DRAFT OF SEPTEMBER 25, 2000
ELASTIC NETWORKS INC.
7,800,000 SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
_____ __, 2000
CHASE SECURITIES INC.
FleetBoston Xxxxxxxxx Xxxxxxxx Inc.
UBS Warburg LLC
c/o Chase Securities Inc.
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
Elastic Networks Inc., a Delaware corporation (herein called the
Company), proposes to issue and sell 6,800,000 shares of its authorized but
unissued Common Stock, $0.01 par value (herein called the Common Stock), and the
stockholder of the Company named in Schedule II hereto (herein called the
Selling Securityholder) proposes to sell an aggregate of 1,000,000 shares of
Common Stock of the Company (said 7,800,000 shares of Common Stock being herein
called the Underwritten Stock). The Company and the Selling Securityholder
propose to grant to the Underwriters (as hereinafter defined) an option to
purchase up to 1,170,000 additional shares of Common Stock (herein called the
Option Stock and, with the Underwritten Stock, herein collectively called the
Stock). The Common Stock is more fully described in the Registration Statement
and the Prospectus hereinafter mentioned.
The Company and the Selling Securityholder severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent and
warrant that you have been authorized by each of the other Underwriters to enter
into this Agreement on its behalf and to act for it in the manner herein
provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities
and Exchange Commission (herein called the Commission) a registration statement
on Form S-1 (No. 333-40500), including the related preliminary prospectus, for
the registration under the Securities Act
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(1) Plus an option to purchase from the Company and the Selling
Securityholder up to 1,170,000 additional shares to cover over-allotments.
of 1933, as amended (herein called the Securities Act) of the Stock. Copies of
such registration statement and of each amendment thereto, if any, including the
related preliminary prospectus (meeting the requirements of Rule 430A of the
rules and regulations of the Commission) heretofore filed by the Company with
the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective, and
any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (herein called the Effective
Date), shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended (including any Rule 462(b) registration
statement). The term Prospectus as used in this Agreement shall mean the
prospectus relating to the Stock first filed with the Commission pursuant to
Rule 424(b) and Rule 430A (or if no such filing is required, as included in the
Registration Statement) and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the filing
with the Commission of such supplement or the effectiveness of such amendment)
such prospectus as so supplemented or amended. The term Preliminary Prospectus
as used in this Agreement shall mean each preliminary prospectus included in
such registration statement prior to the time it becomes effective.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDER.
(a) The Company hereby represents and warrants as follows:
(i) The Company has been duly incorporated and
is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has full
corporate power and authority to own or lease its properties
and conduct its business as described in the Registration
Statement and the Prospectus and as being conducted, and is
duly qualified as a foreign corporation and in good standing
in all jurisdictions in which the character of the property
owned or leased or the nature of the business transacted by it
makes qualification necessary (except where the failure to be
so qualified would not have a material adverse effect on the
business, properties, financial condition or results of
operations of the Company).
(ii) The Registration Statement has become
effective (other than any Rule 462(b) registration statement
to be filed by the Company after the date hereof); any Rule
462(b) registration statement filed after the effectiveness of
this Agreement will become effective no later than 7:00 p.m.,
San Francisco time, on the date of this Agreement; and no stop
order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose
are pending before or threatened by the Commission.
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(iii) The Registration Statement and the
Prospectus comply, and on the Closing Date (as hereinafter
defined) and any later date on which Option Stock is to be
purchased, the Prospectus will comply, in all material
respects, with the provisions of the Securities Act and the
Securities Exchange Act of 1934, as amended (herein called the
Exchange Act), and the rules and regulations of the Commission
thereunder; on the Effective Date, the Registration Statement
did not contain any untrue statement of a material fact and
did not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein
not misleading; and, on the Effective Date the Prospectus did
not, and on the Closing Date and any later date on which
Option Stock is to be purchased will not, contain any untrue
statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that none of the
representations and warranties in this subparagraph (iii)
shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon
and in conformity with information herein or otherwise
furnished in writing to the Company by or on behalf of the
Underwriters or the Selling Securityholder for use in the
Registration Statement or the Prospectus.
(iv) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any materially adverse change
in the business, properties, financial condition or results of
operations of the Company, whether or not arising from
transactions in the ordinary course of business, other than as
set forth in the Registration Statement and the Prospectus,
and since such dates, except in the ordinary course of
business, the Company has not entered into any material
transaction not referred to in the Registration Statement and
the Prospectus.
(v) The authorized capital stock of the Company
conforms to the description thereof contained in the
Registration Statement and the Prospectus. All of the
outstanding shares of capital stock of the Company (including,
without limitation, the Stock to be sold by the Selling
Securityholder) have been duly authorized and validly issued,
are fully paid and non-assessable, conform to the description
of the capital stock of the Company contained in the
Registration Statement and the Prospectus and are not subject
to any preemptive or similar rights. There are no preemptive
or similar rights to subscribe for or to purchase any
securities of the Company.
(vi) The Stock is duly and validly authorized, is
(or, in the case of shares of the Stock to be sold by the
Company, will be, when issued and sold to the Underwriters as
provided herein) duly and validly issued, fully paid and
nonassessable and conforms to the description thereof in the
Prospectus. No further approval or authority of the
stockholders or the Board of Directors of the Company will be
required for the transfer and sale of the Stock to be sold by
the
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Selling Securityholder or the issuance and sale of the Stock
to be sold by the Company as contemplated herein.
(vii) Prior to the Closing Date, the Stock to be
issued and sold by the Company, and the Stock to be sold by
the Selling Securityholder, will be authorized for listing by
the Nasdaq National Market, upon official notice of issuance.
The form of certificate evidencing the Stock complies in all
material respects with the applicable requirements of law, the
Company's Certificate of Incorporation and bylaws and the
Nasdaq National Market.
(viii) No order preventing or suspending the use of
any Preliminary Prospectus has been issued by the Commission.
Each Preliminary Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities
Act, complied when so filed in all material respects with the
Securities Act, and did not contain an untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided, however, that none of the representations and
warranties set forth in this subparagraph shall apply to
statements in, or omissions from, any Preliminary Prospectus
made in reliance upon and in conformity with information
herein or otherwise furnished in writing to the Company by or
on behalf of the Underwriters for use in such Preliminary
Prospectus.
(ix) There are no outstanding subscriptions,
rights, warrants, options, calls, convertible securities,
commitments of sale or liens granted or issued by the Company
relating to or entitling any person to purchase or otherwise
to acquire any shares of the capital stock of the Company,
except as disclosed in the Registration Statement and the
Prospectus.
(x) The Company has no subsidiaries and owns no
equity interests in any other person or entity, other than the
300,000 shares of Series A Preferred Stock of Everest
Broadband Networks, Inc. owned by the Company.
(xi) The Company is not in violation of its
Certificate of Incorporation or bylaws, each as amended, or in
default in the performance of any obligation, agreement,
covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument
that is material to the Company and to which the Company is a
party or by which the Company or its property is bound.
(xii) None of the execution, delivery or
performance of this Agreement by the Company, the compliance
by the Company with any provision hereof or the consummation
of the transactions contemplated hereby or by the Registration
Statement and the Prospectus will (A) require any consent,
approval, authorization or other order of, or qualification
with, any court or governmental
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body or agency (except such as have been obtained and such as
may be required under the securities or Blue Sky laws of the
various states), (B) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the
Certificate of Incorporation or bylaws of the Company, each as
amended, or any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Company,
to which the Company is a party or by which the Company or its
property is bound, (C) violate or conflict with any applicable
law or any rule, regulation, judgment, order or decree of any
court or any governmental body or agency having jurisdiction
over the Company or its property or (D) result in the
suspension, termination or revocation of any Authorization (as
defined below) of the Company, or any other impairment of the
rights of the holder of any such Authorization.
