and were not issued in violation of any preemptive or
similar rights.
(vi) Except as disclosed in the Prospectus, there are not currently,
and will not be as a result of the Offering, any outstanding subscriptions,
rights, warrants, calls, commitments of sale or options to acquire, or
instruments convertible into or exchangeable for, any capital stock or other
equity interest of the Company or any of its subsidiaries.
(vii) The Common Stock (including the Shares) is registered pursuant
to Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") and
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is listed for quotation on the Nasdaq National Market ("Nasdaq"), and the
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Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from Nasdaq, nor has the Company received any
notification that the Commission or Nasdaq is contemplating terminating such
registration or listing.
(viii) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby, including, without limitation,
the corporate power and authority to issue, sell and deliver the Company Shares
as provided herein and the power to effect the Use of Proceeds as described in
the Prospectus.
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(ix) This Agreement has been duly and validly authorized, executed and
delivered by the Company and is the legally valid and binding agreement of the
Company, enforceable against it in accordance with its terms, except insofar as
indemnification and contribution provisions may be limited by applicable law or
equitable principles and subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity (regardless of
whether the relevant proceeding is at law or in equity).
(x) Neither the Company nor any of its subsidiaries is, or, after
giving effect to the offering of the Shares, will be (a) in violation of its
charter, (b) in violation of its bylaws, (c) in default in the performance of
any bond, debenture, note, indenture, mortgage, deed of trust or other agreement
or instrument to which it is a party or by which it is bound or to which any of
its properties is subject, or (d) in violation of any local, state or federal
law, statute, ordinance, rule, regulation, requirement, judgment or court decree
applicable to the Company, its subsidiaries or any of their assets or properties
(whether owned or leased) other than, in the case of clauses (b), (c) and (d),
any default or violation that could not reasonably be expect to (1) individually
or in the aggregate, result in a material adverse effect on the properties,
business, results of operations, condition (financial or otherwise), affairs or
prospects of the Company and its subsidiaries, taken as a whole, (2) interfere
with or adversely affect the sale of the Shares pursuant hereto or (3) in any
manner draw into question the validity of this Agreement (any of the events set
forth in clauses (1), (2) or (3), a "Material Adverse Effect"). There exists no
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condition that, with notice, the passage of time or otherwise, would constitute
a default under any such document or instrument, except as disclosed in the
Prospectus, except for any such condition which would not reasonably be expected
to result in a Material Adverse Effect.
(xi) None of (a) the execution, delivery or performance by the Company
of this Agreement, (b) the issuance and sale of the Shares and (c) consummation
by the Company of the transactions contemplated hereby violate, conflict with or
constitute a breach of any of the terms or provisions of, or a default under (or
an event that with notice or the lapse of time, or both, would constitute a
default), or require consent which has not been obtained under, or result in the
imposition of a lien on any properties of the Company or any of its
subsidiaries, or an acceleration of any indebtedness of the Company or any of
its subsidiaries pursuant to, (1) the charter or bylaws of the Company or any of
its subsidiaries, (2) any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or its subsidiaries or their
properties is or may be bound, (3) any statute, rule or regulation applicable to
the Company or any of its subsidiaries or any of their assets or properties or
(4) any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company or any of its subsidiaries or any
of their assets or properties, except in the case of clauses (2), (3) and (4)
for such violations, conflicts, breaches, defaults, consents, impositions of
liens or accelerations that (x) would not singly, or in the aggregate, have a
Material Adverse Effect or (y) which are disclosed in the Prospectus. Other than
as described in the Prospectus, no consent, approval, authorization or order of,
or filing, registration, qualification, license or permit of or with, (A) any
court or governmental agency,
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body or administrative agency, or (B) any other person is required for (1) the
execution, delivery and performance by the Company of this Agreement, (2) the
issuance and sale of the Company Shares and the transactions contemplated
hereby, except (x) such as have been obtained and made under the Securities Act
and state securities or Blue Sky laws and regulations or such as may be required
by the NASD or (y) where the failure to obtain any such consent, approval,
authorization or order of, or filing registration, qualification, license or
permit would not reasonably be expected to result in a Material Adverse Effect.
(xii) Except as set forth in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to Company's knowledge,
threatened (a) against or affecting the Company or any of its subsidiaries, (b)
which has as the subject thereof any officer or director (in any such capacity)
of, or property owned or leased by, the Company or any of its subsidiaries or
(c) relating to environmental or discrimination matters, where in any such case
(1) there is a reasonable possibility that such action, suit or proceeding might
be determined adversely to the Company or such subsidiary and (2) any such
action, suit or proceeding, if so determined adversely, would reasonably be
expected to result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement. No material
labor dispute with the employees of the Company or any of its subsidiaries
exists or, to the Company's knowledge, is threatened or imminent.
(xiii) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Company Shares or prevents or suspends the use of
the Prospectus; no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued that prevents
the issuance of the Company Shares, prevents or suspends the sale of the Company
Shares in any jurisdiction referred to in Section 4(a)(iv) hereof or that could
adversely affect the consummation of the transactions contemplated by this
Agreement or the Prospectus; and every request of any securities authority or
agency of any jurisdiction for additional information has been complied with in
all material respects.
(xiv) Except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change, (a) to the
Company's knowledge, neither the Company nor any of its subsidiaries is in
violation of any federal, state, local or foreign law or regulation relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products (collectively, "Materials of Environmental
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Concern"), or otherwise relating to the manufacture, processing, distribution,
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use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of the
Company or its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or any
of its subsidiaries received any written communication, whether from a
6
governmental authority, citizens group, employee or otherwise, that alleges that
the Company or any of its subsidiaries is in violation of any Environmental Law;
(b) there is no claim, action or cause of action filed with a court or
governmental authority, no investigation with respect to which the Company or
any of its subsidiaries has received written notice, and no written notice by
any person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, attorneys' fees or penalties arising out of, based
on or resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location owned, leased or operated by
the Company or any of its subsidiaries, now or in the past (collectively,
"Environmental Claims"), pending or, to Company's knowledge, threatened against
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the Company or any of its subsidiaries or any person or entity whose liability
for any Environmental Claim the Company or any of its subsidiaries has retained
or assumed either contractually or by operation of law; and (c) to the Company's
knowledge, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that reasonably could result in a violation of any Environmental Law or
form the basis of a potential Environmental Claim against the Company or any of
its subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed either contractually or by operation of law.
(xv) The Company and each of its subsidiaries has (a) good and
marketable title to all of the properties and assets described in the Prospectus
or the financial statements included in the Prospectus as owned by it, free and
clear of all liens, charges, encumbrances and restrictions, except such as are
described in the Prospectus or as would not have a Material Adverse Effect, (b)
peaceful and undisturbed possession to the extent described in the Prospectus
under all material leases to which it is a party as lessee, (c) all licenses,
certificates, permits, authorizations, approvals, franchises and other rights
from, and has made all declarations and filings with, all federal, state and
local authorities all self-regulatory authorities and all courts and other
tribunals (each an "Authorization") necessary to engage in the business
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conducted by the Company and its subsidiaries in the manner described in the
Prospectus, except as described in the Prospectus and except insofar as the
failure to obtain any such Authorization would not reasonably be expected to
have a Material Adverse Effect, and no such Authorization contains a materially
burdensome restriction that is not disclosed in the Prospectus and (d) not
received any notice that any governmental body or agency is considering
limiting, suspending or revoking any such Authorization. Except where the
failure to be in full force and effect would not have a Material Adverse Effect,
all such Authorizations are valid and in full force and effect and the Company
and each of its subsidiaries is in compliance in all material respects with the
terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having jurisdiction with respect
thereto. All material leases to which the Company and each of its subsidiaries
is a party are valid and binding and no default by the Company or any of its
subsidiaries has occurred and is continuing thereunder and, to the Company's
knowledge, no material defaults by the landlord are existing under any such
lease that could reasonably be expected to result in a Material Adverse Effect.
