EXHIBIT 1.1
3,000,000 SHARES
TERAYON COMMUNICATION SYSTEMS, INC.
COMMON STOCK
($0.001 PAR VALUE)
UNDERWRITING AGREEMENT
----------------------
August __, 1998
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Xxxxx LLC
Xxxxxx Brothers Inc.
Xxxxx Xxxxxx Inc.
As Representatives of the Several Underwriters
c/o BT Alex. Xxxxx Incorporated
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
Terayon Communication Systems, Inc., a Delaware corporation (the
"Company"), proposes to sell to the several underwriters (the "Underwriters")
named in Schedule I hereto for whom you are acting as representatives (the
"Representatives") an aggregate of 3,000,000 shares of the Company's Common
Stock, $0.001 par value (the "Firm Shares"). The respective amounts of the Firm
Shares to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Company also proposes to sell at the
Underwriters' option an aggregate of up to 450,000 additional shares of the
Company's Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters.
The Firm Shares and the Option Shares (to the extent the aforementioned option
is exercised) are herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to each of the Underwriters as
follows:
(a) A registration statement on Form S-1 (File No. 333-56911) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462 (b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (i) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (ii) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus." Any reference
herein to the Registration Statement, any Preliminary Prospectus or to the
Prospectus shall be deemed to refer to and include any supplements or amendments
to any Prospectus filed with the Commission after the date of filing of the
Prospectus under Rules 424(b) or 430A and prior to the termination of the
offering of the Shares by the Underwriters.
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. The reincorporation of the
Company from a California corporation into a Delaware corporation was duly and
properly effectuated in accordance with the Delaware and California corporation
laws, the successor Company succeeded to all rights, privileges and obligations
of the predecessor Company, the reincorporation was effectuated as a merger (the
"Merger") pursuant to Delaware law and the offer and sale of the securities
issued in connection with the Merger were in compliance with the applicable
federal and state securities laws. Each of the subsidiaries of the Company as
listed in
-2-
Exhibit 21.1 to Item 16(a) of the Registration Statement (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation or limited liability company, as applicable, in good standing
under the laws of the jurisdiction of its incorporation, with corporate power
and authority to lease its properties and conduct its business as described in
the Registration Statement. The Subsidiaries are the only subsidiaries, direct
or indirect, of the Company. The Company and each of the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the conduct of
their business requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the earnings, business,
management, properties, assets, rights, prospects, results of operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken
as a whole (a "Material Adverse Effect"). All of the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable. The shares of capital
stock of the Subsidiaries held by the Company are owned by the Company free
and clear of all liens, encumbrances, equities and claims; and, to the
Company's knowledge, no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interest in the
Subsidiaries are outstanding.
(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable and
have been issued in compliance with all applicable securities laws; the Shares
to be issued and sold by the Company have been duly authorized and when issued
and paid for as contemplated herein will be validly issued, fully paid and non-
assessable; and no preemptive rights of stockholders, or other rights to
subscribe to, exist with respect to any of the Shares or the issue and sale
thereof. Neither the filing of the Registration Statement nor the offering or
sale of the Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock. Cisco Systems, Inc., a stockholder
of the Company, has received the notice required pursuant to its right of first
offer to acquire the Company upon a public offering of the Company and has not
responded in writing within the required time period in order to exercise such
right.
(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the Delaware General Corporate Law.
(e) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform, to the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendment thereto did not and will not as of the applicable
effective date, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto did not and will not, as of the date hereof, contain any
untrue statement of a
-3-
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained in
or omitted from the Registration Statement or the Prospectus, or any such
amendment or supplement, in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of any Underwriter
through the Representatives, specifically for use in the preparation thereof.
(f) The consolidated financial statements of the Company, together
with related notes and schedules as set forth in the Registration Statement,
present fairly the financial position and the results of operations and cash
flows of the Company and the Subsidiaries, at the indicated dates and for the
indicated periods. Such financial statements and related schedules have been
prepared in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, except as disclosed
herein, and all adjustments necessary for a fair presentation of results for
such periods have been made. The summary financial and statistical data
included in the Registration Statement present fairly the information shown
therein and such data have been compiled on a basis consistent with the
financial statements presented therein and the books and records of the Company.