(xiii) No Authorization or other action by, or
notice to or filing with, any court, governmental authority,
regulatory body or other person is required for the execution,
delivery or performance of this Agreement, the compliance by
the Company with the provisions hereof or the consummation of
the transactions contemplated hereby or by the Registration
Statement and the Prospectus, except such as have been
obtained and such as may be required under state securities or
Blue Sky laws in connection with the offer, sale and
distribution of the Stock by the Underwriters.
(xiv) There are no legal or governmental
proceedings pending or threatened to which the Company is or
could be a party or to which any of its property is or could
be subject that are required to be described in the
Registration Statement or the Prospectus and are not so
described; nor are there any statutes, rules, regulations,
laws, orders, decrees, judgments, contracts, instruments or
other documents or agreements that are required to be
described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement that are
not so described or filed as required. Without limiting the
generality of the foregoing sentence, the Company has no
reason to believe that any legal or governmental proceedings
will be instituted against it and, to the best knowledge of
the Company, there exists no basis for any legal or
governmental proceedings to be instituted against it.
(xv) The Company has not violated any foreign,
federal, state or local statute, rule, regulation, law, order,
decree or judgment (including, without limitation, any such
statute, rule, regulation, law, order, decree or judgment
relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes,
pollutants or contaminants (hereinafter called Environmental
Laws), any provisions of the Employee Retirement Income
Security Act of 1974, as amended (hereinafter called ERISA),
or any provisions of the Foreign Corrupt Practices Act or the
rules and regulations promulgated thereunder), except for such
violations which, singly or in the aggregate, would not have a
material adverse effect on the business, properties, financial
condition or results of operations of the Company.
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(xvi) The Company has such permits, licenses,
consents, exemptions, franchises, authorizations and other
approvals (each, hereinafter called an Authorization) of, and
has made all filings with and notices to, all governmental or
regulatory authorities and self-regulatory organizations and
all courts and other tribunals, including, without limitation,
under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its properties and to conduct
its business, except where the failure to have any such
Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a material adverse effect on
the business, properties, financial condition or results of
operations of the Company. Each such Authorization is valid
and in full force and effect and the Company is in compliance
with all the terms and conditions thereof and with the rules
and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from
any authority or governing body) which allows or, after notice
or lapse of time or both, would allow, revocation, suspension
or termination of any such Authorization or results or, after
notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions
that are burdensome to the Company; except where such failure
to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence
of any such restriction would not, singly or in the aggregate,
have a material adverse effect on the business, properties,
financial condition or results of operations of the Company.
(xvii) There are no costs or liabilities
(contingent or otherwise) associated with Environmental Laws
(including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any Authorization, any
related constraints on operating activities and any potential
liabilities to third parties) or ERISA which would, singly or
in the aggregate, have a material adverse effect on the
business, properties, financial condition or results of
operations of the Company.
(xviii) This Agreement has been duly authorized,
executed and delivered by the Company.
(xix) Deloitte & Touche LLP are independent public
accountants with respect to the Company as required by the
Securities Act.
(xx) The financial statements included in the
Registration Statement and the Prospectus (and any amendment
or supplement thereto), together with related schedules and
notes, present fairly the financial position, results of
operations and changes in financial position of the Company on
the basis stated therein at the respective dates or for the
respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed
therein; all adjustments necessary for a fair
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presentation of results for such periods have been made; the
selected financial information included in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto) present fairly the information shown therein and have
been compiled on a basis consistent with the financial
statements presented therein; the supporting schedules, if
any, included in the Registration Statement present fairly in
accordance with generally accepted accounting principles the
information required to be stated therein; and the other
financial and statistical information and data set forth in
the Registration Statement and the Prospectus (and any
amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and
records of the Company. No other financial statements,
supporting schedules or other financial information (whether
pro forma financial statements or otherwise) are required to
be included in the Registration Statement or the Prospectus.
As of the date of the Prospectus, the Company is not engaged
in substantive discussions with any third party with respect
to, or obligated to complete, any acquisitions for which
disclosure of pro forma financial information in the
Prospectus is required by the Securities Act.
(xxi) The Company is not and, after giving effect
to the offering and sale of the Stock and the application of
the proceeds thereof as described in the Prospectus, will not
be, an "investment company" as such term is defined in the
investment Company Act of 1940, as amended.
(xxii) Except as disclosed in the Registration
Statement and the Prospectus, there are no contracts,
agreements or understandings between the Company and any
person granting such person the right to require the Company
to file a registration statement under the Securities Act with
respect to any securities of the Company or to include any
securities of the Company in any registration statement of the
Company. Neither the filing of the Registration Statement nor
the offering or sale of the Stock as contemplated by this
Agreement gives rise to any rights for or relating to the
registration of any securities of the Company, except for such
rights which have been waived or satisfied by the inclusion of
shares of Common Stock in the offering of Stock contemplated
hereby.
(xxiii) The Company has good and marketable title in
fee simple to all real property and good and marketable title
to all personal property owned by it which is material to the
business of the Company, in each case free and clear of all
liens, encumbrances, equities, security interests, defects,
adverse interests and claims whatsoever, except such as are
described in the Prospectus or such as do not materially
affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease
by the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made
of such property and buildings by the Company, in each case
except as described in the Prospectus.
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(xxiv) The Company owns or possesses, or can
acquire on reasonable terms, all patents, patent rights,
licenses, inventions, domain names, computer programs,
computer code, communications protocols, copyrights, other
software, know-how (including, without limitation, trade
secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures),
trademarks, service marks and trade names (hereinafter called
Intellectual Property) currently employed by it in connection
with the business now operated by it except (A) where the
failure to own or possess or otherwise be able to acquire such
Intellectual Property would not, singly or in the aggregate,
have a material adverse effect on the business, properties,
financial condition or results of operations of the Company or
(B) as disclosed in the Registration Statement and the
Prospectus. There are no legal or governmental proceedings
pending or threatened relating to any Intellectual Property
that are required to be described in the Registration
Statement or the Prospectus and are not so described; there
are no contracts or other documents relating to any
Intellectual Property required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement or the Prospectus that are not so filed
or described as required. The expiration of any Intellectual
Property owned or employed by the Company will not, singly or
in the aggregate, have a material adverse effect on the
business, properties, financial condition or results of
operations of the Company.
(xxv) The Company is not infringing or otherwise
violating any Intellectual Property of others nor has it
received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual
Property, except for any such infringement, violation or
conflict which (A) would not, singly or in the aggregate, have
a material adverse effect on the business, properties,
financial condition or results of operations of the Company or
(B) is disclosed in the Registration Statement and the
Prospectus. There are no legal or governmental proceedings
pending or threatened relating to any Intellectual Property
which, singly or in the aggregate, would have a material
adverse effect on the business, properties, financial
condition or results of operations of the Company.
(xxvi) The Company is insured by insurers of
recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which it is engaged; and the Company (A) has not
received notice from any insurer or agent of such insurer that
substantial capital improvements or other material
expenditures will have to be made in order to continue such
insurance and (B) has no reason to believe that it will not be
able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar
insurers at a cost that would not, singly or in the aggregate,
have a material adverse effect on the business, properties,
financial condition or results of operations of the Company.
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(xxvii) No relationship, direct or indirect, exists
between or among the Company on the one hand, and the
directors, officers, stockholders, customers or suppliers of
the Company on the other hand, which is required by the
Securities Act to be described in the Registration Statement
or the Prospectus and which is not so described.
(xxviii) There is no (A) significant unfair labor
practice complaint, grievance or arbitration proceeding
pending or threatened against the Company before the National
Labor Relations Board or any state or local labor relations
board, (B) strike, labor dispute, slowdown or stoppage pending
or threatened against the Company or (C) union representation
question existing with respect to the employees of the
Company, except for such actions specified in clause (A), (B)
or (C) above, which, singly or in the aggregate, would not
have a material adverse effect on the business, properties,
financial condition or results of operations of the Company.
