1
EXHIBIT 1.2
1,500,000 Shares
SCM MICROSYSTEMS, INC.
Common Stock
INTERNATIONAL UNDERWRITING AGREEMENT
April __, 1998
XXXXX INTERNATIONAL L.P.
WESTDEUTSCHE LANDESBANK GIROZENTRALE
XXXXXXXXX & XXXXX LLC
As Lead Managers of the several International Managers
x/x Xxxxx Xxxxxxxxxxxxx X.X.
Xxx Xxxxx Xxxxx
Xxxxxx XX0X 0XX
U.K.
Dear Sirs:
1 Introductory. SCM Microsystems, Inc., a Delaware corporation (the
"Company"), and the selling stockholders named in Schedule B hereto (the
"Selling Stockholders") propose to sell, pursuant to the terms of this
Agreement, to the several International Managers named in Schedule A
hereto (the "International Managers," or, each, an "International
Manager"), an aggregate of 1,500,000 shares of Common Stock, $0.001 par
value per share (the "Common Stock"), of the Company. The aggregate of
1,500,000 shares so proposed to be sold is hereinafter referred to as
the "Firm Stock." The Company also proposes to sell to the International
Managers and the U.S. Underwriters (as hereinafter defined), upon the
terms and conditions set forth in Section 3 hereof, up to an additional
450,000 shares of Common Stock (the "Optional Stock"). The Firm Stock
and the Optional Stock are hereinafter collectively referred to as the
"Stock." Xxxxx International L.P. ("Cowen"), Westdeutsche Landesbank
Girozentrale ("West LB") and Xxxxxxxxx & Xxxxx LLC are acting as Lead
Managers of the several International Managers and in such capacity are
hereinafter referred to as the "Lead Managers."
It is understood by all parties that the Company and the Selling
Stockholders are concurrently entering into an agreement dated the date
hereof (the "U.S. Underwriting Agreement") providing for the sale by the
Company and the Selling Stockholders of an aggregate of 1,500,000 shares
of Common Stock (the "U.S. Stock") through arrangements with certain
U.S. Underwriters in the United States and Canada (the "U.S.
Underwriters"), for whom Xxxxx & Company, Xxxxxxxxx & Xxxxx LLC and
Xxxxxxx, Xxxxxx and Xxxxxxxxx are acting as Representatives (the
"Representatives"). The International Managers and the U.S. Underwriters
simultaneously are entering into an agreement among the International
and U.S. underwriting syndicates (the "Agreement Among U.S. Underwriters
and International Managers") which provides for, among
1
2
other things, the transfer of shares of Common Stock between the two
syndicates. Two forms of prospectus are to be used in connection with
the offer and sale of shares of Common Stock contemplated by the
foregoing, one relating to the Stock and the other relating to the U.S.
Stock. Except as used in the first paragraph hereof and in Section 8
herein, and except as the context may otherwise require, references
herein to the Stock shall include all the shares of Common Stock which
may be sold pursuant to both this Agreement and the U.S. Underwriting
Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall
include the U.S. and the International versions thereof; provided,
however, that any such references shall not be deemed to be references
to the prospectus prepared in the German language in connection with the
listing of shares of Stock on the Neuer Markt of the Frankfurt Stock
Exchange. The German language prospectus included in the Application for
Admission (as hereinafter defined) and the final form of the German
language prospectus are collectively referred to as the "German
Prospectus."
2a. Representations and Warranties of the Company. The Company hereby
represents and warrants to, and agrees with, the several International
Managers that:
(a) A registration statement on Form S-1 (File No. 333-47635) in the
form in which it became or becomes effective and also in such
form as it may be when any post-effective amendment thereto
shall become effective with respect to the Stock, including any
pre- effective prospectuses included as part of the registration
statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the
Securities Act of 1933, as amended (the "Securities Act"), and
the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission")
promulgated thereunder, copies of which have heretofore been
delivered to you, has been prepared by the Company in conformity
with the requirements of the Securities Act and has been filed
with the Commission under the Securities Act; one or more
amendments to such registration statement, including in each
case an amended pre-effective prospectus, copies of which
amendments have heretofore been delivered to you, have been so
prepared and filed. If it is contemplated, at the time this
Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared
effective before the offering of the Stock may commence, the
term "Registration Statement" as used in this Agreement means
the registration statement as amended by said post-effective
amendment. The term "Registration Statement" as used in this
Agreement shall also include any registration statement relating
to the Stock that is filed and becomes effective pursuant to
Rule 462(b) under the Securities Act. The term "Prospectus" as
used in this Agreement means the prospectus in the form included
in the Registration Statement, or, (A) if the prospectus
included in the Registration Statement omits information in
reliance on Rule 430A under the Securities Act and such
information is included in a prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities Act, the
term "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information
contained in the prospectus filed with the Commission pursuant
to Rule 424(b) and (B) if prospectuses that meet the
requirements of Section 10(a) of the Securities Act are
delivered pursuant to Rule 434 under the Securities Act, then
(i) the term "Prospectus" as used in this Agreement means the
"prospectus subject to completion" (as such term is defined in
Rule 434(g) under the Securities Act) as supplemented by (a) the
addition of Rule 430A information or other information contained
in the form of prospectus delivered pursuant to Rule 434(b)(2)
under the Securities Act or (b) the information contained in the
term sheets described in Rule
2
3
434(b)(3) under the Securities Act, and (ii) the date of such
prospectuses shall be deemed to be the date of the term sheets.
The term "Pre-effective Prospectus" as used in this Agreement
means the prospectus subject to completion dated March __, 1998,
and as such prospectus shall have been amended from time to time
prior to the date of the Prospectus.
(b) The Commission has not issued or, to the Company's knowledge,
threatened to issue any order preventing or suspending the use
of any Pre-effective Prospectus, and, at its date of issue, each
Pre-effective Prospectus complied in all material respects with
the applicable provisions of the Securities Act, except that the
outside front cover and back cover pages of the International
version omitted certain captions and legends that are required
in the U.S. prospectus, and did not contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, other than any noncompliance,
untrue statement or omission in a Pre-effective Prospectus that
has been corrected in the Prospectus; and, when the Registration
Statement becomes effective and at all times subsequent thereto
up to and including each of the Closing Dates (as hereinafter
defined), the Registration Statement and the Prospectus and any
amendments or supplements thereto contained and will contain all
material statements and information required to be included
therein by the Securities Act, except that the outside front
cover and back cover pages of the International version omitted
certain captions and legends that are required in the U.S.
prospectus, and complied and will comply in all material
respects with the applicable provisions of the Securities Act,
except that the outside front cover and back cover pages of the
International version omitted certain captions and legends that
are required in the U.S. prospectus, and neither the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, contained or will contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the
foregoing representations and warranties shall not apply to
information contained in or omitted from any Pre-effective
Prospectus or the Registration Statement or the Prospectus or
any such amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company
by the Lead Managers on behalf of the several International
Managers, directly or through you, specifically for use in the
preparation thereof. With respect to the preceding sentence, the
Company acknowledges that the only information furnished in
writing by the Lead Managers on behalf of the several
International Managers for use in the Pre- effective Prospectus,
the Registration Statement and the Prospectus is the paragraph
with respect to stabilization on the inside front cover page of
the Prospectus and the statements contained under the caption
"Underwriting" in the Prospectus.
(c) The Registration Statement is effective under the Securities Act
and no stop order suspending effectiveness of the Registration
Statement or suspending or preventing the use of the Prospectus
has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, are threatened under
the Securities Act; any required filing of the Prospectus and
any amendment or supplement thereto pursuant to Rule 424(b) of
the Rules and Regulations has been or will be made in the manner
and within the time period required by Rule 424(b).
(d) There is no document, contract or other agreement of a character
required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration
3
4
Statement which is not described or filed as required by the
Securities Act or the Rules and Regulations. Each agreement
described in the Registration Statement and the Prospectus or
listed in the Exhibits to the Registration Statement is in full
force and effect and is valid and enforceable by and against the
Company or its subsidiaries in accordance with its terms, except
to the extent that rights to indemnity and contribution
hereunder may be limited by applicable bankruptcy, insolvency
and other similar laws affecting conditions, rights and rules of
law governing specific performance, injunctive relief and other
equitable remedies and except to the extent that the
enforceability of certain indemnification provisions of certain
registration rights agreements entered into by the Company may
be limited by principles of public policy. Neither the Company
nor any subsidiary is in default in the observance or
performance of any material term or obligation to be performed
by it under any such agreement, and no event has occurred which,
with notice or lapse of time or both, would constitute such a
default, in any such case which default or event would have a
material adverse effect on the Company and its subsidiaries
taken as a whole. No default exists, and, to the knowledge of
the Company, no event has occurred which, with notice or lapse
of time or both would constitute a default, in the due
performance and observance of any term, covenant or condition,
by the Company or any of its subsidiaries of any other agreement
or instrument to which the Company or any of its subsidiaries is
a party or by which any of them or their respective properties
or businesses may be bound or affected, in any case which
default or event could reasonably be expected to have a material
adverse effect on the operations of the Company and its
subsidiaries considered as a whole.
(e) None of the Company or its subsidiaries is in violation of any
franchise, license, permit, judgment, decree, order, statute or
rule or regulation, which could reasonably be expected to have a
material adverse effect on the operations of the Company and its
subsidiaries considered as a whole, or any term or provision of
its certificate of incorporation or by-laws.
(f) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except
as set forth or contemplated in the Prospectus, neither the
Company nor any of its subsidiaries has incurred any material
liabilities or obligations, direct or contingent, nor entered
into any transactions not in the ordinary course of business,
and there has not been any material adverse change in the
condition (financial or otherwise), properties, business,
management, net worth or results of operations of the Company
and its subsidiaries considered as a whole, or any change in the
capital stock, short-term or long-term debt of the Company and
its subsidiaries considered as a whole, except for issuances of
Common Stock pursuant to the Company's 1997 Stock Plan, 1997
Employee Stock Purchase Plan, 1997 Director Option Plan, 1997
Stock Option Plan for French Employees and the 1997 Employee
Stock Purchase Plan for Non-U.S. Employees (collectively, the
"1997 Plans").