The pro forma financial information included in the Registration Statement and
the Prospectus present fairly the information shown therein, have been prepared
in accordance with the Commission's rules and guidelines with respect to pro
forma financial statements, have been properly compiled on the pro forma bases
described therein, and, in the opinion of the Company, the assumptions used in
the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(g) Ernst & Young LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement, have
advised the Company that they are independent public accountants as required by
the Act and the Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise (i) which if
determined adversely to the Company or any of its Subsidiaries would have a
Material Adverse Effect or (ii) to prevent the consummation of the transactions
contemplated hereby, except as set forth in the Registration Statement.
(i) The Company and the Subsidiaries have good and marketable title to
all of the properties and assets reflected in the financial statements (or as
described in the Registration Statement) hereinabove described, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those reflected
in such financial statements (or as described in the Registration Statement) or
which are not material in amount. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases conforming in all material
respects to the description thereof set forth in the Registration Statement.
-4-
(j) The Company and the Subsidiaries have filed all federal, state,
local and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due. All tax
liabilities have been adequately provided for in the consolidated financial
statements of the Company, and the Company does not know of any actual or
proposed additional tax assessments.
(k) Since the respective dates as of which information is given in the
Registration Statement, and except as disclosed in the Prospectus, there has not
been any Material Adverse Effect or any development that could reasonably be
expected to have a Material Adverse Effect, and there has not been any material
transaction entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business. The Company and the
Subsidiaries have no material contingent obligations which are not disclosed in
the Company's consolidated financial statements included in the Registration
Statement.
(l) Except as disclosed in the Prospectus, neither the Company nor any
of the Subsidiaries is or with the giving of notice or lapse of time or both,
will be, in violation of or in default under its charter or bylaws or under any
agreement, lease, contract, indenture or other instrument or obligation to which
it is a party or by which it, or any of its properties, is bound and which
violation or default would have a Material Adverse Effect. The execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated and the fulfillment of the terms hereof will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust or other agreement or instrument
to which the Company or any Subsidiary is a party, or of the charter or bylaws
of the Company or any Subsidiary or any rule or regulation applicable to the
Company or any Subsidiary or any order of which the Company is aware of any
court or of any regulatory body or administrative agency or other governmental
body.
(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect. Except for the Shares, none of the
offerings by the Company of its securities before or during the Offering is part
of the Offering or part of a single plan of financing together with the
Offering.
(n) The Company and each of the Subsidiaries hold all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their respective businesses. Except as specifically
disclosed in the Prospectus, the Company and each of the Subsidiaries owns or
possesses adequate rights to use all trademarks, trade names, patents, patent
rights, mask works, copyrights, licenses, approvals and governmental
authorizations to conduct its
-5-
business as now conducted and, to the Company's knowledge, as proposed to be
conducted; and, to the Company's knowledge, neither the Company nor any of the
Subsidiaries has infringed any trademark, trade name, patent, patent right,
mask work, copyright, license, trade secret or other similar right of others,
and, except as disclosed in the Prospectus, no written claim has been made
against the Company or any of the Subsidiaries regarding trademark, trade
name, patent, mask work, copyright, license, trade secret or other
infringement which could have a Material Adverse Effect. The Company knows of
no material infringement by others of any trademark, trade name, patent,
patent right, mask work, copyright, license, trade secret or other similar
right owned by or licensed to the Company.
(o) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in the stabilization or manipulation of the price of the shares
of Common Stock to facilitate the sale or resale of the Shares; and the Company
is not aware of any such action by any of its affiliates.
(p) Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the Commission thereunder.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) The Company and each of its Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as the Company reasonably
believes to be adequate for the conduct of their respective businesses and the
value of their respective properties and as is customary for companies engaged
in similar industries.
(s) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
-6-
(t) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba.