To the best of the Company's knowledge, no collective
bargaining organizing activities are taking place with respect
to the Company.
(xxix) The Company maintains 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 with generally accepted
accounting principles and to maintain asset accountability;
(C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the
recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xxx) All material tax returns required to be
filed by the Company in any jurisdiction have been filed,
other than those filings being contested in good faith, and
all material taxes, including, without limitation, withholding
taxes, penalties and interest, assessments, fees and other
charges due pursuant to such returns or pursuant to any
assessment received by the Company have been paid, other than
those being contested in good faith and for which adequate
reserves have been provided.
(xxxi) The Company has complied and is in
compliance with all foreign, federal, state and local
statutes, executive orders, proclamations, regulations, rules,
directives, decrees, ordinances and similar provisions having
the force or effect of law and all judicial and administrative
orders rulings, determinations and common law concerning the
importation of merchandise, the export or reexport of
products, services and technology, and the terms and conduct
of international transactions applicable to the Company in
connection with the conduct of the business of the Company
(including, without limitation, as the same relates to record
keeping requirements) (herein called International Trade Laws
and Regulations), except for such non-compliance which, singly
or in the aggregate,
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would not have a material adverse effect on the business,
financial condition or results of operations of the Company;
the Company has not made or provided any false statement or
omission to any agency of any federal, state or local
government, purchasers of products, or foreign government or
foreign agency, in connection with the exportation of
merchandise (including, without limitation, with respect to
export licenses, exceptions and other export authorizations
and any filings required for or related to exportation of any
item), the importation of merchandise or other approvals
required by a foreign government or agency or any other
requirement relating to any International Trade Laws and
Regulations.
(xxxii) The Company has not offered, or caused the
Underwriters to offer, any Stock to any person pursuant to the
Directed Share Program (as defined below) with the intent to
unlawfully influence (A) a customer or supplier of the Company
to alter the customer's or supplier's level or type of
business with the Company or (B) a trade journalist or
publication to write or publish favorable information about
the Company or its products. As used herein, Directed Share
Program means the offer and sale of Stock described in the
paragraph under the caption "Underwriting" in the Prospectus.
(xxxiii) All sales of the Company's securities prior
to the date hereof were at all relevant times duly registered
under the Securities Act and applicable foreign securities
laws and state securities or Blue Sky laws or were exempt from
the registration requirements of the Securities Act and
applicable foreign and state securities laws, or if such
securities were not registered or exempt in compliance with
the Securities Act and applicable foreign and state securities
laws, any private rights of action for rescission or damages
arising from the failure to register any such securities are
timebarred by applicable statutes of limitations or equitable
principles, including laches.
(xxxiv) Each certificate signed by any officer of
the Company and delivered to the Underwriters or counsel for
the Underwriters shall be deemed to be a representation and
warranty by the Company to the Underwriters as to the matters
covered thereby.
(b) The Selling Securityholder hereby represents and warrants
as follows:
(i) The Selling Securityholder has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation.
(ii) The Selling Securityholder has, and on the
Closing Date and on any later date on which Option Stock is
purchased will have, good and marketable title to all the
shares of Stock to be sold by such Selling Securityholder
hereunder, free and clear of all liens, encumbrances,
equities, security interests and claims whatsoever, with full
right and authority to deliver the same hereunder, and that
upon the delivery of and payment for such shares of the Stock
hereunder, the
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several Underwriters will receive good and marketable title
thereto, free and clear of all liens, encumbrances, equities,
security interests and claims whatsoever.
(iii) The Selling Securityholder has, and on the
Closing Date and any later date on which Option Stock is
purchased will have, full legal right, power and authority,
and all authorization and approval required by law, to enter
into this Agreement and to sell, assign, transfer and deliver
the Stock to be sold by the Selling Securityholder in the
manner provided herein and therein.
(iv) This Agreement has been duly authorized,
executed and delivered by or on behalf of the Selling
Securityholder.
(v) None of the execution, delivery or
performance of this Agreement, the compliance by the Selling
Securityholder with the provisions hereof or the consummation
of the transactions contemplated hereby will (A) require any
consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency
(except such as have been obtained and such as may be required
under the securities or Blue Sky laws of the various states),
(B) conflict with or constitute a breach of any of the terms
or provisions of, or a default under, the Articles of
Incorporation or Bylaws of the Selling Securityholder or
any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Selling
Securityholder or (C) violate or conflict with any applicable
law or any rule, regulation, judgment, order or decree of any
court or any governmental body or agency having jurisdiction
over the Selling Securityholder or its property.
(vi) The Selling Securityholder has reviewed the
Registration Statement and Prospectus and, although the
Selling Securityholder has not independently verified the
accuracy or completeness of all the information contained
therein, nothing has come to the attention of the Selling
Securityholder that would lead the Selling Securityholder to
believe that on the Effective Date, the Registration Statement
contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or
necessary in order to make the statements therein not
misleading; and, on the Effective Date the Prospectus
contained and, on the Closing Date and any later date on which
Option Stock is to be purchased, contains any untrue statement
of a material fact or omitted or omits to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(vii) Each certificate signed by or on behalf of
the Selling Securityholder and delivered to the Underwriters
or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Selling Securityholder to
the Underwriters as to the matters covered thereby.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
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(a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Company
agrees to issue and sell 6,800,000 shares of the Underwritten Stock to
the several Underwriters, the Selling Securityholder agrees to sell to
the several Underwriters the number of shares of the Underwritten Stock
set forth in Schedule II opposite the name of the Selling
Securityholder, and each of the Underwriters agrees to purchase from
the Company and the Selling Securityholder the respective aggregate
number of shares of Underwritten Stock set forth opposite its name in
Schedule I. The price at which such shares of Underwritten Stock shall
be sold by the Company and the Selling Securityholder and purchased by
the several Underwriters shall be $___ per share. The obligation of
each Underwriter to the Company and the Selling Securityholder shall be
to purchase from the Company and the Selling Securityholder that number
of shares of the Underwritten Stock which represents the same
proportion of the total number of shares of the Underwritten Stock to
be sold by each of the Company and the Selling Securityholder pursuant
to this Agreement as the number of shares of the Underwritten Stock set
forth opposite the name of such Underwriter in Schedule I hereto
represents of the total number of shares of the Underwritten Stock to
be purchased by all Underwriters pursuant to this Agreement, as
adjusted by you in such manner as you deem advisable to avoid
fractional shares. In making this Agreement, each Underwriter is
contracting severally and not jointly; except as provided in paragraphs
(b) and (c) of this Section 3, the agreement of each Underwriter is to
purchase only the respective number of shares of the Underwritten Stock
specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall
fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 8 or 9
hereof) to purchase and pay for the number of shares of the Stock
agreed to be purchased by such Underwriter or Underwriters, the Company
or the Selling Securityholder shall immediately give notice thereof to
you, and the non-defaulting Underwriters shall have the right within 24
hours after the receipt by you of such notice to purchase, or procure
one or more other Underwriters to purchase, in such proportions as may
be agreed upon between you and such purchasing Underwriter or
Underwriters and upon the terms herein set forth, all or any part of
the shares of the Stock which such defaulting Underwriter or
Underwriters agreed to purchase. If the non-defaulting Underwriters
fail so to make such arrangements with respect to all such shares and
portion, the number of shares of the Stock which each non-defaulting
Underwriter is otherwise obligated to purchase under this Agreement
shall be automatically increased on a pro rata basis to absorb the
remaining shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase; PROVIDED, HOWEVER, that the
non-defaulting Underwriters shall not be obligated to purchase the
shares and portion which the defaulting Underwriter or Underwriters
agreed to purchase if the aggregate number of such shares of the Stock
exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of
shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase shall not be purchased or absorbed in accordance
with the two preceding sentences, the Company and the Selling
Securityholder shall have the right, within 24 hours next succeeding
the 24-hour period above referred to, to make arrangements with other
underwriters or
12
purchasers satisfactory to you for purchase of such shares and portion
on the terms herein set forth. In any such case, either you or the
Company and the Selling Securityholder shall have the right to postpone
the Closing Date determined as provided in Section 5 hereof for not
more than seven business days after the date originally fixed as the
Closing Date pursuant to said Section 5 in order that any necessary
changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made. If neither the non-defaulting
Underwriters nor the Company and the Selling Securityholder shall make
arrangements within the 24-hour periods stated above for the purchase
of all the shares of the Stock which the defaulting Underwriter or
Underwriters agreed to purchase hereunder, this Agreement shall be
terminated without further act or deed and without any liability on the
part of the Company or the Selling Securityholder to any non-defaulting
Underwriter and without any liability on the part of any non-defaulting
Underwriter to the Company or the Selling Securityholder. Nothing in
this paragraph (b), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
(c) On the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions
herein set forth, the Company and the Selling Securityholder grant an
option to the several Underwriters to purchase, severally and not
jointly, up to 1,170,000 shares in the aggregate of the Option Stock
from the Company and the Selling Securityholder at the same price per
share as the Underwriters shall pay for the Underwritten Stock. Said
option may be exercised only to cover over-allotments in the sale of
the Underwritten Stock by the Underwriters and may be exercised in
whole or in part at any time (but not more than once) on or before the
thirtieth day after the date of this Agreement upon written or
telegraphic notice by you to the Company setting forth the aggregate
number of shares of the Option Stock as to which the several
Underwriters are exercising the option. Delivery of certificates for
the shares of Option Stock, and payment therefor, shall be made as
provided in Section 5 hereof. The number of shares of the Option Stock
to be purchased by each Underwriter shall be the same percentage of the
total number of shares of the Option Stock to be purchased by the
several Underwriters as such Underwriter is purchasing of the
Underwritten Stock, as adjusted by you in such manner as you deem
advisable to avoid fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the
Underwriters of the Stock to be purchased by them shall be as set forth
in the Prospectus. The Underwriters may from time to time change the
public offering price after the closing of the initial public offering
and increase or decrease the concessions and discounts to dealers as
they may determine.