(g) The financial statements, together with the related notes and
schedules, set forth in the Prospectus and elsewhere in the
Registration Statement fairly present the financial position and
the results of operations and changes in financial position of
the Company and its consolidated subsidiaries at the respective
dates or for the respective periods therein specified. Such
statements and related notes and schedules have been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis except as may be set forth in the
Prospectus. The summary and selected financial and statistical
data set forth in the Prospectus under the captions "Summary
Consolidated
4
5
Financial Data," "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations" and "--
Quarterly Results of Operations" fairly present, on the basis
stated in the Registration Statement, the information set forth
therein as of the respective dates and for the respective
periods specified, and such data have been presented on a basis
consistent with the financial statements so set forth in the
Prospectus and other financial information.
(h) To the Company's knowledge, KPMG Peat Marwick LLP, who have
expressed their opinions on the audited financial statements and
related schedules included in the Registration Statement and the
Prospectus are independent public accountants as required by the
Securities Act and the Rules and Regulations.
(i) The Company and each of its subsidiaries have been duly
organized and are validly existing and in good standing as
corporations under the laws of their respective jurisdictions of
organization, with power and authority (corporate and other) to
own or lease their properties and to conduct their businesses as
described in the Registration Statement and the Prospectus; each
of the Company and its subsidiaries is in possession of and
operating in compliance with all franchises, grants,
authorizations, licenses, permits, easements, consents,
certificates and orders required for the conduct of its
business, all of which are valid and in full force and effect,
except where the failure to possess or comply would not have a
material adverse effect on the Company and its subsidiaries
considered as a whole; and each of the Company and its
subsidiaries is duly qualified to do business and in good
standing as a foreign corporation in all other jurisdictions
where its ownership or leasing of properties or the conduct of
its businesses requires such qualification, except where failure
to so qualify would not have a material adverse effect on the
Company and its subsidiaries considered as a whole. No public
regulatory or governmental consent, approval, authorization,
order, registration, qualification, license or permit contains a
materially burdensome restriction not adequately disclosed in
the Registration Statement and the Prospectus. The Company owns
or controls, directly or indirectly, only the corporations,
associations or other entities named in Schedule C hereto.
(j) The Company's authorized and outstanding capital stock is on the
date hereof, and will be on the Closing Dates, as set forth
under the heading "Capitalization" in the Prospectus; the
outstanding shares of Common Stock of the Company conform to the
description thereof in the Prospectus and have been duly
authorized and validly issued and are fully paid and
nonassessable; and have been issued in compliance with all
federal and state securities laws and were not issued in
violation of or subject to any pre-emptive rights or similar
rights to subscribe for or purchase securities. Except as
disclosed in or contemplated by the Prospectus and the
consolidated financial statements of the Company and related
notes thereto included in the Prospectus, the Company does not
have outstanding any options or warrants to purchase, or any
pre-emptive rights or other rights to subscribe for or to
purchase any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital
stock or any such options, rights, convertible securities or
obligations, except for options granted subsequent to the date
of information provided in the Prospectus pursuant to the
Company's employee and stock option plans as disclosed in the
Prospectus. The description of the Company's stock option and
other stock plans or arrangements, and the options or other
rights granted or exercised thereunder, as set forth in the
Prospectus, accurately and fairly presents the information
required to be shown with respect to such plans, arrangements,
options and rights. All outstanding shares of capital
5
6
stock of each subsidiary have been duly authorized and validly
issued, and are fully paid and nonassessable and are owned
directly by the Company or by another wholly owned subsidiary of
the Company free and clear of any liens, encumbrances, equities
or claims.
(k) The Stock to be issued and sold by the Company to the
International Managers hereunder and the U.S Stock to be issued
and sold by the Company to the U.S. Underwriters under the U.S.
Underwriting Agreement has been duly and validly authorized and,
when issued and delivered against payment therefor as provided
herein and therein, will be duly and validly issued, fully paid
and nonassessable and free of any pre-emptive or similar rights
and will conform to the description thereof in the Prospectus,
and the International Managers and the U.S. Underwriters will
receive good title to the Stock and the U.S. Stock,
respectively, free and clear of all liens, security interests,
pledges, charges, claims and encumbrances.
(l) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the
Company or any subsidiary is subject, which, if determined
adversely to the Company or any such subsidiary, could
individually or in the aggregate be reasonably expected to (i)
prevent or adversely affect the transactions contemplated by
this Agreement, (ii) suspend the effectiveness of the
Registration Statement, (iii) prevent or suspend the use of the
Pre-effective Prospectus in any jurisdiction or (iv) result in a
material adverse change in the condition (financial or
otherwise), properties, business, management, net worth or
results of operations of the Company and its subsidiaries
considered as a whole and the Company is not aware of any valid
basis for any such legal or governmental proceeding; and, to the
Company's knowledge, no such proceedings are threatened or
contemplated against the Company or any subsidiary by
governmental authorities or others. Neither the Company nor any
subsidiary is a party nor is subject to the provisions of any
material injunction, judgment, decree or order of any court,
regulatory body or other governmental agency or body. The
description of the Company's litigation under the heading "Legal
Proceedings" in the Prospectus is true and correct and complies
with the Rules and Regulations and no other suit or proceeding
before any court or governmental authority known to the Company
is required to be disclosed in the Prospectus that is not so
disclosed.
(m) The execution, delivery and performance of this Agreement and
the U.S. Underwriting Agreement and the consummation of the
transactions herein and therein contemplated (A) will not result
in any violation of the provisions of the certificate of
incorporation, by-laws or other organizational documents of the
Company or its subsidiaries, or any law, order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or its subsidiaries or any of
their respective properties or assets, and (B) will not conflict
with or result in a breach or violation of any of the terms or
provision of or constitute a default under any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a
party or by which it or any of their respective properties is or
may be bound nor will such delivery and performance result in
the creation of a security interest, lien, encumbrance, charge
or claim, except where such conflict, breach or violation would
not have a material adverse effect on the Company and its
subsidiaries considered as a whole.
(n) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution,
delivery and performance of this Agreement and the U.S.
Underwriting Agreement by the Company or its subsidiaries and
the consummation of the
6
7
transactions contemplated hereby and thereby (including the
issuance, sale and delivery of the Stock), except such as may be
required by the National Association of Securities Dealers, Inc.
(the "NASD"), the NASDAQ National Market, the Neuer Markt of the
Frankfurt Stock Exchange or under the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the securities or "Blue Sky" laws of any jurisdiction,
the German Stock Exchange Act, Stock Exchange Regulations,
Admission Regulation of the Neuer Markt and the German Sales
Prospectus Act in connection with the purchase and distribution
of the Stock by the International Managers and the U.S. Stock by
the U.S. Underwriters.
(o) The Company has the full corporate power and authority to enter
into this Agreement and the U.S. Underwriting Agreement and to
perform its obligations hereunder and thereunder (including to
issue, sell and deliver the Stock and the U.S. Stock), and this
Agreement and the U.S. Underwriting Agreement have each been
duly and validly authorized, executed and delivered by the
Company and each constitutes a valid and binding obligation of
the Company, enforceable against the Company in accordance with
their respective terms, except to the extent that rights to
indemnity and contribution hereunder may be limited by U.S. or
foreign federal or state securities laws or the public policy
underlying such laws and except as may be limited by applicable
bankruptcy, insolvency and other similar laws affecting
conditions, rights and rules of law governing specific
performance, injunctive relief and other equitable remedies.
(p) The Company and its subsidiaries are in all material respects in
compliance with, and conduct their respective businesses in
conformity with, all applicable federal, state, local and
foreign laws, rules and regulations or any court or governmental
agency or body; and to the knowledge of the Company, otherwise
than as set forth in the Registration Statement and the
Prospectus, no prospective change in any of such federal or
state laws, rules or regulations has been adopted which, when
made effective, could reasonably be expected to have a material
adverse effect on the operations of the Company and its
subsidiaries considered as a whole.
(q) The Company and its subsidiaries have filed all necessary
federal, state, local and foreign income, payroll, franchise and
other tax returns and have paid all taxes shown as due thereon
or with respect to any of their properties, and there is no tax
deficiency that has been or to the knowledge of the Company is
reasonably likely to be, asserted against the Company or any of
its subsidiaries or any of their respective properties or assets
that would materially and adversely affect the financial
position, business or operations of the Company and its
subsidiaries considered as a whole.
(r) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company
because of the filing or effectiveness of the Registration
Statement or otherwise, except for persons and entities who have
expressly waived such right or who have been given proper notice
and have failed to exercise such right within the time or times
required under the terms and conditions of such right.
(s) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any
action designed or intended to stabilize or manipulate the price
of the Common Stock in violation of Regulation M of the Exchange
Act, or which caused or resulted in, or which might in the
future reasonably be expected to cause or result in,
7
8
stabilization or manipulation of the price of the Common Stock
in violation of Regulation M of the Exchange Act.
(t) Each of the Company and its subsidiaries owns, or possesses
adequate and enforceable rights, either as owner or licensee, to
use all patents, trademarks (including "SwapBox(TM),"
"SwapSmart(TM)," "SwapAcces(TM)," "SmartOS(TM)," "Smart
Transporter(TM)" and CIMax(TM)" ), trademark registrations,
service marks, service xxxx registrations, trade names,
copyrights, licenses, inventions, trade secrets, know-how and
other similar rights described in the Prospectus as being owned
or licensed by them and except as described in the Prospectus
the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and
its subsidiaries with respect to the foregoing. To the knowledge
of the Company, the Company's business as now conducted and as
proposed to be conducted does not and will not infringe or
conflict with in any material respect any patents, trademarks,
service marks, trade name, copyright, trade secrets, know- how,
licenses or other intellectual property or franchise right of
any person. Except as described in the Prospectus, no claim has
been made against the Company alleging the infringement by the
Company of any patent, trademark, service xxxx, trade name,
copyright, trade secret, know-how, license in or other
intellectual property right or franchise right of any person.
(u) The Company is not involved in any labor dispute nor, to the
knowledge of the Company, is any such dispute threatened. Except
as described in the Prospectus, the Company is not aware that
(A) any executive, key employee or significant group of
employees of the Company or any subsidiary plans to terminate
employment with the Company or any such subsidiary or (B) any
such executive or key employee is subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or
similar agreement that would be violated by the present or
proposed business activities of the Company and its
subsidiaries. Neither the Company nor any subsidiary has or
expects to have any liability for any prohibited transaction or
funding deficiency or any complete or partial withdrawal
liability with respect to any pension, profit sharing or other
plan which is subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), to which the Company or any
subsidiary makes or ever has made a contribution and in which
any employee of the Company or any subsidiary is or has ever
been a participant. With respect to such plans, the Company and
each subsidiary is in compliance in all material respects with
all applicable provisions of ERISA.