---------------------------------------------------------
(u) Except as disclosed to the Underwriters, the Company is not (nor
did it permit any of its officers, directors, agents, representatives or
affiliates to) directly or indirectly, other than as described in the
Prospectus, taking any of the following actions: (i) solicit, entertain,
encourage, initiate or participate in any proposals, or conduct discussions with
or engage in negotiations, relating to, (ii) provide information with respect to
it relating to, or otherwise cooperate with, facilitate or encourage any effort
or attempt with regard to, (iii) enter into an agreement providing for, or (iv)
make or authorize any statement, recommendation or solicitation in support of,
any possible acquisition of Company or any of the Subsidiaries (whether by
merger, purchase of assets, tender offer or otherwise), or any material portion
of its or their capital stock or assets or any equity interest in the Company or
any of the Subsidiaries.
(v) To the best of Company's knowledge, no labor disturbance by the
employees of the Company or any of the Subsidiaries exists or is imminent. No
collective bargaining agreement exists with any of the Company's employees and,
to the best of the Company's knowledge, no such agreement is imminent.
(w) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
(x) Neither the Company nor any of the Subsidiaries has at any time
during the last four (4) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(y) (i) Each of the Company and its Subsidiaries is in compliance with
all rules, laws and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to its respective business, (ii)
neither the Company nor any of its Subsidiaries has received notice from any
governmental authority or third party of an asserted claim under Environmental
Laws, which claim is required to be disclosed in the Registration Statement and
the Prospectus and is not so disclosed, (iii) to the Company's knowledge,
neither the Company nor any of its Subsidiaries will be required to make future
material capital expenditures to comply with existing Environmental Laws, and
(iv) to the Company's knowledge, no property which is leased or occupied by the
Company or any of its Subsidiaries has been designated as a Superfund site
pursuant to the Comprehensive Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. (S) 9601, et seq.), or otherwise designated as a
-- ----
contaminated site under applicable state or local law.
-7-
(z) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or any of its Subsidiaries to or for the benefit of
any of the officers or directors of the Company or any of its Subsidiaries or
any of the members of the families of any of them, except as disclosed in the
Registration Statement and the Prospectus.
2. Purchase, Sale and Delivery of the Firm Shares.
----------------------------------------------
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in
by wire transfer of immediately available funds to an account specified in
writing by the Company against delivery of certificates therefor to the
Representatives for the several accounts of the Underwriters. Such payment and
delivery are to be made at the offices of BT Alex. Xxxxx Incorporated, 000 Xxxx
Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx, at 10:00 a.m., Baltimore time, (a) on the
third business day after the date of this Agreement, (b) if this Agreement is
executed and delivered after 4:30 p.m. Eastern time, on the fourth business day
after the date of this Agreement or (c) at such other time and date not later
than five business days thereafter as you and the Company shall agree upon, such
time and date being herein referred to as the "Closing Date." (As used herein,
"business day" means a day on which the New York Stock Exchange is open for
trading and on which banks in New York are open for business and are not
permitted by law or executive order to be closed.) The certificates for the
Firm Shares will be delivered in such denominations and in such registrations as
the Representatives request in writing not later than the second full business
day prior to the Closing Date, and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is two or
more business days before the Closing
-8-
Date, the notice of exercise shall set the Closing Date as the Option Closing
Date. The number of Option Shares to be purchased by each Underwriter shall be
in the same proportion to the total number of Option Shares being purchased as
the number of Firm Shares being purchased by such Underwriter bears to the
total number of Firm Shares being purchased, adjusted by you in such manner as
to avoid fractional shares. The option with respect to the Option Shares
granted hereunder may be exercised only to cover over-allotments in the sale
of the Firm Shares by the Underwriters. You, as Representatives of the several
Underwriters, may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Shares shall be made
on the Option Closing Date by wire transfer of immediately available funds to
an account specified in writing by the Company against delivery of
certificates therefor at the offices of BT Alex. Xxxxx Incorporated, 000 Xxxx
Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx.
3. Offering by the Underwriters.
----------------------------
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company.
------------------------
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations and (iii) file on a timely basis all
reports and statements required to be filed by the Company with the Commission
subsequent to the date of the Prospectus and prior to the termination of the
offering of the Shares by the Underwriters.
-9-
(b) The Company will advise the Representatives promptly (i) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (ii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any additional
information, and (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or of the institution of any proceedings for that purpose. In the
event of the issuance of any stop order preventing or suspending the use of the
Prospectus, the Company will use its best efforts to obtain as soon as possible
the lifting thereof.