(b) The information set forth in the last paragraph on the
front cover page and under "Underwriting" in the Registration
Statement, any Preliminary Prospectus and the Prospectus relating to
the Stock filed by the Company (insofar as such information relates to
the Underwriters) constitutes the only information furnished by the
Underwriters to the Company for inclusion in the Registration
Statement, any Preliminary Prospectus, and
13
the Prospectus, and you on behalf of the respective Underwriters
represent and warrant to the Company that the statements made therein
are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the
Underwritten Stock and the Option Stock (if the option granted by
Section 3(c) hereof shall have been exercised not later than 7:00 A.M.,
San Francisco time, on the date two business days preceding the Closing
Date), and payment therefor, shall be made at the office of Xxxxx, Day,
Xxxxxx & Xxxxx, 0000 XxxXxxxx Xxxxx, 000 Xxxxxxxxx Xxxxxx, X.X.,
Xxxxxxx, Xxxxxxx 00000 at 7:00 a.m., San Francisco time, on the
[fourth] business day after the date of this Agreement, or at such time
on such other day, not later than seven full business days after such
[fourth] business day, as shall be agreed upon in writing by the
Company, the Selling Securityholder and you. The date and hour of such
delivery and payment (which may be postponed as provided in Section
3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be
exercised after 7:00 a.m., San Francisco time, on the date two business
days preceding the Closing Date, delivery of certificates for the
shares of Option Stock, and payment therefor, shall be made at the
office of Xxxxx, Day, Xxxxxx & Xxxxx, 0000 XxxXxxxx Xxxxx, 000
Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000, at 7:00 a.m., San
Francisco time, on the third business day after the exercise of such
option.
(c) Payment for the Stock purchased from the Company shall be
made to the Company or its order, and payment for the Stock purchased
from the Selling Securityholder shall be made to the Custodian, for the
account of the Selling Securityholder, in each case by one or more
certified or official bank check or checks in same day funds. Such
payment shall be made upon delivery of certificates for the Stock to
you for the respective accounts of the several Underwriters against
receipt therefor signed by you. Certificates for the Stock to be
delivered to you shall be registered in such name or names and shall be
in such denominations as you may request at least one business day
before the Closing Date, in the case of Underwritten Stock, and at
least one business day prior to the purchase thereof, in the case of
the Option Stock. Such certificates will be made available to the
Underwriters for inspection, checking and packaging at the offices of
Lewco Securities Corporation, 0 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on
the business day prior to the Closing Date or, in the case of the
Option Stock, by 3:00 p.m., New York time, on the business day
preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholder for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any later
date on which Option Stock is purchased for the account of such Underwriter. Any
such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
14
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING SECURITYHOLDER.
Each of the Company and the Selling Securityholder respectively covenants and
agrees as follows:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A and (ii) not file any amendment to
the Registration Statement or supplement to the Prospectus of which you
shall not previously have been advised and furnished with a copy or to
which you shall have reasonably objected in writing or which is not in
compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the
event of (i) the request by the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, (iii)
the institution or notice of intended institution of any action or
proceeding for that purpose, (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction or (v) the receipt by it of notice
of the initiation or threatening of any proceeding for such purpose.
The Company and the Selling Securityholder will make every reasonable
effort to prevent the issuance of such a stop order and, if such an
order shall at any time be issued, to obtain the withdrawal thereof at
the earliest possible moment.
(c) The Company will (i) on or before the Closing Date,
deliver to you a signed copy of the Registration Statement as
originally filed and of each amendment thereto filed prior to the time
the Registration Statement becomes effective and, promptly upon the
filing thereof, a signed copy of each post-effective amendment, if any,
to the Registration Statement (together with, in each case, all
exhibits thereto unless previously furnished to you) and will also
deliver to you, for distribution to the Underwriters, a sufficient
number of additional conformed copies of each of the foregoing (but
without exhibits) so that one copy of each may be distributed to each
Underwriter, (ii) as promptly as possible deliver to you and send to
the several Underwriters, at such office or offices as you may
designate, as many copies of the Prospectus as you may reasonably
request and (iii) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an Underwriter
or dealer, likewise send to the Underwriters as many additional copies
of the Prospectus and as many copies of any supplement to the
Prospectus and of any amended prospectus, filed by the Company with the
Commission, as you may reasonably request for the purposes contemplated
by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event
relating to or affecting the Company, or of which the Company shall be
advised in writing by you, shall occur as a result of which it is
necessary, in the opinion of counsel for the Company or of counsel for
the Underwriters, to supplement or amend the Prospectus in order to
make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a
15
purchaser of the Stock, the Company will forthwith prepare and file
with the Commission a supplement to the Prospectus or an amended
prospectus so that the Prospectus as so supplemented or amended will
not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in
the light of the circumstances existing at the time such Prospectus is
delivered to such purchaser, not misleading. If, after the initial
public offering of the Stock by the Underwriters and during such
period, the Underwriters shall propose to vary the terms of offering
thereof by reason of changes in general market conditions or otherwise,
you will advise the Company in writing of the proposed variation, and,
if in the opinion either of counsel for the Company or of counsel for
the Underwriters such proposed variation requires that the Prospectus
be supplemented or amended, the Company will forthwith prepare and file
with the Commission a supplement to the Prospectus or an amended
prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by
the several Underwriters to use the Prospectus, as from time to time
amended or supplemented, in connection with the sale of the Stock in
accordance with the applicable provisions of the Securities Act and the
applicable rules and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the
Company will submit to you, for your information, a copy of any
post-effective amendment to the Registration Statement and any
supplement to the Prospectus or any amended prospectus proposed to be
filed.
(f) The Company will cooperate, when and as requested by you,
in the qualification of the Stock for offer and sale under the
securities or blue sky laws of such jurisdictions as you may designate
and, during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, in keeping such qualifications
in good standing under said securities or blue sky laws; PROVIDED,
HOWEVER, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will,
from time to time, prepare and file such statements, reports, and other
documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for
distribution of the Stock.