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(xvi) Except as described in the Prospectus, the Company and its
subsidiaries own, possess or have the right to employ sufficient patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
software, systems or procedures), trademarks, service marks and trade names,
inventions, computer programs, technical data and information (collectively, the
"Intellectual Property Rights") reasonably necessary to conduct their businesses
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as now conducted. The Intellectual Property Rights presently employed by the
Company and its subsidiaries in connection with the businesses now operated by
them or which are proposed to be operated by them are owned, to the Company's
knowledge, free and clear of and without violating any right, claimed right,
charge, encumbrance, pledge, security interest, restriction or lien of any kind
of any other person and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing except as would not reasonably be
expected to have a Material Adverse Effect. To the Company's knowledge, the use
of the Intellectual Property in connection with the business and operations of
the Company and its subsidiaries does not infringe on the rights of any person,
except as could not reasonably be expected to have a Material Adverse Effect.
(xvii) None of the Company or any of its subsidiaries, or, or to the
knowledge of the Company, any of their respective officers, directors, partners,
employees, agents or affiliates or any other person acting on behalf of the
Company or any of its subsidiaries has, directly or indirectly, given or agreed
to give any money, gift or similar benefit (other than legal price concessions
to customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, official or employee of any
governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is or may be in a position to help or
hinder the business of the Company or any of its subsidiaries (or assist the
Company or any of its subsidiaries in connection with any actual or proposed
transaction) which (a) would reasonably be expected to subject the Company, or
any other individual or entity to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (b) if not given
in the past, would reasonably be expected to have had a Material Adverse Effect
or (c) if not continued in the future, would reasonably be expected to have a
Material Adverse Effect.
(xviii) All material tax returns required to be filed by the Company
and its subsidiaries in all jurisdictions have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities or that are due and payable
have been paid, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without penalty
or interest. To the knowledge of the Company, there are no material proposed
additional tax assessments against the Company or any of its subsidiaries or the
assets or property of the Company or any of its subsidiaries. The Company has
made adequate charges, accruals and reserves in the applicable financial
statements included in the Prospectus in respect of all federal, state and
foreign income and franchise taxes for all periods as to which
8
the tax liability of the Company or any of its consolidated subsidiaries has not
been finally determined.
(xix) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
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(xx) Except as disclosed in the Prospectus, there are no holders of
securities of the Company or any of its subsidiaries who, by reason of the
execution by the Company of this Agreement to which it is a party or the
consummation by the Company or any of its subsidiaries of the transactions
contemplated hereby, have the right to request or demand that the Company or any
of its subsidiaries register under the Securities Act or analogous foreign laws
and regulations securities held by them, other than such that have been duly
waived.
(xxi) The Company and its subsidiaries each maintain a system of
internal accounting controls sufficient to provide reasonable assurance that:
(a) transactions are executed in accordance with management's general or
specific authorizations; (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity in all material respects with
generally accepted accounting principles and to maintain accountability for
assets; and (c) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxii) Each of the Company and its subsidiaries are insured by
recognized, financially sound institutions with policies in such amounts and
with such deductibles and covering such risks as are customary for similarly
situated businesses including, but not limited to, policies covering real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction and acts of vandalism. The Company has no reason to
believe that it or any subsidiary will not be able (a) to renew its existing
insurance coverage as and when such policies expire or (b) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a Material
Adverse Change.
(xxiii) The Company has not (a) taken, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or (b) since the date of the
Preliminary Prospectus (1) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of, the Shares or (2) paid or agreed to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.
(xxiv) The Company and its subsidiaries and any "employee benefit
plan" (as defined under the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
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subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
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Company or a subsidiary, any member of any group of organizations described in
9
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder (the
"Code") of which the Company or such subsidiary is a member. No "reportable
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event" (as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its subsidiaries or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would have
any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither
the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (a) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(b) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(xxv) Except as otherwise disclosed in the Prospectus, subsequent to
the respective dates as of which information is given in the Prospectus: (a)
there has been no Material Adverse Change; (b) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; (c) there has been no dividend or distribution of
any kind declared, paid or made by the Company or, except for dividends paid to
the Company or other subsidiaries, any of its subsidiaries on any class of
capital stock or repurchase or redemption by the Company or any of its
subsidiaries of any class of capital stock; (d) there has been no capital
expenditure or commitment by the Company or any of its subsidiaries exceeding
$100,000, either individually or in the aggregate except in the ordinary course
of business as generally contemplated by the Prospectus; (e) there has been no
change in accounting methods or practices (including any change in depreciation
or amortization policies or rates) by the Company or any of its subsidiaries;
(f) there has been no revaluation by the Company or any of its subsidiaries of
any of their assets; (g) there has been no increase in the salary or other
compensation payable or to become payable by the Company or any of its
subsidiaries to any of their officers, directors, employees or advisors, nor any
declaration, payment or commitment or obligation of any kind for the payment by
the Company or any of its subsidiaries of a bonus or other additional salary or
compensation to any such person; (h) there has been no amendment or termination
of any material contract, agreement or license to which the Company or any
subsidiary is a party or by which it is bound; (i) there has been no waiver or
release of any material right or claim of the Company or any subsidiary,
including any write-off or other compromise of any material account receivable
of the Company or any subsidiary; and (j) there has been no change in pricing or
royalties set or charged by the Company or any subsidiary to their respective
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property Rights to the Company or any of its
subsidiaries.
10
(xxvi) PricewaterhouseCoopers LLP, who have expressed their opinion
with respect to the financial statements (which term as used in this Agreement
includes the related notes thereto) and supporting schedules included in the
Prospectus are independent public or certified public accountants within the
meaning of Regulation S-X under the Securities Act and the Exchange Act.
(xxvii) The financial statements, together with the related notes,
included in the Prospectus present fairly in all material respects the
consolidated financial position of the Company and its subsidiaries as of and at
the dates indicated and the results of their operations and cash flows for the
periods specified. Such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. The financial data set forth in the Prospectus under the
captions "Prospectus Summary--Summary Financial Data", "Selected Financial Data"
and "Capitalization" fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Prospectus.
(xxviii) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company and any other person that would
give rise to a valid claim against the Company or either of the Underwriters for
a brokerage commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Shares.
(xxix) The statements (including the assumptions described therein)
included in the Prospectus (a) are within the coverage of Rule 175(b) under the
Securities Act to the extent such data constitute forward looking statements as
defined in Rule 175(c) and (b) were made by the Company with a reasonable basis
and reflect the Company's good faith estimate of the matters described therein.
(xxx) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters pursuant to this
Agreement shall be deemed to be a representation and warranty by the Company to
the Underwriters as to the matters covered thereby.
(b) Each Selling Shareholder, severally and not jointly, represents and
warrants to, and agrees with the several Underwriters that:
(i) Such Selling Shareholder has duly executed and delivered, in
the form heretofore furnished to Bear Xxxxxxx, the Power of Attorney and Custody
Agreement; the custodian designated in the Custody Agreement is authorized to
deliver the Selling Shareholder Shares to be sold by the Selling Shareholder
hereunder and to accept payment therefor; and each Attorney-in-Fact is
authorized to execute and deliver this Agreement on behalf of such Selling
Shareholder, to sell, assign and transfer to the Underwriters the Selling
Shareholder Shares to be sold by such Selling Shareholder hereunder, to
determine the purchase price to be paid by the Underwriters to such Selling
Shareholder, to authorize the delivery of the Selling Shareholder Shares to be
sold by such Selling Shareholder hereunder, to
11
accept payment therefor, and otherwise to act on behalf of such Selling
Shareholder in connection with this Agreement.