(c) The Company will cooperate with the Representatives in endeavoring
to qualify the Shares for sale under the securities laws of such jurisdictions
as the Representatives may reasonably have designated in writing and will make
such applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to continue
such qualifications in effect for so long a period as the Representatives may
reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, four conformed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such additional number of copies of the Registration
Statement (including such number of copies of the exhibits filed therewith that
may reasonably be requested), and of all amendments thereto, as the
Representatives may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so as to
permit the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
-10-
(f) The Company will make generally available to its stockholders, as
soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earnings statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earnings statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(h) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of Common
Stock (or agreement for such) will be made for a period of 180 days after the
date of this Agreement, directly or indirectly, by the Company except with the
prior written consent of BT Alex. Xxxxx Incorporated. The foregoing sentence
shall not apply to (A) the Shares 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 plans of the Company (the
"Option Plans") or upon the exercise of warrants outstanding as of the date
hereof, (C) options to purchase Common Stock granted under the Option Plans and
(D) shares of Common Stock or options or warrants to purchase Common Stock
issued or granted in connection with equipment lease financing arrangements,
credit agreements or other commercial transactions or corporate strategic
partner transactions approved by the Company's Board of Directors.
(i) Each officer, director and securityholder of the Company has
agreed not to offer, sell, sell short or otherwise dispose of any shares of
Common Stock of the Company or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for Common Shares or
derivative of Common Shares owned by such person (or as to which such person has
the right to direct the disposition of) for a period of 180 days after the date
of this Agreement, directly or indirectly, except with the prior written consent
of the Company or BT Alex. Xxxxx Incorporated ("Lockup Agreements").
(j) The Company shall apply the net proceeds of its sale of the Shares
as set forth in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.
-11-
(k) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
(l) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock.
5. Costs and Expenses.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation
Letter, the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees and
reasonable expenses (including legal fees and disbursements) incident to
securing any required review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Shares; the listing Fee of the
Nasdaq National Market; and the expenses, including the fees and disbursements
of counsel for the Underwriters, incurred in connection with the qualification
of the Shares under state securities or Blue Sky laws. The Company agrees to
pay all costs and expenses of the Underwriters, including the reasonable fees
and disbursements of counsel for the Underwriters, incident to the offer and
sale of directed shares of the Common Stock by the Underwriters to employees and
persons having business relationships with the Company and its Subsidiaries.
The Company shall not, however, be required to pay for any of the Underwriters'
expenses (other than those related to qualification under NASD regulation and
state securities or Blue Sky laws) except that, if this Agreement shall not be
consummated because the conditions in Section 6 hereof are not satisfied, or
because this Agreement is terminated by the Representatives pursuant to Section
11 hereof, or by reason of any failure, refusal or inability on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement or
to comply with any of the terms hereof on its part to be performed, unless such
failure to satisfy said condition or to comply with said terms be due to the
default or omission of any Underwriter, then the Company shall reimburse the
several Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder; but the Company shall not in any event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Shares.
6. Conditions of Obligations of the Underwriters.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy,
-12-
as of the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company contained herein, and to the
performance by the Company of its covenants and obligations hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective and any and
all filings required by Rule 424 and Rule 430A of the Rules and Regulations
shall have been made, and any request of the Commission for additional
information (to be included in the Registration Statement or otherwise) shall
have been disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been taken or threatened by the
Commission and no injunction, restraining order, or order of any nature by a
federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would reasonably be expected to prevent the issuance of
the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Xxxxxx Godward LLP,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement; the Company is duly
qualified to transact business in all jurisdictions in which the conduct of
its business requires such qualification, except where the failure to so
qualify would have a Material Adverse Effect; the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable;
(ii) The Agreement and Plan of Merger dated July 6, 1998 (the
"Plan of Merger") by and between the Company and Terayon Communication Systems,
a California corporation ("Terayon California"), has been duly authorized by all
necessary board of directors and stockholder action on the part of the Company
and Terayon California and has been duly executed and delivered by each of the
parties thereto. The execution and delivery of the Plan of Merger and the
consummation of the merger contemplated thereby (the "Merger") did not
contravene any provision of applicable law of the certificate of incorporation
or bylaws of the Company or the articles of incorporation or bylaws of Terayon
California or any agreement or other instrument binding upon the Company that is
material to the Company and that is set forth as an exhibit to the Registration
Statement or any judgment or decree of any governmental body, agency or court
having jurisdiction over the Company or Terayon California that is known to such
counsel, except for any such contravention that would not have a Material
Adverse Effect, and no consent, approval, authorization or order of
qualification with any governmental body or agency was required for the
performance by the Company and Terayon California of its obligations under the
Plan of Merger except such as were obtained and except such consent, approval,
authorization, order or
-13-
qualification, which if not obtained, would not have a Material Adverse
Effect. The Merger is effective under the laws of the State of California and
the State of Delaware.