(g) During a period of five years commencing with the date
hereof, the Company will furnish to you, and to each Underwriter who
may so request in writing, copies of all periodic and special reports
furnished to stockholders of the Company and of all information,
documents and reports filed with the Commission (including, without
limitation, any information required by Rule 463 of the Securities
Act).
(h) Not later than the 45th day following the end of the
fiscal quarter first occurring after the first anniversary of the
Effective Date, the Company will make generally available to its
security holders an earnings statement in accordance with Section 11(a)
of the Securities Act and Rule 158 thereunder.
16
(i) The Company and the Selling Securityholder jointly and
severally agree to pay all costs and expenses incident to the
performance of their obligations under this Agreement, including all
costs and expenses incident to (i) the preparation, printing and filing
with the Commission and the National Association of Securities Dealers,
Inc. ("NASD") of the Registration Statement, any Preliminary Prospectus
and the Prospectus, (ii) the furnishing to the Underwriters of copies
of any Preliminary Prospectus and of the several documents required by
paragraph (c) of this Section 6 to be so furnished, (iii) the printing
of this Agreement and related documents delivered to the Underwriters,
(iv) the preparation, printing and filing of all supplements and
amendments to the Prospectus referred to in paragraph (d) of this
Section 6, (v) the furnishing to you and the Underwriters of the
reports and information referred to in paragraph (g) of this Section 6
and (vi) the printing and issuance of stock certificates, including the
transfer agent's fees. The Selling Securityholder will pay any transfer
taxes incident to the transfer to the Underwriters of the shares the
Stock being sold by the Selling Securityholder.
(j) The Company and the Selling Securityholder jointly and
severally agree to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including
reasonable counsel fees and disbursements and cost of printing
memoranda for the Underwriters) paid by or for the account of the
Underwriters or their counsel in qualifying the Stock under state
securities or blue sky laws and in the review of the offering by the
NASD.
(k) The provisions of paragraphs (i) and (j) of this Section
are intended to relieve the Underwriters from the payment of the
expenses and costs which the Company and the Selling Securityholder
hereby agree to pay and shall not affect any agreement which the
Company and the Selling Securityholder may make, or may have made, for
the sharing of any such expenses and costs.
(l) The Company and the Selling Securityholder hereby agree
that, without the prior written consent of Chase Securities Inc. on
behalf of the Underwriters, the Company or the Selling Securityholder,
as the case may be, will not, for a period of 180 days following the
commencement of the public offering of the Stock by the Underwriters,
directly or indirectly, (i) sell, offer, contract to sell, make any
short sale, pledge, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose (a "Transfer") of any shares
of Common Stock or any securities convertible into or exchangeable or
exercisable for or any rights to purchase or acquire Common Stock or
(ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences or ownership of Common Stock,
whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the
Stock to be sold to the Underwriters pursuant to this Agreement, (B)
shares of Common Stock issued by the Company upon the exercise of
options granted under the stock option plan of the Company (the "Option
Plan") or upon the exercise of warrants outstanding as of the date
hereof, all as described in the notes to the table under the caption
"Capitalization" in the Preliminary Prospectus, (C) options to purchase
Common Stock
17
granted under the Option Plan, and (D) with respect to the Selling
Securityholder, a Transfer to any subsidiary of which the Selling
Securityholder owns, directly or indirectly, 100% of the voting capital
stock or any parent corporation which owns, directly or indirectly,
100% of the voting capital stock of the Selling Securityholder,
provided that any such transferee executes a "lock-up" agreement
substantially similar to those entered into by Nortel Networks,
Inc. pursuant to Section 9(j) hereof.
(m) If at any time during the 25-day period after the
Registration Statement becomes effective any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which in your opinion the market price for the Stock has been or is
likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising
the Company to the effect set forth above, forthwith prepare, consult
with you concerning the substance of and disseminate a press release or
other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(n) The Company is familiar with the Investment Company Act of
1940, as amended, and has in the past conducted its affairs, and will
in the future conduct its affairs, in such a manner to ensure that the
Company was not and will not be an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section
7, the Company and the Selling Securityholder jointly and severally
agree to indemnify and hold harmless each Underwriter and each person
(including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act from
and against any and all losses, claims, damages or liabilities, joint
or several, to which such indemnified parties or any of them may become
subject under the Securities Act, the Exchange Act, or the common law
or otherwise, and the Company and the Selling Securityholder jointly
and severally agree to reimburse each such Underwriter and controlling
person for any legal or other expenses (including, except as otherwise
hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding
which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and
any Rule 462(b) registration statement) or any post-effective amendment
thereto (including any Rule 462(b) registration statement), or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of
a material fact contained in any Preliminary Prospectus or
18
the Prospectus (as amended or as supplemented if the Company shall have
filed with the Commission any amendment thereof or supplement thereto)
or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that (1) the indemnity agreements of the Company and the
Selling Securityholder contained in this paragraph (a) shall not apply
to any such losses, claims, damages, liabilities or expenses if such
statement or omission was made in reliance upon and in conformity with
information furnished as herein stated or otherwise furnished in
writing to the Company by or on behalf of any Underwriter for use in
any Preliminary Prospectus or the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto, (2) the
indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Stock which is the
subject thereof (or to the benefit of any person controlling such
Underwriter) if at or prior to the written confirmation of the sale of
such Stock a copy of the Prospectus (or the Prospectus as amended or
supplemented) was not sent or delivered to such person and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of
noncompliance by the Company with paragraph (c) of Section 6 hereof,
and (3) the Selling Securityholder shall only be liable under this
paragraph with respect to (A) information pertaining to the Selling
Securityholder furnished by or on behalf of the Selling Securityholder
expressly for use in any Preliminary Prospectus or the Registration
Statement or the Prospectus or any such amendment thereof or supplement
thereto or (B) facts that would constitute a breach of any
representation or warranty of the Selling Securityholder set forth in
Section 2(b) hereof. The indemnity agreements of the Company and the
Selling Securityholder contained in this paragraph (a) and the
representations and warranties of the Company and the Selling
Securityholder contained in Section 2 hereof shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of any indemnified party and shall survive the delivery of and
payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its officers who signs the Registration
Statement on his own behalf or pursuant to a power of attorney, each of
its directors, each other Underwriter and each person (including each
partner or officer thereof) who controls the Company or any such other
Underwriter within the meaning of Section 15 of the Securities Act, and
the Selling Securityholder from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified
parties or any of them may become subject under the Securities Act, the
Exchange Act, or the common law or otherwise and to reimburse each of
them for any legal or other expenses (including, except as otherwise
hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding
which may be brought against, the respective indemnified parties, in
each
19
case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (including the Prospectus as part thereof and any Rule 462(b)
registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement) or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or
(ii) any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state
therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, if such statement, omission or alleged omission was
made in reliance upon and in conformity with information furnished as
herein stated or otherwise furnished in writing to the Company by or on
behalf of such indemnifying Underwriter for use in the Registration
Statement or the Prospectus or any such amendment thereof or supplement
thereto. The indemnity agreement of each Underwriter contained in this
paragraph (b) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs
(a) and (b) of this Section 7 agrees that, upon the service of a
summons or other initial legal process upon it in any action or suit
instituted against it or upon its receipt of written notification of
the commencement of any investigation or inquiry of, or proceeding
against, it in respect of which indemnity may be sought on account of
any indemnity agreement contained in such paragraphs, it will promptly
give written notice (herein called the Notice) of such service or
notification to the party or parties from whom indemnification may be
sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if
the party to whom such Notice was not given was unaware of the action,
suit, investigation, inquiry or proceeding to which the Notice would
have related and was prejudiced by the failure to give the Notice, but
the omission so to notify such indemnifying party or parties of any
such service or notification shall not relieve such indemnifying party
or parties from any liability which it or they may have to the
indemnified party for contribution or otherwise than on account of such
indemnity agreement. Any indemnifying party shall be entitled at its
own expense to participate in the defense of any action, suit or
proceeding against, or investigation or inquiry of, an indemnified