(v) No transaction has occurred, and no relationship, direct or
indirect, exists, between or among the Company or its
subsidiaries, on the one hand, and any of its stockholders,
officers, directors, customers or suppliers of the Company or
its subsidiaries or any affiliate or affiliates of any such
stockholder, officer, director, customer or supplier, on the
other hand, that is required to be described and is not so
described in the Prospectus.
(w) The Company and its subsidiaries have, and the Company and its
subsidiaries as of the Closing Dates will have, good and
marketable title to all personal property owned by them which is
material to the business of the Company or of its subsidiaries,
in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such
as would not have a material adverse effect on the Company and
its subsidiaries considered as a whole; and any real property
and buildings held under lease by the Company and its
subsidiaries are, or will be as of each of the Closing Dates,
held by them under valid, subsisting and enforceable leases with
such exceptions as would not have a material adverse
8
9
effect on the Company and its subsidiaries considered as a
whole, in each case except as described in or contemplated by
the Prospectus.
(x) The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and
risks and in such amounts as are customary in the businesses in
which they are engaged or propose to engage after giving effect
to the transactions described in the Prospectus; and neither the
Company nor any subsidiary of the Company has any reason to
believe that it will not be able to renew any of its existing
insurance coverages as and when such coverage expires or to
obtain similar coverage from similar insurers as may be
necessary to continue their business at a cost that would not
have a material adverse effect on the Company and its
subsidiaries considered as a whole, except as described in or
contemplated by the Prospectus.
(y) Other than as contemplated by this Agreement and the U.S.
Underwriting Agreement, there is no broker, finder or other
party that is entitled to receive from the Company any brokerage
or finder's fee or other fee or commission as a result of any of
the transactions contemplated by this Agreement or the U.S.
Underwriting Agreement.
(z) The Stock has been duly authorized for (i) quotation on the
National Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System, subject to official Notice of
Issuance, and (ii) listing on the Neuer Markt of the Frankfurt
Stock Exchange.
(aa) The books, records and accounts of the Company and its
subsidiaries accurately and fairly reflect, in all material
respects, the transactions in, and dispositions of, the assets,
and the results of operation, of the Company and its
subsidiaries. The Company and each of its subsidiaries 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.
(bb) To the Company's knowledge, neither the Company nor any of its
subsidiaries nor any employee or agent of the Company or any of
its subsidiaries has made any payment of funds of the Company or
any of its subsidiaries or received or retained any funds in
violation of any law, rule or regulation, which payment, receipt
or retention of funds is of a character required to be disclosed
in the Prospectus.
(cc) Neither the Company nor any of its subsidiaries is or, after
application of the net proceeds of this offering as described
under the caption "Use of Proceeds" in the Prospectus, will
become an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment
Company Act of 1940, as amended.
(dd) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated
with or acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds for any unlawful
contribution, gift, entertainment
9
10
or other unlawful expense relating to political activity; made
any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds;
or has violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977.
(ee) An application for admission of the Stock, including the German
Prospectus and all required exhibits, (i) for listing on the
regulated market ("Geregelter Markt") of the Frankfurt Stock
Exchange ("FSE") to be submitted to the Admissions Committee of
the FSE, and (ii) to the "Neuer Markt" of the FSE to be
submitted to the Executive Board of the Deutsche Borse AG, the
operator of the "Neuer Markt", copies of which have heretofore
been delivered to you (both of which applications hereinafter
referred to as the "Application for Admission") have been
prepared and, as of the date of the Application for Admission,
complied in all material respects with the applicable provisions
of the German Securities Act ("BorsG"), the Regulations on
Admissions to the Stock Exchange ("BorsZulVO"), the Regulations
of the FSE ("XxxxX"), and the rules and regulations of the Neuer
Markt segment of the FSE (such provisions, rules and regulations
are hereinafter collectively referred to as the "Applicable
Rules").
(ff) At its date of filing, the Application for Admission, together
with all exhibits, amendments and supplements thereto complied
in all material respects with the Applicable Rules and did not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading and
contained all material statements and information required to be
included therein by the Applicable Rules. Neither the German
Prospectus, nor any amendment or supplement thereto, contained
or will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(gg) There is no document, contract or other agreement of a character
required to be described in the Application for Admission or the
German Prospectus or to be filed as an exhibit to the
Application for Admission which is not described or filed as
required by the Applicable Rules. Each agreement described in
the Application for Admission and the German Prospectus or
listed in the exhibits to the Application for Admission is in
full force and effect and is valid and enforceable by and
against the Company or its subsidiaries in accordance with its
terms, except to the extent that rights to indemnity and
contribution hereunder may be limited by applicable bankruptcy,
insolvency and other similar laws affecting conditions, rights
and rules of law governing specific performance, injunctive
relief and other equitable remedies and except to the extent
that the enforceability of certain indemnification provisions of
certain registration rights agreements entered into by the
Company may be limited by principles of public policy. Neither
the Company nor any subsidiary is in default in the observance
or performance of any material term or obligation to be
performed by it under any such agreement, and no event has
occurred which, with notice or lapse of time or both, would
constitute such a default, in any such case which default or
event would have a material adverse effect on the Company and
its subsidiaries taken as a whole. No default exists, and, to
the knowledge of the Company, no event has occurred which, with
notice or lapse of time or both would constitute a default, in
the due performance and observance of any term, covenant or
condition, by the Company or any of its subsidiaries of any
other agreement or instrument to which the Company or any of its
10
11
subsidiaries is a party or by which any of them or their
respective properties or businesses may be bound or affected, in
any case which default or event could reasonably be expected to
have a material adverse effect on the operations of the Company
and its subsidiaries considered as a whole.
(hh) Subsequent to the respective dates as of which information is
given in the Application for Admission and the German
Prospectus, and except as set forth or contemplated in the
German Prospectus, neither the Company nor any of its
subsidiaries has incurred any material liabilities or
obligations, direct or contingent, nor entered into any
transactions not in the ordinary course of business, and there
has not been any material adverse change in the condition
(financial or otherwise), properties, business, management, net
worth or results of operations of the Company and its
subsidiaries considered as a whole, or any change in the capital
stock, short-term or long-term debt of the Company and its
subsidiaries considered as a whole, except for issuances of
Common Stock pursuant to the 1997 Plans.
(ii) The financial statements, together with the related notes and
schedules, set forth in the German Prospectus and elsewhere in
the Application for Admission fairly present the financial
position and the results of operations and changes in financial
position of the Company and its consolidated subsidiaries at the
respective dates or for the respective periods therein
specified. Such statements and related notes and schedules have
been prepared in accordance with generally accepted accounting
principles in the U.S. applied on a consistent basis except as
may be set forth in the Prospectus. The summary and selected
financial and statistical data set forth in the German
Prospectus under the captions "Summary Consolidated Financial
Data," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and "-- Quarterly Results
of Operations" fairly present, on the basis stated in the
Application for Admission, the information set forth therein as
at the respective dates and for the respective periods
specified, and such data has been presented on a basis
consistent with the financial statements so set forth in the
German Prospectus and other financial information.
(jj) The Company and each of its subsidiaries have been duly
organized and are validly existing and in good standing as
corporations under the laws of their respective jurisdictions of
organization, with power and authority (corporate and other) to
own or lease their properties and to conduct their businesses as
described in the Application for Admission and the German
Prospectus; each of the Company and its subsidiaries is in
possession of and is operating in compliance with all material
franchises, grants, authorizations, licenses, permits,
easements, consents, certificates and orders required for the
conduct of its business, all of which are valid and in full
force and effect; and each of the Company and its subsidiaries
is duly qualified to do business and is in good standing as a
foreign corporation in all other jurisdictions where its
ownership or leasing of properties or the conduct of its
businesses requires such qualification, except where failure to
so qualify would not have a material adverse effect on the
Company and its subsidiaries considered as a whole. The Company
has and each of its subsidiaries have all requisite power and
authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses
and permits of and from all public regulatory or governmental
agencies and bodies to own, lease and operate its properties and
conduct its business as now being conducted and as described in
the Application for Admission and the German Prospectus, and no
such consent, approval, authorization, order, registration,
qualification, license or permit contains
11
12
a materially burdensome restriction not adequately disclosed in
the Application for Admission and the German Prospectus.
(kk) The Company's authorized and outstanding capital stock is on the
date hereof, and will be on the Closing Dates, as set forth
under the heading "Capitalization" in the German Prospectus; the
outstanding shares of Common Stock of the Company conform to the
description thereof in the German Prospectus. Except as
disclosed in and or contemplated by the German Prospectus and
the consolidated financial statements of the Company and related
notes thereto included in the German Prospectus, the Company
does not have outstanding any options or warrants to purchase,
or any preemptive rights or other rights to subscribe for or to
purchase any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital
stock or any such options, rights, convertible securities or
obligations, except for options granted subsequent to the date
of information provided in the German Prospectus pursuant to the
Company's 1997 Plans as disclosed in the German Prospectus. The
description of the Company's stock option and other stock plans
or arrangements, and the options or other rights granted or
exercised thereunder, as set forth in the German Prospectus,
accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and
rights.
(ll) The Stock to be issued and sold by the Company to the
International Managers hereunder will conform to the description
thereof in the German Prospectus.
(mm) Except as set forth in the German Prospectus, there are no legal
or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the
Company or any subsidiary is subject, which, if determined
adversely to the Company or any such subsidiary, could
individually or in the aggregate be reasonably expected to (i)
prevent or adversely affect the transactions contemplated by
this Agreement, (ii) suspend the effectiveness of the
Application for Admission, or (iii) result in a material adverse
change in the condition (financial or otherwise), properties,
business, management, net worth or results of operations of the
Company and its subsidiaries considered as a whole and the
Company is not aware of any valid basis for any such legal or
governmental proceeding; and, to the Company's knowledge, no
such proceedings are threatened or contemplated against the
Company or any subsidiary by governmental authorities or others.