(iii) The Company had authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus as of the date
set forth therein; the authorized shares of the Company's Common Stock have been
duly authorized; the outstanding shares of the Company's Common Stock have been
duly authorized and validly issued and are fully paid and non-assessable; the
Shares conform to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock"; the certificates for the Common Stock in
the form filed as Exhibit 4.2 to the Registration Statement with the Commission,
are in due and proper form under Delaware law; the Firm Shares and the Option
Shares, if any, to be sold by the Company pursuant to this Agreement have been
duly authorized and will be validly issued, fully paid and non-assessable when
issued and paid for as contemplated by this Agreement; and to such counsel's
knowledge, no preemptive rights of stockholders exist with respect to any of the
Shares or the issue or sale thereof.
(iv) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, (a) there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and (b) there are no
outstanding or authorized options, warrants or rights obligating the Company to
issue any shares of its capital stock or any securities convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the Company or any
other person has the right, which has not been satisfied or effectively waived,
to cause the Company to sell or otherwise issue to them, or to permit such
person to underwrite the sale of, any of the Shares or the right to have any
Common Shares or other securities of the Company included in the Registration
Statement or the right, as a result of the filing of the Registration Statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company.
(v) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(vi) The Registration Statement and the Prospectus comply as to
form in all material respects with the requirements of the Act and the
applicable rules and regulations thereunder (except that such counsel need
express no opinion as to the financial statements and schedules, related notes,
other financial data and statistical data derived therefrom included in the
Registration Statement and Prospectus).
(vii) The statements under the captions "Management--Limitation on
Directors' and Officers' Liability," "Management -- Employee Benefit Plans,"
"Certain Transactions," "Description of Capital Stock," and "Shares Eligible for
Future Sale" in the Prospectus, insofar as such statements constitute a summary
of documents referred to therein or
-14-
matters of law, summarize the information called for with respect to such
documents and matters to the extent required by the Act and the Rules and
Regulations.
(viii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are no so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are summarized to the extent required
by the Act and the Rules and Regulations.
(ix) Such counsel knows of no legal or governmental proceedings
pending or threatened against the Company or any of the Subsidiaries required
under the Act and the Rules and Regulations to be described in the Prospectus,
except as set forth in the Prospectus.
(x) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of the
Company, or any agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries may
be bound that was filed as an exhibit to the Registration Statement.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD or as required by State securities
and Blue Sky laws as to which such counsel need express no opinion) except such
as have been obtained or made, specifying the same.
(xiii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and application
of the net proceeds therefrom as described in the Prospectus, required to
register as an investment company under the 1940 Act.
In rendering such opinion Xxxxxx Godward LLP, may rely as to matters
governed by the laws of states other than California, the corporate laws of
Delaware or federal securities laws on local counsel in such jurisdictions,
provided that in each case Xxxxxx Godward LLP, shall state that they believe
that they and the Underwriters are justified in relying on such other counsel.
In addition to the matters set forth above, such opinion shall also state that
nothing has come to the attention of such counsel which leads them to believe
that (i) the Registration Statement, at the time it became effective under the
Act (but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act), contained an untrue statement of a material fact or
omitted to state a
-15-
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, on the date it was
filed pursuant to the Rules and Regulations and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements, in the light of the circumstances under which they are made,
not misleading (except that such counsel need express no view as to financial
statements and schedules, related notes, other financial data and statistical
data derived therefrom). With respect to such statement, check and
verification, Xxxxxx Godward LLP may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(c) The Underwriters shall have received on the Closing Date an
opinion of Xxxx & Fish, dated the Closing Date, with respect to certain
intellectual property matters, to the effect that:
(i) As to the patent applications such counsel has filed, the
Company owns all patent applications and patents which have issued
therefrom although the corporate name change has left the assignments
from the inventors to the Company by its prior name, described in the
Registration Statement and Prospectus as being owned by it or
necessary for the conduct of its business, and such counsel is not
aware of any claim to the contrary or any challenge by any other
person to the rights of ownership in the Company with respect to the
foregoing.