party. Any indemnifying party shall be entitled, if it so elects within
a reasonable time after receipt of the Notice by giving written notice
(herein called the Notice of Defense) to the indemnified party, to
assume (alone or in conjunction with any other indemnifying party or
parties) the entire defense of such action, suit, investigation,
inquiry or proceeding, in which event such defense shall be conducted,
at the expense of the indemnifying party or parties, by counsel chosen
by such indemnifying party or parties and reasonably satisfactory to
the indemnified party or parties; PROVIDED, HOWEVER, that (i) if the
indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and
of the indemnified party or parties in conducting the defense of such
action, suit, investigation,
20
inquiry or proceeding or that there may be legal defenses available
to such indemnified party or parties different from or in addition
to those available to the indemnifying party or parties, then
counsel for the indemnified party or parties shall be entitled to
conduct the defense to the extent reasonably determined by such
counsel to be necessary to protect the interests of the indemnified
party or parties and (ii) in any event, the indemnified party or
parties shall be entitled to have counsel chosen by such indemnified
party or parties participate in, but not conduct, the defense. If,
within a reasonable time after receipt of the Notice, an
indemnifying party gives a Notice of Defense and the counsel chosen
by the indemnifying party or parties is reasonably satisfactory to
the indemnified party or parties, the indemnifying party or parties
will not be liable under paragraphs (a) through (c) of this Section
7 for any legal or other expenses subsequently incurred by the
indemnified party or parties in connection with the defense of the
action, suit, investigation, inquiry or proceeding, except that (A)
the indemnifying party or parties shall bear the legal and other
expenses incurred in connection with the conduct of the defense as
referred to in clause (i) of the proviso to the preceding sentence
and (B) the indemnifying party or parties shall bear such other
expenses as it or they have authorized to be incurred by the
indemnified party or parties. If, within a reasonable time after
receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any and all
legal or other expenses incurred by the indemnified party or parties
in connection with the defense of the action, suit, investigation,
inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in paragraph (a) or
(b) of this Section 7 (i) in such proportion as is appropriate to
reflect the relative benefits received by each indemnifying party from
the offering of the Stock or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of each indemnifying party
in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof,
as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Securityholder on the
one hand and the Underwriters on the other shall be deemed to be in the
same respective proportions as the total net proceeds from the offering
(before deducting expenses) of the Stock received by the Company and
the Selling Securityholder and the total underwriting discount received
by the Underwriters, as set forth in the table on the cover page of the
Prospectus, bear to the aggregate public offering price of the Stock.
Relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by each indemnifying party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission.
21
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparing to defend or defending against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Stock purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) Neither the Company nor the Selling Securityholder will,
without the prior written consent of each Underwriter, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional
release of such Underwriter and each such controlling person from all
liability arising out of such claim, action, suit or proceeding.
(f) The liability of the Selling Securityholder under the
Selling Securityholder's representations and warranties contained in
paragraph (b) of Section 2 hereof and under the indemnity and
reimbursement agreements contained in the provisions of this Section 7
and Section 11 hereof shall be limited to an amount equal to the
initial public offering price of the stock sold by the Selling
Securityholder to the Underwriters, less underwriting discounts and
commissions with respect to such stock. The Company and the Selling
Securityholder may agree, as among themselves and without limiting the
rights of the Underwriters under this Agreement, as to the respective
amounts of such liability for which they each shall be responsible.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Securityholder if after the
22
date of this Agreement trading in the Common Stock shall have been suspended, or
if there shall have occurred (i) the engagement in hostilities or an escalation
of major hostilities by the United States or the declaration of war or a
national emergency by the United States on or after the date hereof, (ii) any
outbreak of hostilities or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
calamity, crisis or change in economic or political conditions in the financial
markets of the United States would, in the Underwriters' reasonable judgment,
make the offering or delivery of the Stock impracticable, (iii) suspension of
trading in securities generally or a material adverse decline in value of
securities generally on the New York Stock Exchange, the American Stock Exchange
or The Nasdaq Stock Market, or limitations on prices (other than limitations on
hours or numbers of days of trading) for securities on either such exchange or
system, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of, or commencement of any
proceeding or investigation by, any court, legislative body, agency or other
governmental authority which in the Underwriters' reasonable opinion materially
and adversely affects or will materially or adversely affect the business or
operations of the Company, (v) declaration of a banking moratorium by either
federal or New York State authorities or (vi) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in the Underwriters' reasonable opinion has a material
adverse effect on the securities markets in the United States. If this Agreement
shall be terminated pursuant to this Section 8, there shall be no liability of
the Company or the Selling Securityholder to the Underwriters and no liability
of the Underwriters to the Company or the Selling Securityholder; PROVIDED,
HOWEVER, that in the event of any such termination the Company and the Selling
Securityholder agree to indemnify and hold harmless the Underwriters from all
costs or expenses incident to the performance of the obligations of the Company
and the Selling Securityholder under this Agreement, including all costs and
expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Securityholder of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Option Stock is to be purchased, as the case may be,
and to the following further conditions:
(a) The Registration Statement shall have become effective;
and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings therefor shall be pending or threatened by
the Commission.
(b) The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing
the Stock, all corporate proceedings and other legal matters incident
to the foregoing, and the form of the Registration Statement and of the
Prospectus (except as to the financial statements contained therein),
shall have been approved at or prior to the Closing Date by Xxxxx, Day,
Xxxxxx & Xxxxx, counsel for the Underwriters.
(c) You shall have received from Hunton & Xxxxxxxx, counsel
for the Company, an opinion addressed to the Underwriters and dated the
Closing Date, covering the
23
matters set forth in Annex A and Xxxxx X hereto, and from Xxxxxxxx
X. XxXxxx, Chief Legal Officer of the Selling Securityholder, an
opinion addressed to the Underwriters and dated the Closing Date,
covering the matters set forth in Annex C hereto, and if Option
Stock is purchased at any date after the Closing Date, additional
opinions from each such counsel, addressed to the Underwriters and
dated such later date, confirming that the statements expressed as
of the Closing Date in such opinions remain valid as of such later
date.
(d) You shall be satisfied that (i) as of the Effective Date,
the statements made in the Registration Statement and the Prospectus
were true and correct and neither the Registration Statement nor the
Prospectus omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein,
respectively, not misleading, (ii) since the Effective Date, no event
has occurred which should have been set forth in a supplement or
amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein,
there has not been any material adverse change or any development
involving a prospective material adverse change in or affecting the
business, properties, financial condition or results of operations of
the Company, whether or not arising from transactions in the ordinary
course of business, and, since such dates, except in the ordinary
course of business, the Company has not entered into any material
transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained
therein, (iv) the Company has no material contingent obligations which
are not disclosed in the Registration Statement and the Prospectus, (v)
there are not any pending or known threatened legal proceedings to
which the Company is a party or of which property of the Company is the
subject which are material and which are not disclosed in the
Registration Statement and the Prospectus, (vi) there are not any
franchises, contracts, leases or other documents which are required to
be filed as exhibits to the Registration Statement which have not been
filed as required, (vii) the representations and warranties of the
Company herein are true and correct in all material respects as of the
Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, and (viii) there has not been any
material change in the market for securities in general or in
political, financial or economic conditions from those reasonably
foreseeable as to render it impracticable in your reasonable judgment
to make a public offering of the Stock, or a material adverse change in
market levels for securities in general (or those of companies in
particular) or financial or economic conditions which render it
inadvisable to proceed.
(e) You shall have received on the Closing Date and on any
later date on which Option Stock is purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by the
President and the Chief Financial Officer of the Company, stating that
the respective signers of said certificate have carefully examined the
Registration Statement in the form in which it originally became
effective and the Prospectus contained therein and any supplements or
amendments thereto, and that the statements included in clauses (i)
through (vii) of paragraph (d) of this Section 9 are true and correct.