Neither the Company nor any subsidiary is a party nor subject to
the provisions of any material injunction, judgment, decree or
order of any court, regulatory body or other governmental agency
or body. The description of the Company's litigation under the
heading "Legal Proceedings" in the German Prospectus is true and
correct and no other suit or proceeding before any court or
governmental authority known to the Company is required to be
disclosed in the Application for Admission or the German
Prospectus that is not so disclosed.
2b. Representations and Warranties and Agreements of the Selling
Stockholders. Each Selling Stockholder represents and warrants to, and
agrees with, the several International Managers that such Selling
Stockholder:
(a) Now has, and on the Closing Date will have, valid and marketable
title to the Stock and the U.S. Stock to be sold by such Selling
Stockholder, free and clear of any lien, claim, security
12
13
interest or other encumbrance, including, without limitation,
any restriction on transfer, and has full right, power and
authority to enter into this Agreement, the Power of Attorney
and the Custody Agreement (each as hereinafter defined).
(b) Now has, and on the Closing Date will have, upon delivery of and
payment for each share of Stock hereunder and U.S. Stock under
the U.S. Underwriting Agreement, full right, power and
authority, and approval required by law to sell, transfer,
assign and deliver the Stock being sold by such Selling
Stockholder hereunder and the U.S. Stock being sold by such
Selling Stockholder under the U.S. Underwriting Agreement, and
each of the several International Managers will acquire valid
and marketable title to all of the Stock being sold to the
International Managers by such Selling Stockholder and each of
the several U.S Underwriters will acquire valid and marketable
title to all of the U.S. Stock being sold to the U.S
Underwriters by such Selling Stockholder, in each case, free and
clear of any liens, encumbrances, equities claims, restrictions
on transfer or other defects whatsoever.
(c) For a period of 90 days after the date of this Agreement,
without the consent of Xxxxx & Company, such Selling Stockholder
will not offer, sell, assign, transfer, encumber, contract to
sell, grant an option to purchase or otherwise dispose of any
Stock or securities convertible into or exchangeable for Stock,
including, without limitation Stock which may be deemed to be
beneficially owned by such Selling Shareholder in accordance
with the Rules and Regulations, except for the Stock being sold
hereunder and the U.S. Stock being sold under the U.S.
Underwriting Agreement.
(d) Has duly executed and delivered a power of attorney, in
substantially the form heretofore delivered by the Lead Managers
(the "Power of Attorney"), appointing Xxxxxx Xxxxxxxxx and Xxxx
Neidermaier and each of them, as attorney-in-fact (the
"Attorneys-in-fact"), with authority to execute and deliver this
Agreement and the U.S. Underwriting Agreement on behalf of such
Selling Stockholder, to authorize the delivery of the shares of
Stock to be sold by such Selling Stockholder hereunder and the
shares of U.S. Stock being sold by such Selling Stockholder
under the U.S. Underwriting Agreement and otherwise to act on
behalf of such Selling Stockholder in connection with the
transactions contemplated by this Agreement and the U.S.
Underwriting Agreement.
(e) Has duly executed and delivered a custody agreement, in
substantially the form heretofore delivered by the Lead Managers
( the "Custody Agreement"), with American Stock Transfer & Trust
Company, as custodian (the "Custodian"), pursuant to which
certificates in negotiable form for the shares of Stock and the
U.S. Stock to be sold by such Selling Stockholder hereunder and
under the U.S. Underwriting Agreement have been placed in
custody for delivery under this Agreement and the U.S.
Underwriting Agreement.
(f) Has, by execution and delivery of each of this Agreement, the
U.S. Underwriting Agreement, the Power of Attorney and the
Custody Agreement, created valid and binding obligations of such
Selling Stockholder, enforceable against such Selling
Stockholder in accordance with its terms, except to the extent
that rights to indemnity and contribution hereunder may be
limited by U.S. or foreign federal laws, state securities laws
or the public policy underlying such laws and except as may be
limited by applicable bankruptcy, insolvency and other similar
laws affecting conditions, rights and rules of law governing
specific performance, injunctive relief and other equitable
remedies and except to the extent
13
14
that the irrevocability of the Power of Attorney and Custody
Agreement and the enforcement of the arbitration provisions
contained therein may be limited by German law.
(g) The performance of this Agreement, the U.S. Underwriting
Agreement, the Custody Agreement and the Power of Attorney, and
the consummation of the transactions contemplated hereby and
thereby will not result in a breach or violation by such Selling
Stockholder of any of the terms or provisions of, or constitute
a default by such Selling Stockholder under, any material
indenture, mortgage, deed of trust, trust (constructive or
other), loan agreement, lease, franchise, license or other
agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder or any of its
properties is bound, or any judgement of any court or
governmental agency or body applicable to such Selling
Stockholder or any of its properties, or to such Selling
Stockholder's knowledge, any statute, decree, order, rule or
regulation of any court or governmental agency or body
applicable to such Selling Stockholder or any of its properties,
except to the extent that the irrevocability of the Power of
Attorney and Custody Agreement and the enforcement of certain
arbitration provisions may be limited by German law.
Each Selling Stockholder agrees that the shares of Stock and
U.S. Stock represented by the certificates held in custody under
the Custody Agreement are for the benefit of and coupled with
and subject to the interests of the International Managers, the
U.S. Underwriters, the Selling Stockholders, and the Company
hereunder, and that the arrangement for such custody and the
appointment of the Attorneys-in-fact are irrevocable, except to
the extent that the irrevocability of the Power of Attorney and
Custody Agreement may be limited by German law; that the
obligations of such Selling Stockholder hereunder shall not be
terminated by operation of law, whether by the death or
incapacity of such Selling Stockholder, or any other event, that
if such Selling Stockholder should die or become incapacitated
or any other event occurs, before the delivery of the Stock
hereunder and the U.S. Stock under the U.S. Underwriting
Agreement, certificates for the Stock and the U.S. Stock to be
sold by such Selling Stockholder shall be delivered on behalf of
such Selling Stockholder in accordance with the terms and
conditions of this Agreement, the U.S. Underwriting Agreement
and the Custody Agreement, and action taken by the
Attorneys-in-fact or any of them under the Power of Attorney
shall be as valid as if such death, incapacity, or other event
had not occurred, whether or not the Custodian, the
Attorneys-in-fact or any of them shall have notice of such
death, incapacity or other event.
3 Purchase by, and Sale and Delivery to, International Managers--Closing
Dates. The Company and the Selling Stockholders agree, severally and not
jointly, to sell to the International Managers the Firm Stock with the
number of shares to be sold by the Company and each Selling Stockholder
being the number of shares set forth opposite its or his name in
Schedule B, and on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the International Managers agree, severally
and not jointly, to purchase the Firm Stock from the Company and the
Selling Stockholders, with the number of shares of Firm Stock to be
purchased by each International Manager being set opposite its name in
Schedule A, subject to adjustment in accordance with Section 12 hereof.
The number of shares of Stock to be purchased by each International
Manager from each Selling Stockholder hereunder shall bear the same
proportion to the total number of shares of Stock to be purchased by
such International Manager hereunder as the number of shares of Stock
being sold by each Selling Stockholder bears
14
15
to the total number of shares of Stock being sold by all Selling
Stockholders, subject to adjustment by the Lead Managers to eliminate
fractions.
The purchase price per share to be paid by the International Managers to
the Company and the Selling Stockholders will be the price per share set
forth in the "Per Share" row of the table on the cover page of the
Prospectus under the heading "Proceeds to Company" and "Proceeds to
Selling Stockholders," respectively (the "Purchase Price").
The Company and the Selling Stockholders will deliver the Firm Stock to
the Lead Managers for the respective accounts of the several
International Managers (in the form of definitive certificates, issued
in such names and in such denominations as Cowen may direct by notice in
writing to the Company and the Selling Stockholders given at or prior to
12:00 Noon, New York Time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such direction is
received, in the names of the respective International Managers or in
such other names as Cowen may designate (solely for the purpose of
administrative convenience) and in such denominations as Cowen may
determine), against payment of the aggregate Purchase Price therefore by
wire transfer in immediately available funds (same day funds), to the
Company and American Stock Transfer & Trust Company, as Custodian for
the Selling Stockholders, all at the offices of Xxxxxx Xxxxxxx Xxxxxxxx
& Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000. The time and
date of the delivery and closing shall be at 10:00 A.M., New York Time,
on April __, 1997. The time and date of such payment and delivery are
herein referred to as the "First Closing Date". The First Closing Date
and the location of delivery of, and the form of payment for, the Firm
Stock may be varied by agreement among the Company, Cowen and the
Selling Stockholders. The First Closing Date may be postponed pursuant
to the provisions of Section 12.
The Company and the Selling Stockholders shall make the certificates for
the Stock available to the Lead Managers for examination on behalf of
the International Managers not later than 10:00 A.M., New York time, on
the business day preceding the First Closing Date at the offices of
Xxxxx & Company, Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
It is understood that the Lead Managers, individually and not as Lead
Managers of the several International Managers, may (but shall not be
obligated to) make payment to the Company or to the Selling Stockholders
on behalf of any International Manager or International Managers, for
the Stock to be purchased by such International Manager or International
Managers. Any such payment by a Lead Manager shall not relieve such
International Manager or International Managers from any of its or their
other obligations hereunder.
The several International Managers agree to make a public offering of
the Stock at the public offering price set forth on the cover page of
the Prospectus as soon after the effectiveness of the Registration
Statement or the Application for Admission as in their judgment is
advisable. The Lead Managers shall promptly advise the Company and the
Selling Stockholders of the making of the public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the
Prospectus, the Company hereby grants to the International Managers and
the U.S. Underwriters an option to purchase, severally and not jointly,
up to an aggregate of 450,000 shares of Optional Stock. The price per
share to be paid for the Optional Stock shall be the Purchase Price. The
option granted hereby may be exercised as to all or any part of the
Optional Stock at any time, and from time to time, not more than thirty
(30) days subsequent to the
15
16
effective date of this Agreement. No Optional Stock shall be sold and
delivered unless the Firm Stock previously has been, or simultaneously
is, sold and delivered. The right to purchase the Optional Stock or any
portion thereof may be surrendered and terminated at any time upon
notice by the International Managers and the U.S. Underwriters to the
Company.