(ii) The execution, delivery and performance of this Agreement and a
Power of Attorney (the "Power of Attorney") and Custody Agreement (the "Custody
----------------- -------
Agreement") by such Selling Shareholder and the consummation of the transactions
---------
contemplated hereby and thereby will not (A) conflict with or result in the
breach of any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a default)
or require consent under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of such Selling Shareholder
pursuant to the terms of, any agreement, instrument, franchise, license or
permit to which such Selling Shareholder is a party or by which such Selling
Shareholder or any of its property or assets may be bound including, without
limitation, the terms of any trust or similar agreement under which such Selling
Shareholder was formed, or (B) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over such Selling Shareholder or
its properties or assets.
(iii) Such Selling Shareholder has, and will have at the time of
delivery of the Selling Shareholder Shares to be sold by it, full legal right,
power, authority and capacity, and, except as required under the Securities Act
and state securities and Blue Sky laws, all necessary consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies and bodies,
as are required for the execution, delivery and performance of this Agreement,
the Power of Attorney and the Custody Agreement and the consummation of the
transactions contemplated hereby and thereby, including the sale, assignment,
transfer and delivery of the Selling Shareholder Shares to be sold, assigned,
transferred and delivered by such Selling Shareholder hereunder.
(iv) This Agreement, the Power of Attorney and the Custody Agreement
have been duly and validly authorized, executed and delivered by such Selling
Shareholder and, assuming the execution and delivery by the other parties hereto
and thereto, are the valid and binding obligations of such Selling Shareholder,
enforceable against such Selling Shareholder in accordance with its respective
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditor's rights generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and as limited by the unenforceability under certain circumstances under law or
court decisions of provisions providing for the indemnification of or
contribution to a party with respect to a liability where such indemnification
or contribution is contrary to public policy.
(v) Such Selling Shareholder has good, valid and marketable title to
the Selling Shareholder Shares to be sold by it pursuant to this Agreement, free
and clear of all liens, encumbrances, adverse claims, security interests,
restrictions on transfer (other than those imposed by the Securities Act and the
State Blue Sky laws of certain jurisdictions),
12
shareholders' agreements, voting trusts, options and other defects in title
whatsoever, with full power to deliver such Selling Shareholder Shares
hereunder, and, upon the delivery of and payment for such Selling Shareholder
Shares as herein contemplated, each of the Underwriters will receive good, valid
and marketable title to the Shares purchased by it from the Selling Shareholder,
free and clear of all liens, encumbrances, adverse claims, security interests,
restrictions on transfer (other than those imposed by the Securities Act and the
State Blue Sky laws of certain jurisdictions), shareholders' agreements, voting
trusts, options and other defects in title whatsoever.
(vi) Such Selling Shareholders has not taken, directly or
indirectly, any action designed to, or that might reasonably be expected to,
cause or result in stabilization or manipulation of the price of any security of
the Company or any of its subsidiaries to facilitate the sale or resale of the
Common Stock.
(vii) Except as disclosed in the Prospectus, the Selling Shareholder
(A) does not have any preemptive right, co-sale right or right of first refusal
or other similar right to purchase any of the Shares that are to be sold by to
the Underwriters pursuant to this Agreement, and (B) does not own any warrants,
options or similar rights to acquire, and does not have any right or arrangement
to acquire, any capital stock, rights, warrants, options or other securities
from the Company.
(viii) Except as disclosed in the Prospectus, the Selling Shareholder
does not possess any registration rights with respect to any securities of the
Company or its subsidiaries.
(ix) The Company and the Selling Shareholders acknowledge that each
of the Underwriters and, for purposes of the opinions to be delivered to the
Underwriters pursuant to Section 8 hereof, counsel to the Company, Counsel to
the Selling Shareholders and counsel to the Underwriters, will rely upon the
accuracy and truth of the foregoing representations and hereby consents to such
reliance.
(x) Certificates for all of the Selling Shareholder Shares to be
sold by such Selling Shareholder pursuant to this Agreement, in suitable form
for transfer by delivery or accompanied by duly executed instruments of transfer
or assignment in blank with signatures guaranteed, have been placed in custody
with the custodian designated in the Custody Agreement with irrevocable
conditional instructions to deliver such Selling Shareholder Shares to the
Underwriters pursuant to this Agreement.
(xi) Neither such Selling Shareholder nor any of its affiliates
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other association
with (within the meaning of Article I, Section 1(m) of the By-laws of the
National Association of Securities Dealers, Inc.), any member firm of the
National Association of Securities Dealers, Inc.
13
2. Purchase, Sale and Delivery of the Shares.
-----------------------------------------
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company and the Selling Shareholders severally and not jointly agree
to sell to the Underwriters and the Underwriters, severally and not jointly,
agree to purchase from the Company and the Selling Shareholders, at a purchase
price per share of $_____, the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any additional
number of Firm Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of certificates for,
the Firm Shares shall be made at the office of Bear, Xxxxxxx & Co. Inc., 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, or at such other place as shall be agreed upon
by the Underwriters and the Company, at 10:00 A.M. on March ___, 2000 (unless
postponed in accordance with the provisions of Section 9 hereof) after the
determination of the public offering price of the Firm Shares, or such other
time not later than ten business days after such date as shall be agreed upon by
the Underwriters and the Company (such time and date of payment and delivery
being herein called the "Closing Date"). Payment shall be made to the Company
and to the custodian designated by the Selling Shareholders in the Custody
Agreement by wire transfer in same day funds, against delivery to the
Underwriters of certificates for the Shares to be purchased by them.
Certificates for the Firm Shares shall be registered in such name or names and
in such authorized denominations as the Underwriters may request in writing at
least two full business days hours prior to the Closing Date. The Company and
the Selling Shareholders will permit the Underwriters to examine and package
such certificates for delivery at least one full business day prior to the
Closing Date.
(c) In addition, the Company hereby grants to the Underwriters the option
to purchase the Company Additional Shares, and the Selling Shareholders
identified on Schedule III hereto hereby collectively grant to the Underwriters
the option to purchase up to that number of Additional Shares identified on
Schedule III set forth next to such Selling Shareholder's name at the same
purchase price per share to be paid by the Underwriters to the Company and the
Selling Shareholders for the Firm Shares as set forth in this Section 2, for the
sole purpose of covering over-allotments in the sale of Firm Shares by the
Underwriters. This option may be exercised at any time, in whole or in part, on
or before the thirtieth day following the date of the Prospectus, by written
notice by the Underwriters to the Company and to such Selling Shareholders. Such
notice shall set forth the aggregate number of Additional Shares as to which the
option is being exercised and the date and time, as reasonably determined by the
Underwriters, when the Additional Shares are to be delivered (such date and time
being herein sometimes referred to as the "Additional Closing Date"); provided,
-----------------------
however, that the Additional Closing Date shall not be earlier than the Closing
Date or earlier than the second full business day after the date on which the
option shall have been exercised nor later than the eighth full business day
after the date on which the option shall have been exercised (unless such time
and date are postponed in accordance with the provisions of Section 9 hereof).
Certificates for the Additional Shares shall be registered in
14
such name or names and in such authorized denominations as the Underwriters may
request in writing at least two full business days prior to the Additional
Closing Date. The Company and each Selling Shareholder listed on Schedule III
will permit the Underwriters to examine and package such certificates for
delivery at least one full business day prior to the Additional Closing Date.
(d) The number of Additional Shares to be sold to each Underwriter shall
be the number that bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto (or such number increased as set forth
in Section 9 hereof) bears to the total number of Firm Shares being purchased
from the Company and the Selling Shareholders, subject, however, to such
adjustments to eliminate any fractional shares as the Underwriters in their sole
discretion shall make. If less than 525,000 Additional Shares are purchased, the
Underwriters shall purchase (i) one-half of the Additional Shares purchased from
the Company, and (ii) one-half of the Additional Shares purchased from the
Selling Shareholders in such proportion as is set forth on Schedule III.