24
(f) You shall have received from Deloitte & Touche LLP, a
letter or letters, addressed to the Underwriters and dated the Closing
Date and any later date on which Option Stock is purchased, confirming
that they are independent public accountants with respect to the
Company within the meaning of the Securities Act and the applicable
published rules and regulations thereunder and based upon the
procedures described in their letter delivered to you concurrently with
the execution of this Agreement (herein called the Original Letter),
but carried out to a date not more than three business days prior to
the Closing Date or such later date on which Option Stock is purchased
(i) confirming, to the extent true, that the statements and conclusions
set forth in the Original Letter are accurate as of the Closing Date or
such later date, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in
the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of the Original
Letter or to reflect the availability of more recent financial
statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or
affecting the business or properties of the Company which, in your sole
judgment, makes it impractical or inadvisable to proceed with the
public offering of the Stock or the purchase of the Option Stock as
contemplated by the Prospectus.
(g) You shall have received from Deloitte & Touche LLP, a
letter stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's financial
statements for the year ended December 31, 1999, did not disclose any
weakness in internal controls that they considered to be material
weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the
qualification referred to in paragraph (f) of Section 6 hereof.
(i) Prior to the Closing Date, the Stock to be issued and sold
by the Company and the Stock to be sold by the Selling Securityholder
shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have received
from [all] stockholders of the Company (other than the Selling
Securityholder) agreements, in form reasonably satisfactory to Chase
Securities Inc., stating that without the prior written consent of
Chase Securities Inc. on behalf of the Underwriters, such person or
entity will not, for a period of 180 days following the commencement of
the public offering of the Stock by the Underwriters, directly or
indirectly, (i) sell, offer, contract to sell, make any short sale,
pledge, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any
rights to purchase or acquire Common Stock or (ii) enter into any swap
or other agreement that transfers, in whole or in part, any of the
economic consequences or ownership of Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other
25
securities, in cash or otherwise; provided, however, that this
restriction shall not apply to the sale of Stock by the Selling
Securityholder to the Underwriters pursuant to this Agreement.
In addition, you shall have received on the Closing Date and on any
later date on which Option Stock is purchased, such additional documents
(including, without limitation, opinions of counsel, letters, certificates and
agreements) as you may reasonably request. All the agreements, opinions,
certificates and letters mentioned above or elsewhere in this Agreement shall be
deemed to be in compliance with the provisions hereof only if Xxxxx, Day, Xxxxxx
& Xxxxx, counsel for the Underwriters, shall be satisfied that they comply in
form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholder. Any such termination shall be without
liability of the Company or the Selling Securityholder to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholder; PROVIDED, HOWEVER, that (i) in the event of such termination,
the Company and the Selling Securityholder agree to indemnify and hold harmless
the Underwriters from all costs or expenses incident to the performance of the
obligations of the Company and the Selling Securityholder under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company or the Selling
Securityholder to perform any agreement herein, to fulfill any of the conditions
herein, or to comply with any provision hereof other than by reason of a default
by any of the Underwriters, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including reasonable fees
and disbursements of counsel) that shall have been incurred by them in
connection with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDER. The obligation of the Company and the Selling Securityholder to
deliver the Stock shall be subject to the conditions that (a) the Registration
Statement shall have become effective and (b) no stop order suspending the
effectiveness thereof shall be in effect and no proceedings therefor shall be
pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not
be fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholder by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholder to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholder; PROVIDED, HOWEVER, that in the event of any such termination the
Company and the Selling Securityholder jointly and severally agree to indemnify
and hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholder
under this Agreement, including all costs and expenses referred to in paragraphs
(i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement (and subject, in the case of the
Selling Securityholder, to the provisions of paragraph (f) of Section 7), the
Company and the Selling Securityholder hereby
26
jointly and severally agree to reimburse on a quarterly basis the Underwriters
for all reasonable legal and other expenses incurred in connection with
investigating or defending any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in paragraph (a) of Section 7 of this
Agreement, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this Section 11 and the
possibility that such payments might later be held to be improper; PROVIDED,
HOWEVER, that (i) to the extent any such payment is ultimately held to be
improper, the persons receiving such payments shall promptly refund them and
(ii) such persons shall provide to the Company, upon request, reasonable
assurances of their ability to effect any refund, when and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company, the Selling Securityholder and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholder and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing and, if to the Underwriters, shall be mailed or
delivered to Chase Securities Inc., Xxx Xxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx
00000; and if to the Company, shall be mailed or delivered to it at its office,
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Chief
Executive Officer; and if to the Selling Securityholder, shall be mailed or
delivered to the Selling Securityholder in care of Law Department, 0000 Xxxxx
Xxxx, Xxxxx 000, Xxxx. 0000, Xxxxxxxx, Xxxxxxx, Xxxxxx L6T 5P6.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or the Selling Securityholder or their respective directors or
officers, and (c) delivery and payment for the Stock under this Agreement;
PROVIDED, HOWEVER, that if this Agreement is terminated prior to the Closing
Date, the provisions of paragraphs (l), (m) and (n) of Section 6 hereof shall be
of no further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
27
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
Please sign and return to the Company and to the Selling Securityholder
in care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling
Securityholder and the several Underwriters in accordance with its terms.
Very truly yours,
ELASTIC NETWORKS INC.
By:___________________________________
Name:
Title:
SELLING SECURITYHOLDER:
Nortel Networks Limited
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
CHASE SECURITIES INC.
FleetBoston Xxxxxxxxx Xxxxxxxx Inc.
UBS Warburg LLC
By:__________________________________
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
SCHEDULE I
UNDERWRITERS
UNDERWRITERS NUMBER OF SHARES TO BE PURCHASED
------------ --------------------------------
Chase Securities Inc..........................................
FleetBoston Xxxxxxxxx Xxxxxxxx Inc............................
UBS Warburg LLC...............................................