(ii) Such counsel is not aware of any legal actions, claims or
proceedings pending or threatened against the Company alleging that
the Company is infringing or otherwise violating any patents or trade
secrets owned by others other than those identified in the
Registration Statement and the Prospectus.
(iii) Based upon a review of certain third party patent rights
owned by Unisys and not asserted by them but made known to such
counsel, a formal interpretation of the claims and discussions with
scientific personnel of the Company regarding application of the
properly interpreted claims to the technology of the Company, such
counsel does not believe any claim of this patent would be found in a
correctly decided patent litigation to be infringed by the activities
of the Company in the manufacture, use or sale of any product of the
Company, the technologies employed by the Company or the method of
their use in any product of the Company, each as described in the
Registration Statement and Prospectus and as such are related to the
Company's technologies and products. Such counsel have been made aware
of another pair of patents owned by Scientific Atlanta which have not
been asserted by them and which relate to cable modem technology.
Based upon some preliminary studies of the prosecution history and
discussions with company technical personnel, such counsel believes
there is no infringement of these patents. However, such counsel has
not as yet had time to do a formal claim interpretation and
infringement analysis, so such counsel has no final opinion on this
matter.
-16-
(iv) Such counsel has reviewed the patent applications filed by
the Company and prepared by us, such applications have been properly
prepared and filed, are being diligently pursued by the Company, and
the inventions described in such applications are owned by the
Company.
(v) Such counsel has reviewed the statements under the captions
"Risk Factors--Dependence on Proprietary Technology; Protection of
Intellectual Property Rights" and "Business--Intellectual Property" in
the Registration Statement and Prospectus, and, to the extent they
constitute matters of law or legal conclusions, these descriptions
appear to be accurate and fairly and completely present the
intellectual property situation of the Company with respect to patents
that have actually been asserted or as to which infringement has been
claimed.
(vi) Such counsel is aware of nothing that causes such counsel to
believe that, as of the date that the Registration Statement became
effective and as of the date of such opinion, the statements under the
captions "Risk Factors--Dependence on Proprietary Technology;
Protection of Intellectual Property Rights" and "Business--
Intellectual Property" in the Registration Statement and Prospectus
contained or contains any untrue statement of a material fact other
than understating the number of patent applications now pending -
there are now 7 pending U.S. patent applications and one PCT
application which has not yet entered the national stage, but if it
does and if the Company files in all the countries in which they filed
a prior application, there will be 14 pending foreign applications in
January 1999 - there are currently 7 pending foreign applications) or
omitted or omits to state a material fact necessary to make the
statements made therein, in light of the circumstances under which
they were made, not misleading, (except that no mention is made of the
unasserted patents the situations of which have been described above -
if those facts are deemed material). There is never absolute certainty
about the validity, enforceability or infringement of a patent, and
the Registration Statement does a good job of accurately reflecting
this uncertainty. There are always challenges to the validity and/or
enforceability of patents in patent litigation and neither the
Registration Statement nor this opinion can possibly anticipate what
they will be if litigation occurs.
(d) The Representatives shall have received from Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, P.C., counsel for the Underwriters, an opinion dated the
Closing Date or the Option Closing Date, as the case may be, substantially to
the effect specified in subparagraphs (iv) and (v) of Paragraph (b) of this
Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In addition to the matters
set forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that (i) the Registration Statement, or any amendment thereto, as of the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) contained an untrue
statement of a
-17-
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii)
the Prospectus, or any supplement thereto, on the date it was filed pursuant
to the Rules and Regulations and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact, necessary in order to make the statements,
in the light of the circumstances under which they are made, not misleading
(except that such counsel need express no view as to financial statements,
related notes, schedules and other financial information or statistical data
derived therefrom therein). With respect to such statement, Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, P.C. may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(e) The Representatives shall have received at or prior to the Closing
Date from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., a memorandum or summary, in
form and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
State securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(f) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(g) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
-18-
(iii) All filings required to have been made pursuant to Rules 424
or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been set forth
in a supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the Company
and its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business.