The option granted hereby may be exercised by the International Managers
and the U.S. Underwriters by giving written notice from Cowen to the
Company setting forth the number of shares of the Optional Stock to be
purchased by them and the date and time for delivery of and payment for
the Optional Stock. Each date and time for delivery of and payment for
the Optional Stock (which may be the First Closing Date, but not
earlier) is herein called an "Option Closing Date" and shall in no event
be earlier than two (2) business days nor later than ten (10) business
days after written notice is given. (The Option Closing Date and the
First Closing Date are herein called the "Closing Dates".) Optional
Stock shall be purchased for the account of each International Manager
and or U.S. Underwriter, as the case may be, in the same proportion as
the number of shares of Firm Stock set forth opposite such International
Manager's or U.S. Underwriter's name in Schedule A hereto or Schedule A
to the International Underwriting Agreement, as the case may be, bears
to the total number of shares of Firm Stock (subject to adjustment by
the International Managers to eliminate odd lots). Upon exercise of the
option of the International Managers and the U.S. Underwriters, the
Company agrees to sell to the International Managers and the U.S.
Underwriters the number of shares of Optional Stock set forth in the
written notice of exercise and the International Managers and the U.S.
Underwriters agree, severally and not jointly and subject to the terms
and conditions herein set forth, to purchase the number of such shares
determined as aforesaid.
The Company will deliver the Optional Stock to the International
Managers and the U.S. Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as Cowen
may direct by notice in writing to the Company given at or prior to
12:00 Noon, New York Time, on the second full business day preceding the
Option Closing Date or, if no such direction is received, in the names
of the respective U.S. Underwriters and International Managers or in
such other names as Cowen may designate (solely for the purpose of
administrative convenience) and in such denominations as Cowen may
determine), against payment of the aggregate Purchase Price therefor by
wire transfer in immediately available funds (same day funds), to the
Company, all at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000. The Company shall make the
certificates for the Optional Stock available to the U.S. Underwriters
and the International Managers for examination not later than 10:00
A.M., New York Time, on the business day preceding the Option Closing
Date at the offices of Xxxxx & Company, Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000. The Option Closing Date and the location of delivery of, and
the form of payment for, the Option Stock may be varied by agreement
between the Company and Cowen. The Option Closing Date may be postponed
pursuant to the provisions of Section 12.
4 Covenants and Agreements of the Company. The Company covenants and
agrees with the several International Managers that:
(a) The Company will (i) if the Company and the Lead Managers have
determined not to proceed pursuant to Rule 430A of the Rules and
Regulations, use its best
16
17
efforts to cause the Registration Statement to become effective,
(ii) if the Company and the Lead Managers have determined to
proceed pursuant to Rule 430A of the Rules and Regulations, use
its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to Rule 430A and
Rule 424 of the Rules and Regulations and (iii) if the Company
and the Lead Managers have determined to deliver Prospectuses
pursuant to Rule 434 of the Rules and Regulations, to use its
best efforts to comply with all the applicable provisions
thereof. The Company will advise the Lead Managers promptly as
to the time at which the Registration Statement becomes
effective, will advise the Lead Managers promptly of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose, and will use
its best efforts to prevent the issuance of any such stop order
and to obtain as soon as possible the lifting thereof, if
issued. The Company will advise the Lead Managers promptly of
the receipt of any comments of the Commission or any request by
the Commission for any amendment of or supplement to the
Registration Statement or the Prospectus or for additional
information and will not at any time file any amendment to the
Registration Statement or supplement to the Prospectus which
shall not previously have been submitted to the Lead Managers a
reasonable time prior to the proposed filing thereof or, unless
such filing is required by applicable law, to which the Lead
Managers shall reasonably object in writing or which is not in
compliance with the Securities Act and the Rules and
Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon the request of the Lead Managers, any amendments or
supplements to the Registration Statement or the Prospectus
which in the reasonable opinion of the Lead Managers may be
necessary to enable the several International Managers to
continue the distribution of the Stock and the several U.S.
Underwriters to continue the distribution of the U.S. Stock and
will use its best efforts to cause the same to become effective
as promptly as possible.
(c) If, at any time after the effective date of the Registration
Statement when a prospectus relating to the Stock is required to
be delivered under the Securities Act, any event relating to or
affecting the Company or any of its subsidiaries occurs as a
result of which the Prospectus or any other prospectus as then
in effect would contain any untrue statement of a material fact,
or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, or if it is necessary at any
time to amend the Prospectus to comply with the Securities Act,
the Company will promptly notify the Lead Managers thereof and
will prepare an amended or supplemented prospectus which will
correct such statement or omission; and in case any
International Manager is required to deliver a prospectus
relating to the Stock nine (9) months or more after the
effective date of the Registration Statement, the Company upon
the request of the Lead Managers and at the expense of such
International Manager will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Securities Act.
(d) The Company will deliver to each of the Lead Managers, at or
before the Closing Dates, one signed copy of the Registration
Statement, as originally filed with the Commission, and one
signed copy of all amendments thereto including all financial
statements and exhibits thereto and will deliver to the Lead
Managers (i) such number of unsigned copies of the Registration
Statement, including such financial statements but without
exhibits, and all amendments thereto, and (ii) such number of
copies of the Application for Admission and the German
Prospectus, as the Lead Managers may reasonably request. The
Company will deliver or mail to or upon the order the Lead
Managers, from time to time until the effective
17
18
date of the Registration Statement, as many copies of the
Pre-effective Prospectus as the Lead Managers may reasonably
request. The Company will deliver or mail to or upon the order
of the Lead Managers on the date of the public offering, and
thereafter from time to time during the period when delivery of
a prospectus relating to the Stock is required under the
Securities Act, as many copies of the Prospectus, in final form
or as thereafter amended or supplemented as the Lead Managers
may reasonably request; provided, however, that the expense of
the preparation and delivery of any prospectus required for use
nine (9) months or more after the effective date of the
Registration Statement shall be borne by the International
Managers required to deliver such prospectus.
(e) The Company will use its best efforts to cause, and provide all
information, documentation, and other materials (whether
contained or to be provided in the German Prospectus or
otherwise) to the FSE and the Lead Managers as may be required
or appropriate for, the Application for Admission to become and
remain effective.
(f) The Company will make generally available to its stockholders as
soon as practicable, but not later than fifteen (15) months
after the effective date of the Registration Statement, an
earnings statement which will be in reasonable detail (but which
need not be audited) and which will comply with Section 11(a) of
the Securities Act, covering a period of at least twelve (12)
months beginning after the "effective date" (as defined in Rule
158 under the Securities Act) of the Registration Statement.
(g) The Company will cooperate with the Lead Managers to enable the
Stock to be registered or qualified for offering and sale by the
International Managers and by dealers under the securities laws
of such jurisdictions as the Lead Managers may designate and at
the request of the Lead Managers will make such applications and
furnish such consents to service of process or other documents
as may be required of it as the issuer of the Stock for that
purpose; provided, however, that the Company shall not be
required to qualify to do business or to file a general consent
(other than that arising out of the offering or sale of the
Stock) to service of process in any such jurisdiction where it
is not now so subject. The Company will, from time to time,
prepare and file such statements and reports as are or may be
required of it as the issuer of the Stock to continue such
qualifications in effect for so long a period as the Lead
Managers may reasonably request for the distribution of the
Stock. The Company will advise the Lead Managers promptly after
the Company becomes aware of the suspension of the
qualifications or registration of (or any such exception
relating to) the Common Stock of the Company for offering, sale
or trading in any jurisdiction or of any initiation or threat of
any proceeding for any such purpose, and in the event of the
issuance of any orders suspending such qualifications,
registration or exception, the Company will, with the
cooperation of the Lead Managers use its best efforts to obtain
the withdrawal thereof.
(h) The Company will furnish to its stockholders annual reports
containing financial statements certified by independent public
accountants.
(i) The Company will maintain a transfer agent and registrar for its
Common Stock.
(j) The Company will not offer, sell, assign, transfer, encumber,
contract to sell, register for sale, grant an option to purchase
or otherwise dispose of, other than by operation of law, gifts,
pledges or dispositions by estate representatives, any shares of
Common Stock or
18
19
securities convertible into or exercisable or exchangeable for
Common Stock (including, without limitation, Common Stock of the
Company which may be deemed to be beneficially owned by the
Company in accordance with the Rules and Regulations) during the
90 days following the date of this Agreement, other than (i) the
Company's sale of Common Stock hereunder, (ii) issuances of
Common Stock, stock options, stock purchase rights or other
similar rights issued pursuant to the 1997 Plans as described in
the Prospectus, and (iii) any Common Stock or preferred stock
issued by the Company in any transaction of the type described
in Rule 145 under the Securities Act or otherwise issued by the
Company in exchange for technology or other non-cash assets of
any third party.
(k) The Company will apply the net proceeds from the sale of the
Stock as set forth in the description under "Use of Proceeds" in
the Prospectus.
(l) The Company will supply the Lead Managers with copies of all
correspondence to and from, and all documents issued to and by,
the Commission in connection with the registration of the Stock
under the Securities Act and the respective German authorities
in connection with the listing on the Neuer Markt of the
Frankfurt Stock Exchange in connection with the offer and sale
of the Stock pursuant to this Agreement.
(m) Prior to the First Closing Date the Company will furnish to the
Lead Managers, as soon as they have been prepared, copies of any
unaudited interim consolidated financial statements of the
Company and its subsidiaries for any periods subsequent to the
periods covered by the financial statements appearing in the
Registration Statement and the Prospectus.
(n) Prior to the Closing Dates the Company will issue no press
release or other public communications directly or indirectly
and hold no press conference with respect to the Company (other
than customary product related sales and marketing
communications) or any of its subsidiaries, the financial
condition, results of operations, business, prospects, assets or
liabilities of the Company or any of its subsidiaries, or the
offering of the Stock, without Xxxxx'x prior written consent,
which shall not be unreasonably withheld.
(o) During the period of five (5) years hereafter, the Company will
furnish to the Lead Managers, and upon request of the Lead
Managers, to each of the International Managers: (i) as soon as
practicable after the end of each fiscal year, copies of the
Annual Report of the Company containing the balance sheet of the
Company as of the close of such fiscal year and statements of
income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent
public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form
10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other
report filed by the Company on a non-confidential basis with the
Commission, or the NASD or any securities exchange; (iii) as
soon as available, copies of any report or communication of the
Company mailed generally to holders of its Common Stock; and
(iv) from time to time such other information concerning the
Company as you may reasonably request.