(e) Payment for the Additional Shares shall be made by wire transfer in
same day funds each payable to the order of the Company and, in the case of the
Selling Shareholders, to the custodian designated by the Selling Shareholders on
behalf of the Selling Shareholders at the office of Bear, Xxxxxxx & Co. Inc.,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, or such other location as may be mutually
acceptable, upon delivery of the certificates for the Additional Shares to the
Underwriters.
3. Offering. Upon the Underwriters' authorization of the release of the
--------
Firm Shares, the Underwriters propose to offer the Shares for sale to the public
upon the terms set forth in the Prospectus.
4. Covenants of the Company and the Selling Shareholders.
-----------------------------------------------------
(a) The Company covenants and agrees with each of the Underwriters that:
(i) The Company will notify the Underwriters immediately (and, if
requested by the Underwriters, will confirm such notice in writing) (a) when any
post-effective amendment to the Registration Statement becomes effective, (b) of
any request by the Commission for any amendment of or supplement to the
Registration Statement or the Prospectus or for any additional information, (c)
of the mailing or the delivery to the Commission for filing of the Prospectus or
any amendment of or supplement to the Registration Statement or the Prospectus
or any document to be filed pursuant to the Exchange Act during any period when
the Prospectus is required to be delivered under the Securities Act, (d) of the
issuance by the Commission of any stop order suspending the effectiveness of
either Registration Statement or any post-effective amendment thereto or of the
initiation, or the threatening, of any proceedings therefor, (e) of the receipt
of any comments or inquiries from the Commission, and (f) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for that purpose. If the Commission shall propose or enter a stop
order at any time, the Company will make every reasonable effort to prevent the
issuance of any such stop order and, if issued, to obtain the lifting of such
order as soon as possible. The Company will not file any post-effective
15
amendment to the Registration Statement or any amendment of or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Shares which differs
from the prospectus filed with the Commission pursuant to Rule 424(b) of the
Securities Act Regulations, whether or not such revised prospectus is required
to be filed pursuant to Rule 424(b) of the Securities Act Regulations) to which
the Underwriters or Underwriters' Counsel (as hereinafter defined) shall
reasonably object, will furnish the Underwriters with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Underwriters or counsel for
the Underwriters shall reasonably object.
(ii) For such period of time as in the judgment of counsel for the
Underwriters a Prospectus is required to be delivered in connection with sales
by an Underwriter, any event shall occur as a result of which the Prospectus
would, in the judgment of counsel to the Underwriters (which may be internal
counsel for such Underwriter) or the Company include an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary at any
time to amend or supplement the Prospectus or either Registration Statement to
comply with the Securities Act or the Securities Act Regulations, the Company
will notify the Underwriters promptly and prepare and file with the Commission
an appropriate amendment or supplement (in form and substance satisfactory to
the Underwriters) which will correct such statement or omission or which will
effect such compliance.
(iii) The Company has delivered to the Underwriters four conformed
copies of the Registration Statement as originally filed, including exhibits,
and all amendments thereto, and the Company will promptly deliver to each of the
Underwriters, from time to time during the period that the Prospectus is
required to be delivered under the Securities Act, such number of copies of the
Prospectus and the Registration Statement, and all amendments of and supplements
to such documents, if any, as the Underwriters may reasonably request.
(iv) The Company will endeavor in good faith, in cooperation with
the Underwriters, to qualify the Shares for offering and sale under the
securities laws relating to the offering or sale of the Shares of such
jurisdictions as the Underwriters may reasonably designate and to maintain such
qualification in effect for so long as required for the distribution thereof;
except that in no event shall the Company be obligated in connection therewith
to qualify as a foreign corporation or to execute a general consent to service
of process.
(v) The Company will make generally available (within the meaning
of Section 11(a) of the Securities Act) to its security holders and to the
Underwriters as soon as practicable, but not later than 45 days after the end of
its fiscal quarter in which the first anniversary date of the effective date of
the Registration Statement occurs (or if such fiscal quarter is the Company's
fourth fiscal quarter, not later than 90 days after the end of such quarter), an
earnings statement (in form complying with the provisions of Rule 158 of the
16
Regulations) covering a period of at least twelve consecutive months beginning
after the effective date of the Registration Statement (as defined in Rule
158(c) under the Securities Act).
(vi) During the period of 90 days from the date of the Prospectus,
the Company will not, directly or indirectly, without the prior written consent
of Bear Xxxxxxx, offer, sell, contract to sell, grant any option to purchase,
pledge or otherwise dispose of, or, in any manner, transfer all or a portion of
the economic consequences associated with the ownership of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock, except that the Company may (a) issue shares of Common Stock and
options to purchase Common Stock under its 1998 and 1994 Stock Option Plans and
1999 Employee Stock Purchase Plans (as such terms are used in the Prospectus) in
the form in which they are in effect on the date of the Prospectus, (b) shares
of Common Stock upon exercise of warrants to purchase Common Stock that were
issued and outstanding on the date of the Prospectus, or (c) shares of Common
Stock issuable upon conversion of convertible securities that were issued and
outstanding on the date of the Prospectus.
(vii) During a period of three years from the date of the Prospectus,
the Company will furnish to the Underwriters copies of (a) all reports to its
shareholders; and (b) all reports, financial statements and proxy or information
statements filed by the Company with the Commission or any national securities
exchange.
(viii) The Company will apply the proceeds from the sale of the Shares
as set forth under "Use of Proceeds" in the Prospectus.
(ix) If the Company elects to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 A.M., Washington,
D.C. time, on the date of this Agreement, no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission, and all requests for additional information on the
part of the Commission shall have been complied with to the Underwriters'
reasonable satisfaction.
(x) The Company, during the period when the Prospectus is required
to be delivered under the Securities Act or the Exchange Act, will use
commercially reasonable efforts to file all documents required to be filed with
the Commission pursuant to Sections 13, 14 or 15 of the Exchange Act within the
time periods required by the Exchange Act and the rules and regulations
thereunder.
(b) Each Selling Shareholder covenants and agrees with each of the
Underwriters that:
(i) During the period of 90 days after the date of the Prospectus,
the Selling Shareholder will not, directly or indirectly, without the prior
written consent of Bear Xxxxxxx, offer, sell, contract to sell, grant any option
to purchase, pledge or otherwise dispose of, or, in any manner, transfer all or
a portion of the economic consequences associated with the
17
ownership of any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock, except that the Selling
Shareholder may make a disposition: (i) as a bona fide gift or gifts, provided
that the donee or donees thereof agree in writing to be bound by the terms of
the lock-up agreement signed by the Selling Shareholder of even date herewith;
(ii) as a distribution to limited partners or shareholders of the undersigned,
provided that the distributees thereof agree in writing to be bound by the terms
of the lock-up agreement signed by the Selling Shareholder of even date
herewith; (iii) if the undersigned is an individual, either during his or her
lifetime or on death by will or intestacy to his or her immediate family or to a
trust the beneficiaries of which are exclusively the undersigned and/or a member
or members of his or her immediate family, provided that prior to any such
transfer each transferee agrees in writing to be bound by the terms of the lock-
up agreement signed by the Selling Shareholder of even date herewith; (iv)
with respect to dispositions of common stock acquired on the open market or
(v) with respect to the delivery of common shares to the Company in connection
with the exercise of options issued on or prior to the date of the final
prospectus held by the Selling Shareholders under the Company's 1998 and 1994
Stock Option Plans.
(ii) The Selling Shareholder will deliver to Bear Xxxxxxx prior to
the Closing Date a properly completed and executed United States Treasury
Department Form W-8 (if the Selling Shareholder is a non-United States person)
or Form W-9 (if the Selling Shareholder is a United States person).