(h) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, shall have been
approved for listing on the Nasdaq National Market, subject to official notice
of issuance.
(j) The Lockup Agreements described in Section 4 (j) shall be in full
force and effect as of the Closing Date.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, P.C., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing or
by telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
-19-
7. Conditions of the Obligations of the Company.
--------------------------------------------
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or (ii) 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; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made; and will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, or controlling person in connection with investigating
or defending any
-20-
such loss, claim, damage, liability, action or proceeding; provided, however,
that each Underwriter will be liable in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission has been made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representatives specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the 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 the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party and the indemnifying party shall pay as incurred the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or
-21-
potential party to such claim, action or proceeding) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on the
other from the offering of the Shares. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party or parties on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter, and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this Section
8(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
-22-
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Shares or Option Shares, as the case may
be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 36 hours you, as such Representatives, shall not have procured such
other Underwriters, or any others, to purchase the Firm Shares or Option Shares,
as the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company or you
as the Representatives of the Underwriters will have the right, by written
notice given within the next 36-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters or of the Company except to the extent provided in Section 8
hereof. In the event of a
-23-
default by any Underwriter or Underwriters, as set forth in this Section 9,
the Closing Date or Option Closing Date, as the case may be, may be postponed
for such period, not exceeding seven days, as you, as Representatives, may
determine in order that the required changes in the Registration Statement or
in the Prospectus or in any other documents or arrangements may be effected.
The term "Underwriter" includes any person substituted for a defaulting
Underwriter. Any action taken under this Section 9 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
10. Notices.
-------
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to BT Alex. Xxxxx
Incorporated, 000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx
00000, Attention: Xxxx Xxxxxxxxxx; with a copy to BT Alex. Xxxxx Incorporated,
One Bankers Trust Plaza, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: General Counsel; if to the Company, to
Xx. Xxxx Rakib
Chief Executive Officer
Terayon Communication Systems, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx Xxxxx, XX 00000
with a copy to:
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
11. Termination.
-----------
This Agreement may be terminated by you by notice to the Company as
follows:
(a) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any Material Adverse Effect has
occurred or is reasonably likely to occur, (ii) any outbreak or escalation of
hostilities or declaration of war or national emergency or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, escalation, declaration, emergency, calamity,
crisis or change on the financial markets of the United States would, in your
reasonable judgment, make it impracticable to market the Shares or to enforce
contracts for the sale of the Shares, or (iii) suspension of trading in
securities generally on
-24-
the New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree or
other promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in your opinion is reasonably likely to
have a Material Adverse Effect, (v) declaration of a banking moratorium by
United States or New York State authorities, (vi) any downgrading in the
rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Exchange Act); (vii) the suspension of trading of the Company's Common
Stock by the Commission on the Nasdaq National Market or (viii) the taking of
any action by any governmental body or agency in respect of its monetary or
fiscal affairs which in your reasonable opinion has a material adverse effect
on the securities markets in the United States; or
(b) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
----------
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters.
------------------------------------
The Company, and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
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 on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.
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.
-25-
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
TERAYON COMMUNICATION SYSTEMS, INC.
By
______________________________________
Xxxx Xxxxx
Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. XXXXX INCORPORATED
XXXXXXXXX & XXXXX LLC
XXXXXX BROTHERS INC.
XXXXX XXXXXX INC.
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. Xxxxx Incorporated
By:
____________________________________
Authorized Officer
-26-
SCHEDULE I
SCHEDULE OF UNDERWRITERS
NUMBER OF
FIRM
SHARES TO BE
UNDERWRITER PURCHASED
____________________________________________________ ____________
BT Alex. Xxxxx Incorporated.........................
Xxxxxxxxx & Xxxxx LLC...............................
Xxxxxx Brothers Inc.................................
Xxxxx Xxxxxx Inc....................................
Total............................................ 3,000,000
=========