(p) The Company will comply with the German Code for Mergers and
Acquisitions ("Ubernahmekodex") as long as such compliance is
required.
19
20
(q) The Company will maintain a Securities Caretaker ("Betreuer") as
long as shares of its Common Stock are listed at the Neuer Markt
of the FSE and maintenance of a Betreuer is required.
(r) The Selling Stockholders will comply with the holding
requirements for their Stock established by the FSE for
securities listed at the Neuer Markt.
5 Payment of Expenses.
(a) The Company will pay (directly or by reimbursement) all costs,
fees and expenses incurred in connection with the performance of
the obligations of the Company and of the Selling Stockholders
under this Agreement and the U.S. Underwriting Agreement and in
connection with the transactions contemplated hereby, including
but not limited to (i) all expenses and taxes incident to the
issuance and delivery of the Stock to the Lead Managers; (ii)
all expenses incident to the registration of the Stock and the
U.S. Stock under the Securities Act; (iii) the costs of
preparing stock certificates (including printing and engraving
costs); (iv) all fees and expenses of the registrar and transfer
agent of the Stock and the U.S. Stock; (v) all necessary issue,
transfer and other taxes in connection with the issuance and
sale of the Stock to the International Managers or the execution
of this Agreement; (vi) fees and expenses of the Company's
counsel and the Company's independent accountants; (vii) all
costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration
Statement, each Pre-effective Prospectus and the Prospectus
(including all exhibits and financial statements) and all
amendments and supplements provided for herein, (viii) all costs
and expenses incurred in connection with the shipping and
distribution of the Selling Stockholders' Power of Attorney, the
Custody Agreement, the "Agreement Among U.S. Underwriters and
International Managers" between the Lead Managers and the
Representatives, the "Agreement Among U.S. Underwriters" between
the Representatives and the U.S. Underwriters, the Master
Selected Dealers' Agreement, the U.S. Underwriters'
Questionnaire and the Blue Sky memoranda (including with respect
to such Blue Sky memoranda related fees and expenses of counsel
to the Underwriters) and this Agreement; (ix) all filing fees,
attorneys' fees and expenses incurred by the Company or the U.S.
Underwriters in connection with exemptions from the qualifying
or registering (or obtaining qualification or registration of)
all or any part of the Stock for offer and sale and
determination of its eligibility for investment under the Blue
Sky or other securities laws of such jurisdictions as the
Representatives may designate; (x) all fees and expenses paid or
incurred in connection with filings made with the NASD and the
listing of the Stock on the Neuer Markt of the FSE; and (xi) all
other costs and expenses incurred by the Company and the Selling
Stockholders incident to the performance of their obligations
hereunder which are not otherwise specifically provided for in
this Section.
(b) In addition to their other obligations under Section 6(a)
hereof, the Company and the Selling Stockholders agree that, as
an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or
based upon (i) any statement or omission or any alleged
statement or omission by the Company or the Selling Stockholders
or (ii) any breach or inaccuracy in their representations and
warranties contained in this Agreement, they will reimburse each
International Manager on a quarterly basis for all reasonable
legal or other expenses incurred in connection with
investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and
enforceability of the Company's
20
21
and each Selling Stockholder's obligation to reimburse each
International Manager for such expenses and the possibility that
such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper,
each International Manager shall promptly return it to the
Company or such Selling Stockholder, as the case may be,
together with interest, compounded daily, determined on the
basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to
time by Citibank, N.A., New York, New York (the "Prime Rate").
Any such interim reimbursement payments which are not made to an
International Manager in a timely manner as provided below shall
bear interest at the Prime Rate from the due date for such
reimbursement. This expense reimbursement agreement will be in
addition to any other liability which the Company or any Selling
Stockholder may otherwise have. The request for reimbursement
will be sent to the Company with a copy to each Selling
Stockholder.
(c) In addition to its other obligations under Section 6(b) hereof,
each International Manager severally agrees that, as an interim
measure during the pendency of 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 Section 6(b) hereof which relates to information
furnished to the Company pursuant to Section 6(c) hereof, it
will reimburse the Company (and, to the extent applicable, each
officer, director, controlling person or Selling Stockholder) on
a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the International Managers'
obligation to reimburse the Company (and, to the extent
applicable, each officer, director, controlling person or
Selling Stockholder) for such expenses and the possibility that
such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper,
the Company (and, to the extent applicable, each officer,
director, controlling person or Selling Stockholder) shall
promptly return it to the International Managers together with
interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made
to the Company within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the
date of such request. This indemnity agreement will be in
addition to any liability which such International Manager may
otherwise have.
(d) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in paragraph
(b) and/or (c) of this Section 5, including the amounts of any
requested reimbursement payments and the method of determining
such amounts, shall be settled by arbitration conducted under
the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to
the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for
arbitration or written notice of intention to arbitrate, therein
electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an
arbitration tribunal in such demand or notice, then the party
responding to said demand or notice is authorized to do so. Such
an arbitration would be limited to the operation of the interim
reimbursement provisions contained in paragraph (b) and/or (c)
of this Section 5 and would not resolve the ultimate propriety
or enforceability of the obligation to reimburse expenses which
is created by the provisions of Section 6.
21
22
6 Indemnification and Contribution.
(a) The Company and SCM Microsystems GmbH jointly and severally
agree to indemnify and hold harmless each International Manager
and each person, if any, who controls such International Manager
within the meaning of the Securities Act and the respective
officers, directors, partners, employees, representatives and
agents of each of such International Manager (collectively, the
"Manager Indemnified Parties" and, each, a "Manager Indemnified
Party"), against any losses, claims, damages, liabilities or
expenses (including the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred
in connection therewith), joint or several, which may be based
upon the Securities Act, or any Federal, state or foreign
statute, regulation or at common law, (i) on the ground or
alleged ground that any Pre-effective Prospectus, the
Registration Statement, the Application for Admission, the
Prospectus or the German Prospectus (or any Pre-effective
Prospectus, the Registration Statement, the Application for
Admission, the Prospectus or the German Prospectus as from time
to time amended or supplemented) includes or allegedly includes
an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, unless
such statement or omission was made in reliance upon, and in
conformity with, written information furnished to the Company by
any International Manager, directly or through the Lead
Managers, specifically for use in the preparation thereof and
provided that the foregoing indemnity agreement with respect to
any Pre-effective Prospectus shall not inure to the benefit of
any International Manager from whom the person asserting any
such losses, claims, damages or liabilities purchased Stock, or
any person controlling such International Manager, if a copy of
the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of such International Manager
to such person, if required by law so to have been delivered, at
or prior to the written confirmation of the sale of the Stock to
such person, and the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims,
damages or liabilities, unless such failure to deliver the
Prospectus (as so amended or supplemented) resulted from the
Company's failure to perform its obligations pursuant to Section
4(c) above or (ii) for any act or failure to act or any alleged
act or failure to act by any International Manager in connection
with, or relating in any manner to, the Stock or the offering
contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or expense
arising out of or based upon matters covered by clause (i) above
(provided that the Company shall not be liable under this clause
(ii) to the extent that it is determined in a final judgment by
a court of competent jurisdiction that such loss, claim, damage,
or liability or expense resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such
International Manager through its gross negligence or willful
misconduct). The Company will be entitled to participate at its
own expense in the defense or, if it so elects, to assume the
defense of any suit brought to enforce any such liability, but
if the Company elects to assume the defense, such defense shall
be conducted by counsel chosen by it and reasonably acceptable
to the International Managers. In the event the Company elects
to assume the defense of any such suit and retain such counsel,
any Manager Indemnified Parties, defendant or defendants in the
suit, may retain additional counsel but shall bear the fees and
expenses of such counsel unless (i) the Company shall have
specifically authorized the retaining of such counsel or (ii)
the parties to such suit include both any such Manager
Indemnified Party and the Company, and such Manager Indemnified
Parties have been advised by counsel to the International
22
23
Managers that one or more legal defenses may be available to it
or them which may not be available to the Company, in which case
the Company shall not be entitled to assume the defense of such
suit without the written consent of the Manager Indemnified
Parties party to such suit notwithstanding its obligation to
bear the fees and expenses of such counsel. In circumstances
where the Company does not assume the defense of a suit for
which indemnification is sought by one or more Manager
Indemnified Parties, the Company will be obligated to bear the
fees and expenses of only one firm on behalf of all Manager
Indemnified Parties (plus local counsel, if, in the judgment of
the primary counsel to the Manager Indemnified Parties use of
such local counsel is necessary). This indemnity agreement is
not exclusive and will be in addition to any liability which the
Company might otherwise have and shall not limit any rights or
remedies which may otherwise be available at law or in equity to
each Manager Indemnified Party.
(b) Each Selling Stockholder severally and not jointly agrees to
indemnify and hold harmless each Manager Indemnified Party
against any losses, claims, damages, liabilities or expenses
(including, unless such Selling Stockholder elects to assume the
defense, the reasonable cost of investigating and defending
against any claims therefor and counsel fees incurred in
connection therewith), joint or several, which may be based upon
the Securities Act, or any Federal, state or foreign statute,
regulation or at common law, on the ground or alleged ground
that any Pre-Effective Prospectus, the Registration Statement,
the Application for Admission, the Prospectus or the German
Prospectus (or any Pre-Effective Prospectus, the Registration
Statement, the Application for Admission, the Prospectus or the
German Prospectus, as from time to time amended and
supplemented) includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon, and
in conformity with, written information furnished to the Company
by any International Manager, directly or through the Lead
Managers specifically for use in the preparation thereof;
provided however that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any
Pre-Effective Prospectus, the indemnity agreement contained in
this subsection (b) shall not inure to the benefit of any
Manager Indemnified Party from whom the person asserting any
such losses, claims, damages or liabilities purchased the shares
of Stock concerned to the extent that any such loss, claim,
damage or liability of such Manager Indemnified Party results
from the fact that a copy of the Prospectus was not sent or
given to such person at or prior to the written confirmation of
the sale of such shares of Stock, as required by the Securities
Act, and if the untrue statement or omission concerned has been
corrected in the Prospectus. Such Selling Stockholder shall be
entitled to participate at his own expense in the defense, or,
if he so elects, to assume the defense of any suit brought to
enforce any such liability, but, if such Selling Stockholder
elects to assume the defense, such defense shall be conducted by
counsel chosen by him. In the event that any Selling Stockholder
elects to assume the defense of any such suit and retain such
counsel, the Manager Indemnified Parties, defendant or
defendants in the suit, may retain additional counsel but shall
bear the fees and expenses of such counsel unless (i) such
Selling Stockholder shall have specifically authorized the
retaining of such counsel or (ii) the parties to such suit
include both such Manager Indemnified Parties and such Selling
Stockholder and such Manager Indemnified Parties have been
advised by counsel that one or more legal defenses may be
available to it or them which may not be available to such
Selling Stockholder, in which case such Selling Stockholder
shall not be entitled to assume the defense of such suit
notwithstanding
23
24
its obligation to bear the fees and expenses of such counsel.