18
5. Payment of Expenses. Whether or not the transactions contemplated in
-------------------
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement, as originally filed and all amendments thereto (including all
exhibits thereto), any Preliminary Prospectus, the Prospectus and any amendments
or supplements thereto (including, without limitation, fees and expenses of the
Company's accountants and counsel), printing, duplicating and distributing the
underwriting documents (including this Agreement and the Agreement Among
Underwriters) and all other documents related to the public offering of the
Shares (including those supplied to the Underwriters in quantities as
hereinabove stated), (ii) the issuance, transfer and delivery of the Shares to
the Underwriters, including any transfer or other taxes payable thereon, (iii)
the qualification of the Shares under state or foreign securities or Blue Sky
laws, including the costs of printing and mailing a preliminary and final "Blue
Sky Memorandum" and the reasonable fees of counsel in connection therewith and
such counsel's disbursements in relation thereto, (iv) listing of the Shares for
quotation on the Nasdaq, (v) filing fees of the Commission and the NASD, (vi)
the cost of printing certificates representing the Shares, and (vii) the cost
and charges of any transfer agent or registrar.
6. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company and each Selling Shareholder herein contained, as of
the date hereof and as of the Closing Date (for purposes of this Section 6,
"Closing Date" shall refer to the Closing Date for the Firm Shares and any
Additional Closing Date, if different, for the Additional Shares), to the
absence from any certificates, opinions, written statements or letters furnished
to the Underwriters or to Xxxxxx & Xxxxxxx ("Underwriters' Counsel") pursuant to
this Section 6 of any material misstatement or omission, to the performance in
all material respects by the Company and each Selling Shareholder of its
respective obligations hereunder, and to all of the following additional
conditions:
(a) On the Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the Securities Act or
proceedings therefor initiated or, to the Company's knowledge, threatened by the
Commission. The Prospectus shall have been filed or transmitted for filing with
the Commission pursuant to Rule 424(b) of the Securities Act Regulations within
the prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Underwriters of such timely filing or
transmittal.
(b) All of the representations and warranties of the Company and each
Selling Shareholder contained in this Agreement shall be true and correct on the
date hereof and on the Closing Date with the same force and effect as if made on
and as of the date hereof and the Closing Date, respectively.
19
(c) The Prospectus shall have been printed and copies distributed to the
Underwriters not later than 10:00 A.M., New York City time, on the second
business day following the date of this Agreement or at such later date and time
as to which the Underwriters may agree, and no stop order suspending the
qualification or exemption from qualification of the Shares in any jurisdiction
referred to in Section 4(a)(iv) shall have been issued and no proceeding for
that purpose shall have been commenced or shall be pending or threatened.
(d) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Shares; no
action, suit or proceeding shall have been commenced and be pending against or
affecting or, to the best knowledge of the Company, threatened against, the
Company before any court or arbitrator or any governmental body, agency or
official that (1) could reasonably be expected to result in a Material Adverse
Effect and (2) has not been disclosed in the Prospectus.
(e) Since the respective dates as of which information is given in the
Prospectus, (i) there shall not have been any Material Adverse Change, or any
development that is reasonably likely to result in a Material Adverse Change, in
the capital stock or the long-term debt, or material increase in the short-term
debt, of the Company or any of its subsidiaries from that set forth in the
Prospectus, (ii) no dividend or distribution of any kind shall have been
declared, paid or made by the Company or any of its subsidiaries on any class of
its capital stock, other than as described in the Prospectus, (iii) neither the
Company nor any of its subsidiaries shall have incurred any liabilities or
obligations, direct or contingent, that are material, individually or in the
aggregate, to the Company and its subsidiaries, taken as a whole, and that are
required to be disclosed on the latest balance sheet or notes thereto included
in the Prospectus in accordance with generally accepted accounting principles
and are not so disclosed. Since the date hereof and since the dates as of which
information is given in the Prospectus, there shall not have occurred any
Material Adverse Effect.
(f) The Underwriters shall have received a certificate, dated the Closing
Date, signed on behalf of the Company by each of the Company's Chief Executive
Officer and Chief Financial Officer in form and substance reasonably
satisfactory to the Underwriters, confirming, as of the Closing Date, the
matters set forth in paragraphs (a), (b), (d) and (e) of this Section 6 and
that, as of the Closing Date, the obligations of the Company to be performed
hereunder on or prior thereto have been duly performed in all material respects.
(g) The Underwriters shall have received on the Closing Date an opinion,
dated the Closing Date, in form and substance satisfactory to the Underwriters
and counsel to the Underwriters, of Xxxxxx, Xxxxxx & Xxxxxxxx, LLP, counsel for
the Company, to the effect set forth in Exhibit A hereto.
---------
(h) The Underwriters shall have received on the Closing Date an opinion,
dated the Closing Date, in form and substance satisfactory to the Underwriters
and counsel to the
20
Underwriters, of Xxxxxx, Xxxxxx & Xxxxxxxx, LLP, counsel to the Selling
Shareholders to the effect set forth in Exhibit A hereto.
---------
(i) All proceedings taken in connection with the sale of the Firm Shares
and the Additional Shares as herein contemplated shall be in form and substance
reasonably satisfactory to the Underwriters and to Underwriters' Counsel, and
the Underwriters shall have received from Underwriters' Counsel a favorable
opinion, dated as of the Closing Date with respect to the issuance and sale of
the Shares, the Registration Statement and the Prospectus and such other related
matters as the Underwriters may reasonably require, and the Company shall have
furnished to Underwriters' Counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(j) At the time this Agreement is executed and at the Closing Date, the
Underwriters shall have received a letter from PricewaterhouseCoopers LLP,
independent public accountants for the Company, dated, respectively, as of the
date of this Agreement and as of the Closing Date addressed to the Underwriters
and in form and substance reasonably satisfactory to the Underwriters,
containing statements and information of the type ordinarily included in
auditors' "comfort letters" to underwriters with respect to financial statements
and certain information of the Company and its subsidiaries contained or
incorporated by reference (if any) in the Registration Statement and the
Prospectus.
(k) At the time this Agreement is executed, the Underwriters shall have
received a "lock-up" agreement, substantially in the form attached as Exhibit B
---------
hereto, from each of the executive officers of the Company and the Selling
Shareholders.
(l) At the Closing Date, the Shares shall have been approved for quotation
on the Nasdaq.
(m) At the time this Agreement is executed and at the Closing Time, the
NASD shall not have withdrawn, or given notice of an intention to withdraw, its
approval of the fairness of the underwriting terms and arrangements of the
offering of the Shares by the Underwriters.
(n) All opinions, certificates, letters and other documents required by
this Section 6 to be delivered by the Company and each Selling Shareholder will
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Underwriters. The Company and each
Selling Shareholder will furnish the Underwriters with such conformed copies of
such opinions, certificates, letters and other documents as Bear Xxxxxxx shall
reasonably request. Prior to the Closing Date, the Company and each Selling
Shareholder shall have furnished to the Underwriters such further information,
certificates and documents as the Underwriters may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to the Underwriters or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to the
21
Underwriters and to Underwriters' Counsel, all obligations of the Underwriters
hereunder may be canceled by the Underwriters at, or at any time prior to, the
Closing Date and the obligations of the Underwriters to purchase the Additional
Shares may be canceled by the Underwriters at, or at any time prior to, the
Additional Closing Date. Notice of such cancellation shall be given to the
Company and each Selling Shareholder in writing or by telephone, telex or
telegraph, confirmed in writing.
7. Indemnification.
----------------
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act against any and
all losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing for or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
either Registration Statement, as originally filed or any amendment thereof, or
any related preliminary prospectus or the Prospectus, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that the Company will not be liable in any such case to the extent but only to
the extent that any such loss, liability, claim, damage or expense arises out of
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any
Underwriter through the Representatives expressly for use therein. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have including under this Agreement.
(b) Each Selling Shareholder agrees, severally and not jointly, to
indemnify and hold harmless each Underwriter, its directors, its officers and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to each Underwriter, but only with
reference to information relating to such Selling Shareholder furnished in
writing by or on behalf of such Selling Shareholder expressly for use in the
Registration Statement, the prospectus or any preliminary prospectus.