Total......................................................... 7,800,000
=========
SCHEDULE I
SCHEDULE II
SELLING SECURITYHOLDER
NAME AND ADDRESS OF SELLING SECURITYHOLDER NUMBER OF SHARES TO BE SOLD
------------------------------------------ ---------------------------
Nortel Networks Limited 1,000,000 Shares of Underwritten Stock
0000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0 585,000 Shares of Option Stock
Total......................................................... 1,585,000
===========================
SCHEDULE II
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF XXXXXX & XXXXXXXX
COUNSEL FOR THE COMPANY
(i) The Company has been duly incorporated and
is validly existing as a corporation in good standing under
the laws of Delaware, is duly qualified as a foreign
corporation and in good standing in each state of the United
States of America in which its ownership or leasing of
property requires such qualification, except where the failure
to be so qualified and in good standing would not, in the
aggregate, have a material adverse effect on the business,
prospects, properties, operation, condition (financial or
otherwise) or results of operations of the Company, and has
full corporate power and authority to own or lease its
properties and conduct its business as described in the
Prospectus;
(ii) the authorized capital stock of the Company
consists of 25,000,000 shares of Preferred Stock, $0.01 par
value, of which there are no outstanding shares, and
100,000,000 shares of Common Stock, $.01 par value, of which
there are outstanding shares (including the
Underwritten Stock plus the number of shares of Option Stock
issued on the date hereof); proper corporate proceedings have
been taken validly to authorize such authorized capital
stock; all of the outstanding shares of such capital stock
(including the Underwritten Stock and the shares of Option
Stock issued, if any) have been duly and validly issued and
are fully paid and nonassessable; any Option Stock purchased
after the Closing Date, when properly issued and delivered to
and fully paid for by the Underwriters as provided in the
Underwriting Agreement, will be duly and validly issued and
be fully paid and nonassessable; and no preemptive rights of,
or rights of refusal in favor of, stockholders exist with
respect to the Stock, or the issue and sale thereof, pursuant
to the Certificate of Incorporation or Bylaws of the Company
and, to the knowledge of such counsel, there are no
contractual preemptive rights that have not been waived,
rights of first refusal or rights of co-sale which exist with
respect to the Stock being sold by the Selling Securityholder
or the issue and sale of the Stock;
(iii) the Registration Statement has become
effective under the Securities Act and, to such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement or suspending or preventing the use of
the Prospectus is in effect and no proceedings for that
purpose have been instituted or are pending or contemplated by
the Commission;
(iv) the Registration Statement and the
Prospectus (except as to the financial statements and
schedules and other financial data contained therein, as to
which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the
Securities Act, the Exchange Act and with the rules and
regulations of the Commission thereunder;
ANNEX A-1
(v) such counsel is of the opinion that the
Registration Statement (except as to the financial statements
and schedules and other financial data contained or
incorporated by reference therein, as to which such counsel
need not express any opinion or belief) at the Effective Date
did not contain any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or
that the Prospectus (except as to the financial statements and
schedules and other financial data contained or incorporated
by reference therein, as to which such counsel need not
express any opinion or belief) as of its date or at the
Closing Date (or any later date on which Option Stock is
purchased), contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(vi) the information required to be set forth in
the Registration Statement in answer to Items 9, 10 (insofar
as it relates to such counsel) and 11(c) of Form S-1 is to
such counsel's knowledge accurately and adequately set forth
therein in all material respects or no response is required
with respect to such Items and to such counsel's knowledge the
description of the Company's stock option plan and the options
granted and which may be granted thereunder set forth in the
Prospectus accurately and fairly presents in all material
respects the information required to be shown with respect to
said plan and options to the extent required by the Securities
Act and the rules and regulations of the Commission
thereunder;
(vii) such counsel does not know of any
franchises, contracts, leases, documents or legal proceedings,
pending or threatened, which in the opinion of such counsel
are of a character required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement, which are not
described and filed as required;
(viii) the Underwriting Agreement has been duly
authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company
and of the Selling Securityholder, enforceable against the
Company and the Selling Securityholder in accordance with
its terms, except as may be limited or otherwise affected
by (a) bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the rights of creditors generally, and
(b) principles of equity, whether considered at law or in
equity;
(ix) the issue and sale by the Company of the
shares of Stock as contemplated by the Underwriting Agreement
will not conflict with, or result in a breach of, the
Certificate of Incorporation or Bylaws of the Company or any
agreement or instrument known to such counsel to which the
Company is a party or any applicable law or regulation, or to
such counsel's knowledge, any order, writ, injunction or
decree, of any jurisdiction, court or governmental
instrumentality applicable to the Company;
ANNEX A-2
(x) all holders of securities of the Company
having rights to the registration of shares of Common Stock,
or other securities, because of the filing of the Registration
Statement by the Company, have waived such rights or such
rights have expired;
(xi) no consent, approval, authorization or order
of any court or governmental agency or body is required for
the consummation of the transactions contemplated in the
Underwriting Agreement, except such as have been obtained
under the Securities Act, the Exchange Act and such as may be
required under state securities or blue sky laws in connection
with the purchase and distribution of the Stock by the
Underwriters provided that, to the extent the foregoing
relates to the stock to be sold by the Selling Securityholder
and is based upon factual matters, such counsel may rely
solely upon certificates of the Selling Securityholder which
certificates have been delivered to the Underwriters;
(xii) the Stock transferred and sold by the
Selling Securityholder and issued and sold by the Company is
duly authorized for listing by the Nasdaq National Market upon
official notice of issuance; and
(xiii) valid title to the shares of Stock sold
by the Selling Securityholder under the Underwriting
Agreement, free and clear of all liens, encumbrances,
equities, security interests and claims, has been
transferred to the Underwriters who have severally
purchased such shares of Stock under the Underwriting
Agreement, assuming for the purpose of this opinion that
the Underwriters purchased such Stock in good faith without
notice of any claims in conflict with this opinion
paragraph.
ANNEX A-3
ANNEX B
MATTERS TO BE COVERED IN THE OPINION OF XXXXXX & XXXXXXXX
PATENT COUNSEL FOR THE COMPANY
Such counsel are generally familiar with the technology used by the
Company in its business and the manner of its use thereof and have read the
Registration Statement and the Prospectus, including particularly the portions
of the Registration Statement and the Prospectus referring to patents, trade
secrets, trademarks, service marks and other proprietary information or
materials and:
(i) to the best of such counsel's knowledge,
based on information made available to such counsel after
reasonable inquiry, such counsel have no reason to believe
that the Registration Statement or the Prospectus (A) contains
any untrue statement of a material fact with respect to
patents, trade secrets, trademarks, service marks or other
proprietary information or material owned or used by the
Company, or the manner of its use thereof, or any allegation
on the part of any person that the Company is infringing any
patents, trade secrets, trademarks, service marks or other
proprietary rights of any such person or (B) omits to state
any material fact relating to patents, trade secrets,
trademarks, service marks or other proprietary information or
materials owned or used by the Company, or the manner of its
use thereof, or any allegation of which such counsel have
knowledge, that is required to be stated in the Registration
Statement or the Prospectus or is necessary to make the
statements therein not misleading;
(ii) to the best of such counsel's knowledge,
based on information made available to such counsel after
reasonable inquiry, and except as provided in subsection (vi)
below, there are no legal or governmental proceedings pending
relating to patent rights, trade secrets, trademarks, service
marks or other proprietary information of the Company, and to
the best of such counsel's knowledge no such proceedings are
threatened or contemplated by governmental authorities or
others;
(iii) to the best of such counsel's knowledge,
based on information made available to such counsel after
reasonable inquiry, such counsel do not know of any contracts
or other documents, relating to the Company's patents, trade
secrets, trademarks, service marks or other proprietary
information of a character required to be filed as an exhibit
to the Registration Statement or required to be described in
the Registration Statement or the Prospectus that are not
filed or described as required;
(iv) to the best of such counsel's knowledge,
based on information made available to such counsel after
reasonable inquiry and except as provided in subsection (vi)
below, the Company is not, and has not been accused of,
infringing or otherwise violating any patents, trade secrets,
trademarks, service
ANNEX B-1
marks or other proprietary information of others, and to the
best of such counsel's knowledge, based on information made
available to such counsel after reasonable inquiry, the
Company has not notified such counsel of any allegations of
infringement by others of any of the Company's patents, trade
secrets, trademarks, service marks or other proprietary
information which in the judgment of such counsel could affect
materially the use thereof by the Company; and
(v) to the best of such counsel's knowledge,
based on information provided to such counsel after
reasonable inquiry, no third party has raised a claim that the
Company fails to own or possess sufficient licenses under any
patents, trade secrets, trademarks, service marks or other
proprietary information owned or possessed by that third party
that the third party claims to be necessary to conduct the
business now being or proposed to be conducted by the Company
as described in the Prospectus.
(vi) A third party has filed a Notice of
Opposition in the United States Patent and Trademark Office,
contending that one of the trademarks and service marks used
by the Company should be denied registration on the ground
that the mark is confusingly similar to a mark allegedly owned
by that third party. The Company intends to defend the
opposition proceeding vigorously.
ANNEX B-2
ANNEX C
MATTERS TO BE COVERED IN THE OPINION OF XXXXXXXX X. XXXXXX,
THE CHIEF LEGAL OFFICER OF THE SELLING SECURITYHOLDER
(i) The Selling Securityholder is validly existing as a corporation in good
standing under the laws of Canada;
(ii) the Underwriting Agreement has been duly authorized, executed and delivered
by the Selling Securityholder; and
(iii) the Selling Securityholder has full legal right and authority to enter
into the Underwriting Agreement and to sell, transfer and deliver in the manner
provided for in the Underwriting Agreement the shares of Stock sold by the
Selling Securityholder.
ANNEX C-1