This indemnity agreement is not exclusive and will be in
addition to any liability which such Selling Stockholder might
otherwise have and shall not limit any rights or remedies which
may otherwise be available at law or in equity to each Manager
Indemnified Party. The Company and the Selling Stockholders may
agree, as among themselves and without limiting the rights of
the International Managers under this Agreement, as to their
respective amounts of such liability for which they each shall
be responsible.
Notwithstanding any other provision of this Agreement or the
U.S. Underwriting Agreement, the liability of each Selling
Stockholder to the International Managers and U.S. Underwriters
under this Agreement, the U.S. Underwriting Agreement or
otherwise shall be limited to an amount equal to the proceeds
paid to such Selling Stockholder in the initial public offering.
(c) Each International Manager severally and not jointly agrees to
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 Securities Act (collectively, the "Company
Indemnified Parties") and each Selling Stockholder (the "Selling
Stockholder Indemnified Parties") against any losses, claims,
damages, liabilities or expenses (including, unless the
International Manager or International Managers elect to assume
the defense, the reasonable cost of investigating and defending
against any claims therefor and counsel fees incurred in
connection therewith), joint or several, which arise out of or
are based in whole or in part upon the Securities Act, the
Exchange Act or any other federal, state, local or foreign
statute or regulation, or at common law, on the ground or
alleged ground that any Pre-effective Prospectus, the
Registration Statement, the Application for Admission, the
Prospectus or the German Prospectus (or any Pre-effective
Prospectus, the Registration Statement, the Application for
Admission, the Prospectus or the German Prospectus, as from time
to time amended and supplemented) includes an untrue statement
of a material fact or omits to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made,
not misleading, but only insofar as any such statement or
omission was made in reliance upon, and in conformity with,
written information furnished to the Company by such
International Manager, directly or through the Lead Managers,
specifically for use in the preparation thereof. Such
International Manager shall be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the
defense of any suit brought to enforce any such liability, but,
if such International Manager elects to assume the defense, such
defense shall be conducted by counsel chosen by it. In the event
that any International Manager elects to assume the defense of
any such suit and retain such counsel, the Company Indemnified
Parties or Selling Stockholders Indemnified Parties and any
other International Manager or International Managers or
controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel
retained by them, respectively. The International Manager
against whom indemnity may be sought shall not be liable to
indemnify any person for any settlement of any such claim
effected without such International Manager's consent. This
indemnity agreement is not exclusive and will be in addition to
any liability which such International Manager might otherwise
have and shall not limit any rights or remedies which may
otherwise be available at law or in equity to any Company
Indemnified Party or Selling Stockholder Indemnified Party.
24
25
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified
party under subsection (a), (b) or (c) above in respect of any
losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to herein, then each indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one
hand and the International Managers on the other from the
offering of the Stock. If, however, the allocation provided by
the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and the
Selling Stockholders on the one hand and the International
Managers on the other in connection with the statements or
omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on
the one hand and the International Managers 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 and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the
International Managers, 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, the Selling Stockholders or
the International Managers and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling
Stockholders and the International Managers agree that it would
not be just and equitable if contribution were determined by pro
rata allocation (even if the International Managers 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. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred
to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating, defending, settling or compromising any such
claim. Notwithstanding the provisions of this subsection (d), no
International Manager shall be required to contribute any amount
in excess of the amount by which the total price at which the
shares of the Stock underwritten by it and distributed to the
public were offered to the public exceeds the amount of any
damages which such International Manager has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The International
Managers' obligations to contribute are several in proportion to
their respective underwriting obligations and not joint. No
person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act or the equivalent
legal provision under German law) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission to so notify the
indemnifying party shall not relieve the indemnifying party from
any liability that
25
26
it may have to any indemnified party except to the extent that
any such delay results in the loss of the ability to assert any
affirmative or negative defense the loss of which is materially
prejudicial to the disposition of this matter.
7 Survival of Indemnities, Representations, Warranties, etc. The
respective indemnities, covenants, agreements, representations,
warranties and other statements of the Company and its subsidiaries, the
Selling Stockholders and the several International Managers, as set
forth in this Agreement or made by them respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation made by or on behalf of any International Manager, the
Selling Stockholders, the Company or any of its officers or directors or
any controlling person, and shall survive delivery of and payment for
the Stock until all applicable statutes of limitation have expired.
8 Conditions of International Managers Obligations. The respective
obligations of the several International Managers hereunder shall be
subject to the accuracy, at and (except as otherwise stated herein) as
of the date hereof and at and as of each of the Closing Dates, of the
representations and warranties made herein by the Company and the
Selling Stockholders to compliance at and as of each of the Closing
Dates by the Company and the Selling Stockholders with their covenants
and agreements herein contained and other provisions hereof to be
satisfied at or prior to each of the Closing Dates, and to the following
additional conditions:
(a) The Registration Statement and the Application for Admission
shall have become effective and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been initiated or, to the knowledge
of the Company or the Lead Managers, shall be threatened by the
Commission, and any request for additional information on the
part of the Commission (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of the Lead
Managers. Any filings of the Prospectus, or any supplement
thereto, required pursuant to Rule 424(b) or Rule 434 of the
Rules and Regulations, shall have been made in the manner and
within the time period required by Rule 424(b) and Rule 434 of
the Rules and Regulations, as the case may be.
(b) The Lead Managers shall have been satisfied that there shall not
have occurred any change prior to each of the Closing Dates, in
the condition (financial or otherwise), properties, business,
management, net worth or results of operations of the Company
and its subsidiaries considered as a whole, or any change in the
capital stock, short-term or long-term debt of the Company and
its subsidiaries considered as a whole, such that (i) the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact which,
in the reasonable opinion of the Lead Managers, is material, or
omits to state a fact which, in the reasonable opinion of the
Lead Managers, is required to be stated therein or is necessary
to make the statements therein not misleading or (ii) it is
impracticable in the reasonable judgment of the Lead Managers to
proceed with the public offering or purchase the Stock as
contemplated hereby.
(c) The Lead Managers shall be satisfied that no legal or
governmental action, suit or proceeding affecting the Company
which is material and adverse to the Company or which affects or
may affect the Company's or the Selling Stockholders' ability to
perform their respective obligations under this Agreement shall
have been instituted or threatened and there shall have occurred
no material adverse development in any existing such action,
suit or proceeding.
26
27
(d) At the time of execution of this Agreement, the Lead Managers
shall have received from KPMG Peat Marwick LLP, independent
certified public accountants, a letter, dated the date hereof,
in form and substance satisfactory to the International Managers
to the effect set forth in Exhibit I hereto.
(e) The Lead Managers shall have received from KPMG Peat Marwick
LLP, independent certified public accountants, letters, dated
each of the Closing Dates, to the effect that such accountants
reaffirm, as of each of the Closing Dates, and as though made on
each of the Closing Dates, the statements made in the letter
furnished by such accountants pursuant to paragraph (d) of this
Section 8.
(f) The Lead Managers shall have received (i) from Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation, United States
securities counsel for the Company; (ii) from Oppenhoff &
Xxxxxx, German counsel for the Company; and (iii) from the Law
Offices of Xxxxxx Xxxxxx, Esq., intellectual property counsel to
the Company, an opinion, dated each of the Closing Date, to the
effect set forth in Exhibits II, III and IV hereto,
respectively.
(g) The Lead Managers shall have received from Xxxxxx & Xxxxx,
counsel for the International Managers, their opinion dated each
of the Closing Dates with respect to the incorporation of the
Company, the validity of the Stock, the Registration Statement
and the Prospectus and such other related matters as it may
reasonably request, and the Company shall have furnished to such
counsel such documents as they may request for the purpose of
enabling them to pass upon such matters.
(h) The Lead Managers shall have received from _________________,
counsel for the Selling Stockholders, an opinion dated the
Closing Date, to the effect set forth in Exhibit V.
(i) The Lead Managers shall have received a certificate or
certificates, dated each of the Closing Dates, of the chief
executive officer or the President and the chief financial or
accounting officer of the Company to the effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the
knowledge of the signers, no proceedings for that
purpose have been instituted or are pending or
contemplated under the Securities Act;
(ii) Neither any Pre-effective Prospectus, as of its date,
nor the Registration Statement or the Application for
Admission nor the Prospectus or the German Prospectus,
nor any amendment or supplement thereto, as of the time
when the Registration Statement or the Application for
Admission, as the case may be, became effective and at
all times subsequent thereto up to the delivery of such
certificate, contained any untrue statement of a
material fact or omitted to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading;
(iii) The representations and warranties of the Company in
this Agreement are true and correct at and as of each of
the Closing Dates, and the Company has complied with all
the agreements and performed or satisfied all the
conditions on its part to be performed or satisfied at
or prior to the Closing Dates; provided, however, that
the
27
28
representation contained in clause (ii) of paragraph
2(a)(z) hereof need not be true as of a Closing Date;
and
(iv) Since the respective dates as of which information is
given in the Registration Statement, the Prospectus and
the German Prospectus, and except as disclosed in or
contemplated by the Prospectus, (i) there has not been
any material adverse change or a development involving a
material adverse change in the condition (financial or
otherwise), properties, business, management, net worth
or results of operations of the Company and its
subsidiaries considered as a whole; (ii) the business
and operations conducted by the Company and its
subsidiaries have not sustained a loss by strike, fire,
flood, accident or other calamity (whether or not
insured) of such a character as to interfere materially
with the conduct of the business and operations of the
Company and its subsidiaries considered as a whole;
(iii) no legal or governmental action, suit or
proceeding is pending or to the knowledge of the signers
threatened against the Company which is material to the
Company, whether or not arising from transactions in the
ordinary course of business, or which may materially and
adversely affect the transactions contemplated by this
Agreement; (iv) since such dates and except as so
disclosed, the Company has not incurred any material
liability or obligation, direct, contingent or indirect,
made any change in its capital stock (except pursuant to
the 1997 Plans), made any material change in its
short-term or funded debt or repurchased or otherwise
acquired any of the Company's capital stock; and (v) the
Company has not declared or paid any dividend, or made
any other distribution, upon its outstanding capital
stock payable to stockholders of record on a date prior
to the Closing Date.