Notwithstanding the foregoing, the aggregate liability of such Selling
Shareholder pursuant to the provisions of this paragraph shall be limited to an
amount equal to the total proceeds (before deducting underwriting discounts and
commissions and expenses) received by such Selling Shareholder from the sale of
Selling Shareholder Shares owned by it hereunder.
(c) Each Underwriter severally, and not jointly, agrees to indemnify and
hold harmless the Company, each of the directors of the Company, each of the
officers of the
22
Company who shall have signed the Registration Statement, and each other person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, and each Selling
Shareholder against any and all losses, liabilities, claims, damages and
expenses whatsoever as incurred (including but not limited to attorneys' fees
and any and all expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in either Registration Statement, as originally filed or
any amendment thereof, or any related preliminary prospectus, preliminary
prospectus supplement or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through Bear, Xxxxxxx & Co. Inc. expressly for use
therein; provided, however, that in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount applicable to
the Shares purchased by such Underwriter hereunder. This indemnity will be in
addition to any liability which any Underwriter may otherwise have including
under this Agreement.
(d) Promptly after receipt by an indemnified party under Subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve the indemnifying
party from any liability which it may have under this Section 7, except to the
extent that the indemnifying party has been prejudiced in any material respect
by such failure or from any liability that it may have otherwise). In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case
23
the indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this Subsection to the contrary notwithstanding, an indemnifying party shall not
be liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
8. Contribution. In order to provide for contribution in circumstances
------------
in which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company and the Selling
Shareholders, on the one hand, and the Underwriters, on the other hand, shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company or the Selling Shareholders any
contribution received by the Company or the Selling Shareholders from persons,
other than the Underwriters, who may also be liable for contribution, including
persons who control the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, officers of the Company who
signed the Registration Statement and directors of the Company) as incurred to
which the Company, the Selling Shareholders and one or more of the Underwriters
may be subject, in such proportions as is appropriate to reflect the relative
benefits received by the Company, the Selling Shareholders and the Underwriters
from the offering of the Shares or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 7 hereof,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company, the Selling
Shareholders and the Underwriters in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Selling Shareholders, on the one hand, and the
Underwriters, on the other hand, shall be deemed to be in the same proportion as
(x) the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and the
Selling Shareholders and (y) the underwriting discounts and commissions received
by the Underwriters, respectively, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company and the Selling
Shareholders, on the one hand, and the Underwriters, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Selling Shareholders and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable
24
considerations referred to above. Notwithstanding the provisions of this Section
8, (i) in no case shall any Underwriter be liable or responsible for any amount
in excess of the underwriting discount applicable to the Shares purchased by
such Underwriter hereunder, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section 8
and the preceding sentence, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 8, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act shall have the same rights to contribution
as such Underwriter, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 8. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties, notify each party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.
9. Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if the
Firm Shares or Additional Shares with respect to which such default relates do
not (after giving effect to arrangements, if any, made by the Underwriters
pursuant to Subsection (b) below) exceed in the aggregate 10% of the number of
Firm Shares or Additional Shares, the Firm Shares or Additional Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase shall be purchased by the non-defaulting Underwriters in proportion to
the respective proportions which the numbers of Firm Shares set forth opposite
their respective names in Schedule I hereto bear to the aggregate number of Firm
Shares set forth opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of the Firm
Shares or Additional Shares, as the case may be, the Underwriters may in their
discretion arrange for themselves or for another party or parties (including any
non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such default relates
on the terms contained herein. In the event that within 5 calendar days after
such a default the Underwriters do not arrange for the purchase of the
25
Firm Shares or Additional Shares, as the case may be, to which such default
relates as provided in this Section 9, this Agreement, or in the case of a
default with respect to the Additional Shares, the obligations of the
Underwriters to purchase and of the Company and the Selling Shareholders to sell
the Additional Shares, shall thereupon terminate, without liability on the part
of the Company or the Selling Shareholders with respect thereto (except in each
case as provided in Section 5, 7(a) and 8 hereof) or the Underwriters, but
nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters
of its or their liability, if any, to the other Underwriters, the Company and
the Selling Shareholders for damages occasioned by its or their default
hereunder.
(c) In the event that the Firm Shares or Additional Shares to which the
default relates are to be purchased by the non-defaulting Underwriters, or are
to be purchased by another party or parties as aforesaid, the Underwriters, the
Company or the Selling Shareholders shall have the right to postpone the Closing
Date or Additional Closing Date, as the case may be for a period, not exceeding
five business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment or supplement to the Registration Statement or the Prospectus which,
in the opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 9 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares or Additional
Shares.
10. Survival of Representations and Agreements. All representations and
------------------------------------------
warranties, covenants and agreements of the Underwriters, the Company and each
Selling Shareholder contained in this Agreement, including the agreements
contained in Section 5, the indemnity agreements contained in Section 7 and the
contribution agreements contained in Section 8, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any controlling person thereof or by or on behalf of the
Company, any of its officers and directors, or any controlling person of the
Company or any Selling Shareholder, and shall survive delivery of and payment
for the Shares to and by the Underwriters. The representations contained in
Section 1 and the agreements contained in Sections 5, 7, 8, 11(d) and 12 hereof
shall survive the termination of this Agreement, including termination pursuant
to Section 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective upon the execution and delivery
of a counterpart hereof by each of the parties hereto.
(b) The Underwriters shall have the right to terminate this Agreement at
any time prior to the Closing Date or the obligations of the Underwriters to
purchase the Additional Shares at any time prior to the Additional Closing Date,
as the case may be, if on or prior to such date, (i) the Company or any Selling
Shareholder shall have failed, refused or been unable to perform in any material
respect any agreement on its respective part to be performed
26
hereunder, (ii) any other condition to the obligations of the Underwriters
hereunder as provided in Section 6 is not fulfilled when and as required in any
material respect, (iii) in the reasonable judgment of the Underwriters any
Material Adverse Change shall have occurred since the respective dates as of
which information is given in the Prospectus, other than as set forth in the
Prospectus, (iv) any downgrading shall have occurred in the rating accorded the
Company's debt securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes of Rule
436(g)(2) under the Securities Act, or any such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities, or (v)(A) any
domestic or international event or act or occurrence has materially disrupted,
or in the opinion of the Underwriters will in the immediate future materially
disrupt, the market for the Company's securities or for securities in general;
or (B) trading in securities generally on the New York Stock Exchange ("NYSE")
----
or quotations on the Nasdaq shall have been suspended or materially limited, or
minimum or maximum prices for trading shall have been established, or maximum
ranges for prices for securities shall have been required, on such exchange, or
by such exchange or other regulatory body or governmental authority having
jurisdiction; or (C) a banking moratorium shall have been declared by federal or
state authorities, or a moratorium in foreign exchange trading by major
international banks or persons shall have been declared; or (D) there is an
outbreak or escalation of armed hostilities involving the United States on or
after the date hereof, or if there has been a declaration by the United States
of a national emergency or war, the effect of which shall be, in the
Underwriters' judgment, to make it inadvisable or impracticable to proceed with
the offering, sale and delivery of the Firm Shares or the Additional Shares, as
the case may be, on the terms and in the manner contemplated by the Prospectus;
or (E) there shall have been such a material adverse change in general economic,
political or financial conditions or if the effect of international conditions
on the financial markets in the United States shall be such as, in the
Underwriters' judgment, makes it inadvisable or impracticable to proceed with
the offering, sale and delivery of the Firm Shares or the Additional Shares, as
the case may be, on the terms and in the manner contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, telegraph or telephonic facsimile, confirmed in writing by
letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (other than pursuant to Section 9(b) or 11(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company or any Selling Shareholder to perform any agreement herein or comply
with any provision hereof, the Company will, subject to demand by the
Underwriters, reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of their counsel), incurred by the Underwriters
in connection herewith.
12. Underwriters' Information. The Company, the Selling Shareholders and
-------------------------
the Underwriters severally acknowledge that the statements set forth in (i) the
fourth paragraph under the caption "Underwriting" in the Prospectus concerning
the proposed public offering
27
price, discount and concession; and (ii) the ninth paragraph under the caption
"Underwriting" in the Prospectus concerning transactions that stabilize,
maintain or otherwise affect the price of the Common Stock, constitute the only
information furnished in writing by or on behalf of any Underwriter expressly
for use in the Registration Statement, as originally filed or in any amendment
thereof, any related preliminary prospectus or preliminary prospectus supplement
or the Prospectus or in any amendment thereof or supplement thereto, as the case
may be.
13. Notices. All communications hereunder, except as may be otherwise
-------
specifically provided herein, shall be in writing and, if sent to the
Underwriters shall be mailed, delivered, or telexed, telegraphed or telecopied
and confirmed in writing to Bear, Xxxxxxx & Co. Inc., X.X. Xxxxxx Securities
Inc., Chase Securities Inc., Xxxxxx Xxxxxx Partners LLC, and Pacific Growth
Equities, Inc. c/o Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Corporate Finance Department, telecopy number: (000) 000-0000,
with a copy, which shall not constitute notice, to Xxxxxx & Xxxxxxx, Attn:
Xxxxxxx X. Xxxxxx, 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx
00000; telecopy number: (000) 000-0000; and if sent to the Company, shall be
mailed, delivered or telexed, telegraphed or telecopied and confirmed in writing
to SonicWALL, Inc., 0000 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, Attention:
Chief Executive Officer, telecopy number: (000) 000-0000, with a copy, which
shall not constitute notice, to Xxxxxx, Xxxxxx & Xxxxxxxx, LLP Attn: Xxxxxxx X.
Xxxxxxxxxxx, telecopy number: (000) 000-0000.
14. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, the Underwriters, the Selling Shareholders, the Company
and the controlling persons, directors, officers, employees and agents referred
to in Section 7 and 8, and their respective successors and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained. The term "successors and assigns" shall not include a
purchaser, in its capacity as such, of Shares from any of the Underwriters.
15. GOVERNING LAW; Construction. This Agreement shall be construed in
---------------------------
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed within such State, without giving any effect
to any provisions thereof relating to conflicts of law. TIME IS OF THE ESSENCE
IN THIS AGREEMENT.
16. Captions. The captions included in this Agreement are included solely
--------
for convenience of reference and are not to be considered a part of this
Agreement.
17. Counterparts. This Agreement may be executed in various counterparts,
------------
which together shall constitute one and the same instrument.
28
If the foregoing correctly sets forth the understanding among the
Underwriters, each Selling Shareholder and the Company, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
SonicWALL, Inc.
By: __________________________
Name:
Title:
Selling Shareholders
By: __________________________
Name:
Title: Attorney In Fact
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
X.X. XXXXXX SECURITIES INC.
CHASE SECURITIES INC.
XXXXXX XXXXXX PARTNERS LLC
PACIFIC GROWTH EQUITIES, INC.
BEAR, XXXXXXX & CO. INC.
By: __________________________
Name:
Title:
SCHEDULE I
Number of Firm
Name of Underwriter Shares to be Purchased
------------------- ----------------------
Bear, Xxxxxxx & Co. Inc................................
X.X. Xxxxxx Securities Inc.............................
Chase Securities Inc...................................
Xxxxxx Xxxxxx Partners LLC.............................
Pacific Growth Equities, Inc...........................
Total.............................................
----------------
SCHEDULE II
Selling Shareholders Selling Shareholder Firm Shares
-------------------- -------------------------------
Xxxx Xxxx.................................... 100,000
Xxxxx Xxxx................................... 10,000
Xxxxxxx Xxxxxxx.............................. 450,000
Xxxxx Xxxxxxxxx.............................. 10,000
Xxxxxxxx Xxxxxx.............................. 10,000
Xxxxxx X. Xxxxxxxxx.......................... 60,000
Xxxxxxxxx Xxxx............................... 500,000
Xxxxxxxxx Xxxx 1999 POT Trust................
Xxxxxxxx Xxxx................................ 500,000
Xxxxxxxx and Xxxxxxxx Xxxx 1999 Trust........
Xxxxx Xxxxxxxxx.............................. 100,000
Xxxxxxxx Xxxxxxx............................. 10,000
SCHEDULE III
Selling Shareholders Selling Shareholder Additional Shares
-------------------- -------------------------------------
Xxxx Xxxx............................. 22,917
Xxxxxxxxx Xxxx........................ 114,583
Xxxxxxxx Xxxx......................... 114,583
Xxxxx Xxxxxxxxx....................... 22,917
Exhibit A
Form of Opinion of Manatt, Xxxxxx & Xxxxxxxx, LLP
1. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of California, and
has the corporate power and authority to own its property and to conduct
its business as described in the Prospectus. The Company is duly qualified
to transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect
on the Company on a consolidated basis.
2. Sonic Systems International, Inc. is a corporation duly incorporated
and validly existing as a corporation in good standing under the laws of
the State of Delaware and has all requisite corporate power and authority
to carry on its business as it is currently being conducted and as
described in the Prospectus and to own, lease and operate its properties.
Sonic Systems International, Inc. is duly qualified and in good standing as
a foreign corporation authorized to do business in each jurisdiction in
which the nature of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect
on the Company on a consolidated basis.
3. All of the outstanding shares of capital stock of the Company have
been, to such counsel's knowledge, duly authorized and validly issued, are
fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights contained in the Amended and Restated Articles
of Incorporation, Bylaws of the Company or any Reviewed Agreement (as
defined). As of December 31, 1999, the authorized, issued and outstanding
capital stock of the Company is, to such counsel's knowledge, as set forth
in the Prospectus in the column entitled "Actual" under the caption
"Capitalization.
4. To such counsel's knowledge, there are not currently, and will not be
following the offering of the Shares, any outstanding subscriptions,
rights, warrants, calls, commitments of sale or options to acquire, or
instruments convertible into or exchangeable for, any capital stock or
other equity interest of the Company, except as described in the Prospectus
and except as contained in the Amended and Restated Articles of
Incorporation, Bylaws of the Company or any Reviewed Agreement.
5. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby, including,
without limitation, the corporate power and authority to issue, sell and
deliver the Firm Shares.
6. This Agreement has been duly and validly authorized, executed and
delivered by the Company.
7. The execution and delivery by the Company of, and the performance by
the Company of its obligations under, this Agreement and the issuance and
sale of the Firm Shares will not contravene any provision of (a) the
California General Corporation Law or any federal statute, rule or
regulation known to such counsel to be applicable to the Company (other
than federal or state securities laws, which are specifically addressed
elsewhere herein) (b) the Amended and Restated Articles of Incorporation or
Bylaws of the Company, (c) any Reviewed Agreement (as defined) binding upon
the Company that is material to the Company on a consolidated basis or (d)
to such counsel's knowledge, any order, judgment, or decree of any
governmental body, agency or court having jurisdiction over the Company. No
consent, approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by the Company
or, to such counsel's knowledge, the Selling Shareholders of their
respective obligations under this Agreement, except such as has been
obtained under the Securities Act and as may be required by the securities
or "Blue Sky" laws of the various states in connection with the offer and
sale of the Firm Shares as contemplated by the Prospectus, as to which such
counsel need express no opinion.
8. Upon (i) payment for the Selling Shareholder Shares in accordance with
the terms of this Agreement, (ii) delivery of the Selling Shareholder
Shares to EquiServe Trust Company, N.A., as registrar and transfer agent,
(iii) delivery of the Selling Shareholder Shares to DTC, and registration
of the Selling Shareholder Shares in the name of DTC upon registration of
transfer by the issuer thereof, (iv) registration by book-entry of the
credit to the Bear, Xxxxxxx & Co. Inc.'s securities accounts with DTC of
the purchase of the Selling Shareholder Shares in the records of DTC, and
(v) registration by book-entry of the credit to the other Underwriters'
securities accounts of their purchase of the Selling Shareholder Shares in
the records of any other "securities intermediary" (as defined in Section
8102(a)(14) of the California Commercial Code (the "California UCC") which
acts as a "clearing corporation" (as defined in Section 8102(a)(5) of the
California UCC) or maintains "securities accounts" (as defined in Section
8501(a) of the California UCC) with respect to the transfer of the Selling
Shareholder Shares to the Underwriters, then the Underwriters will become
the "entitlement holders" (as defined in Section 8102(a)(7) of the
California UCC) of the Selling Shareholder Shares, to such counsel's
knowledge, free of any "adverse claims" (as defined in Section 8102(a)(1)
of the California UCC).
ii
9. The Company is not and, after giving effect to the offering of the
Shares and the application of the proceeds therefrom as described in the
Prospectus, 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.
10. The Registration Statement, Preliminary Prospectus and Prospectus
comply as to form in all material respects with the requirements for
registration statements on Form S-1 under the Securities Act and the
Securities Act Regulations; it being understood, however, that such counsel
need not express an opinion with respect to the financial statements and
schedules and other financial data included in the Registration Statement,
Preliminary Prospectus or Prospectus. To such counsel's knowledge, there
are no contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein, and, to such counsel's knowledge, the
descriptions thereof or references thereto are correct in all material
respects.
11. Except as set forth in this Agreement, to such counsel's knowledge,
there are no holders of securities of the Company who, by reason of the
execution by the Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby, have the right to request
or demand that the Company register securities held by them under the
Securities Act.
12. To such counsel's knowledge, there is no legal or governmental
proceeding pending or threatened to which the Company or any of its
Subsidiaries is a party or to which any of the properties of the Company or
any of its Subsidiaries is subject other than proceedings fairly summarized
in all material respects in the Prospectus and proceedings which such
counsel believes are not likely to have a Material Adverse Effect on the
Company and its subsidiaries, taken as a whole, or on the power or ability
of the Company to perform its obligations under this Agreement or to
consummate the offering of the Shares as contemplated by the Prospectus.
13. The statements contained in the Prospectus under the captions
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources", "Management--Director and
Officer Indemnification and Liability", "Management--Employee Benefit
Plans", and "Description of Capital Stock", in each case, insofar as such
statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information required
with respect to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein in all material respects.
14. Such counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent
certified public accountants of the Company and the Underwriters and its
representatives at which the
iii
contents of the Registration Statement, Preliminary Prospectus and the
Prospectus and related matters were discussed and, although such counsel is
not passing upon and assumes no responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement, Preliminary Prospectus or the Prospectus (except as indicated
above), on the basis of the foregoing, no facts have come to such counsel's
attention which led such counsel to believe that the Registration Statement
(except as to the financial statements and schedules and other financial
data included therein), at the time it became effective, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus (except as to the financial
statements and schedules and other financial data included therein), as of
its date or the Closing Date, contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters involving
the application of laws other than the laws of the United States, California and
any other jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel familiar with the applicable laws and
reasonably acceptable to Underwriters' Counsel; provided, that such opinion
shall expressly state that the Underwriters may rely on such opinion as if it
were addressed to them. In rendering such opinion, such counsel may rely as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and its subsidiaries and certificates or other written
statements of officers of departments of various jurisdictions having custody of
documents respecting the existence or good standing of the Company and its
subsidiaries, provided that such opinion shall state that such counsel and the
Underwriters are justified in so relying upon any such certificate. The opinion
of such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion, the
Underwriters and they are justified in relying thereon.
iv
Exhibit B
SonicWALL, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Lock-Up Agreement
_________________, 2000
Bear, Xxxxxxx & Co. Inc.
X.X. Xxxxxx Securities Inc.
Chase Securities Inc.
Xxxxxx Xxxxxx Partners LLC
Pacific Growth Equities, Inc.
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Ladies and Gentlemen:
The undersigned understands that Bear, Xxxxxxx & Co. Inc. (the
"Representative") of the several underwriters (the "Underwriters"), proposes to
enter into an Underwriting Agreement with SonicWALL, Inc. (the "Company")
providing for the offering (the "Offering") by the Underwriters, including the
Representative, of the Company's Common Stock, no par value per share (the
"Common Stock").
In consideration of the Underwriters' agreement to purchase and
undertake the Offering and for other good and valuable consideration, receipt of
which is hereby acknowledged, the undersigned, pursuant to this letter agreement
(this "Agreement"), agrees that, without the prior written consent of the
Representative, the undersigned will not, directly or indirectly, offer, sell,
contract to sell, grant any option to purchase, pledge or otherwise dispose of
any shares of Common Stock of the Company (including, without limitation, shares
of Common Stock of the Company that may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations of the Securities
and Exchange Commission and shares of Common Stock that may be issued upon
exercise of a stock option or warrant) or any securities convertible into or
exercisable or exchangeable for such Common Stock (such Common Stock and
securities are referred to herein as, collectively, "Securities"), or, in any
manner, transfer all or a portion of the economic consequences associated with
the ownership of Securities, for a period (the "Lock-Up Period") of 90 days
after the date of the Prospectus used by the Company in connection with the
Offering (any of the foregoing, a "Disposition"); provided, however, that the
undersigned may make a Disposition: (i) as a bona fide gift or gifts, provided
that the donee or donees thereof agree in writing to be bound by the terms of
this Agreement; (ii) as a distribution to limited partners or shareholders of
the undersigned, provided that the distributees thereof agree in
writing to be bound by the terms of this Agreement; (iii) if the undersigned is
an individual, either during his or her lifetime or on death by will or
intestacy to his or her immediate family or to a trust the beneficiaries of
which are exclusively the undersigned and/or a member or members of his or her
immediate family, provided that prior to any such transfer each transferee
agrees in writing to be bound by the terms of this Agreement; (iv) with respect
to dispositions of common stock acquired on the open market; (v) with the
prior written consent of the Representative; or (vi) with respect to the
delivery of common shares to the Company in connection with the exercise of
options issued on or prior to the date of the final prospectus held by the
Selling Shareholders under the Company's 1998 and 1994 Stock Option Plans. For
the purposes of this paragraph, "immediate family" shall mean spouse, lineal
descendant, father, mother, brother or sister of the transferor.
In addition, the undersigned agrees that the Company may, and that the
undersigned will, (i) with respect to any shares for which the undersigned is
the record holder, cause the transfer agent for the Company to note stop
transfer instructions with respect to such shares on the transfer books and
records of the Company and (ii) with respect to any shares for which the
undersigned is the beneficial holder but not the record holder, cause the record
holder of such shares to cause the transfer agent for the Company to note stop
transfer instructions with respect to such shares on the transfer books and
records of the Company.
The foregoing restrictions are expressly agreed to preclude the holder
of any Securities from engaging in any hedging or other transaction that is
designed to or is reasonably expected to lead to or result in a Disposition of
Securities during the Lock-Up Period even if such Securities would be disposed
of by someone other than the undersigned. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any of the Securities or any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from any of the
Securities.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Agreement, and that, upon
request, the undersigned will execute any additional documents necessary or
desirable in connection with the enforcement hereof. All authority herein
conferred or agreed to the conferred shall survive the death or incapacity of
the undersigned and any obligations of the undersigned shall be binding upon the
heirs, personal representatives, successors, and assigns of the undersigned.
[signature page follows]
1
The undersigned hereby executes this Agreement and agrees to its terms
as of the date first written above.
Very truly yours,
_________________________________
(Signature)
Please type: _________________________________
(Name)
_________________________________
(Address)
_________________________________
(Social Security or
Taxpayer Identification No.)
Number of shares owned or Certificate numbers:
subject to warrants, options
or convertible securities: _________________________________
________________________________ _________________________________
2