(j) The Selling Stockholders shall have furnished to the Lead
Managers certificates as to the accuracy, at and as of each of
the Closing Dates, of the representations and warranties made
herein by them and as to compliance at and as of each of the
Closing Dates by them with their covenants and agreements herein
contained and other provisions hereof to be satisfied at or
prior to each of the Closing Dates, and as to satisfaction of
the other conditions to the obligations of the International
Managers hereunder.
(k) Xxxxx & Company shall have received, on behalf of the several
International Managers, the written agreements, substantially in
the form of Exhibit VI hereto, of the officers, directors and
certain holders of Common Stock that each will not offer, sell,
assign, transfer, encumber, contract to sell, register for sale,
grant an option to purchase or otherwise dispose of, other than
by operation of law, gifts, pledges or dispositions by estate
representatives, any shares of Common Stock (including, without
limitation, Common Stock which may be deemed to be beneficially
owned by such officer, director or holder in accordance with the
Rules and Regulations) during the 90 days following the date of
the final Prospectus except as provided therein.
(l) The Closing under the U.S. Underwriting Agreement shall have
occurred concurrently with the Closing hereunder on the Closing
Date.
All opinions, certificates, letters and other documents will be in
compliance with the provisions hereunder only if they are reasonably
satisfactory in form and substance to the Lead Managers. The Company
will furnish to the Lead Managers conformed copies of such opinions,
certificates, letters
28
29
and other documents as the Lead Managers shall reasonably request. If
any of the conditions hereinabove provided for in this Section shall not
have been satisfied when and as required by this Agreement, this
Agreement may be terminated by the Lead Managers by notifying the
Company of such termination in writing or by telegram at or prior to
each of the Closing Dates, but Cowen, following consultation with West
LB, on behalf of the Lead Managers, shall be entitled to waive any of
such conditions.
9 Effective Date. This Agreement shall become effective immediately as to
Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16 and 17 and, as to all other
provisions, at 11:00 a.m. New York City time on the first full business
day following the effectiveness of the Registration Statement or at such
earlier time after the Registration Statement becomes effective as the
Lead Managers may determine on and by notice to the Company or by
release of any of the Stock for sale to the public. For the purposes of
this Section 9, the Stock shall be deemed to have been so released upon
the release for publication of any newspaper advertisement relating to
the Stock or upon the release by you of notices (i) advising
International Managers that the shares of Stock are released for public
offering or (ii) offering the Stock for sale to securities dealers,
whichever may occur first.
10 Termination. This Agreement (except for the provisions of Section 5) may
be terminated by the Company at any time before it becomes effective in
accordance with Section 9 by notice to the Lead Managers and may be
terminated by the Lead Managers at any time before it becomes effective
in accordance with Section 9 by notice to the Company. In the event of
any termination of this Agreement under this or any other provision of
this Agreement, there shall be no liability of any party to this
Agreement to any other party, other than as provided in Sections 5, 6
and 11 and other than as provided in Section 12 as to the liability of
defaulting International Managers.
This Agreement may be terminated after it becomes effective by the Lead
Managers by notice to the Company (i) if at or prior to the First
Closing Date trading in securities on any of the New York Stock Exchange
or the Nasdaq National Market System shall have been suspended (other
than any short term suspension of trading pursuant to any "circuit
breaker" provisions of the New York Stock Exchange) or minimum or
maximum prices shall have been established on any such exchange or
market, or a banking moratorium shall have been declared by New York or
United States authorities; (ii) trading of any securities of the Company
shall have been suspended on any U.S. or foreign exchange or in any U.S.
or foreign over-the-counter market; (iii) if at or prior to the First
Closing Date there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power or of any
other insurrection or armed conflict involving the United States or (B)
any material change in financial markets or any calamity or crisis
which, in the reasonable judgment of the Lead Managers, makes it
impractical or inadvisable to offer or sell the Stock on the terms
contemplated by the Prospectus; (iv) if there shall have been any
material adverse development or prospective material adverse development
involving particularly the business or properties or securities of the
Company or any of its subsidiaries or the transactions contemplated by
this Agreement, which, in the reasonable judgment of the Lead Managers,
makes it impracticable or inadvisable to offer or deliver the Stock on
the terms contemplated by the Prospectus; (v) if there shall be any
litigation or proceeding, pending or threatened, which, in the
reasonable judgment of the Lead Managers, makes it impracticable or
inadvisable to offer or deliver the on the terms contemplated by the
Prospectus; or (vi) if there shall have occurred any of the events
specified in the immediately preceding clauses (i) - (v) together with
any other such event that makes it, in the reasonable
judgment of the Lead Managers, impractical or inadvisable to offer or
deliver the Stock on the terms contemplated by the Prospectus.
29
30
11 Reimbursement of International Managers. Notwithstanding any other
provisions hereof, if this Agreement shall not become effective by
reason of any election of the Company or the Selling Stockholder
pursuant to the first paragraph of Section 10 or shall be terminated by
the Lead Managers under Section 8 (excluding Section 8(g)) or Section
10, the Company will bear and pay the expenses specified in Section 5
hereof and, in addition to their obligations pursuant to Section 6
hereof, the Company will reimburse the reasonable out-of-pocket expenses
of the several International Managers (including reasonable fees and
disbursements of counsel for the International Managers) incurred in
connection with this Agreement and the proposed purchase of the Stock,
and promptly upon demand the Company will pay such amounts to you as
Lead Managers.
12 Substitution of International Managers. If any International Manager or
International Managers shall default in its or their obligations to
purchase shares of Stock hereunder and the aggregate number of shares
which such defaulting International Manager or International Managers
agreed but failed to purchase does not exceed ten percent (10%) of the
total number of shares underwritten, the other International Managers
shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the shares which such defaulting
International Manager or International Managers agreed but failed to
purchase. If any International Manager or International Managers shall
so default and the aggregate number of shares with respect to which such
default or defaults occur is more than ten percent (10%) of the total
number of shares underwritten and arrangements satisfactory to the Lead
Managers and the Company for the purchase of such shares by other
persons are not made within forty-eight (48) hours after such default,
this Agreement shall terminate.
If the remaining International Managers or substituted International
Managers are required hereby or agree to take up all or part of the
shares of Stock of a defaulting International Manager or International
Managers as provided in this Section 12, (i) the Company and the Selling
Stockholders shall have the right to postpone the Closing Dates for a
period of not more than five (5) full business days in order that the
Company may effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to
the Registration Statement or supplements to the Prospectus which may
thereby be made necessary, and (ii) the respective numbers of shares to
be purchased by the remaining International Managers or substituted
International Managers shall be taken as the basis of their underwriting
obligation for all purposes of this Agreement. Nothing herein contained
shall relieve any defaulting International Manager of its liability to
the Company, the Selling Stockholders or the other International
Managers for damages occasioned by its default hereunder. Any
termination of this Agreement pursuant to this Section 12 shall be
without liability on the part of any non-defaulting International
Manager, the Selling Stockholders or the Company, except for expenses to
be paid or reimbursed pursuant to Section 5 and except for the
provisions of Section 6.
13 Notices. All communications hereunder shall be in writing and, if sent
to the International Managers shall be mailed, delivered or facsimilied
and confirmed to you, as their Lead Managers c/o Cowen & Company at
Xxxxxxxxx Xxxxxx, Xxx Xxxx. Xxx Xxxx 00000 except that notices given to
an International Manager pursuant to Section 6 hereof shall be sent to
such International Manager at the address furnished by the Lead Managers
or, if sent to the Company, shall be mailed, delivered or facsimilied
and confirmed c/o SCM Microsystems, Inc., 000 Xxxxxxxx Xxx, Xxx Xxxxx,
Xxxxxxxxxx 00000, Attention: President.
30
31
14 Successors. This Agreement shall inure to the benefit of and be binding
upon the several International Managers, the Company and the Selling
Stockholders and their respective successors and legal representatives.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person other than the persons mentioned in the
preceding sentence any legal or equitable right, remedy or claim under
or in respect of this Agreement, or any provisions hereby contained,
this Agreement and all conditions and provisions hereof being intended
to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations,
warranties, covenants, agreements and indemnities of the Company and the
Selling Stockholders contained in this Agreement shall also be for the
benefit of the person or persons, if any, who control any International
Manager or International Managers within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, and the
indemnities of the several International Managers shall also be for the
benefit of each director of the Company, each of its officers who has
signed the Registration Statement and the person or persons, if any, who
control the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act.
15 Applicable Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of New York.
16 Authority of Lead Managers. In connection with this Agreement, you will
act for and on behalf of the several International Managers, and any
action taken under this Agreement by Cowen, as Lead Manager, after
consultation with West LB, will be binding on all the International
Managers; and any action taken under this Agreement by any of the
Attorneys-in-fact will be binding on all the Selling Stockholders.
17 Partial Unenforceability. The invalidity or unenforceability of any
Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision
hereof. If any Section, paragraph or provision of this Agreement is for
any reason determined to be invalid or unenforceable, there shall be
deemed to be made such minor changes (and only such minor changes) as
are necessary to make it valid and enforceable.
18 General. This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in
this Agreement are for the convenience of the parties only and will not
affect the construction or interpretation of this Agreement. This
Agreement may be amended or modified, and the observance of any term of
this Agreement may be waived, only by a writing signed by the party or
parties to this Agreement directly affected by such amendment,
modification or waiver.
19 Counterparts. This Agreement may be signed in two (2) or more
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
31
32
If the foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
SCM MICROSYSTEMS, INC.
By:__________________________________
Name:
Title:
Accepted and delivered in SELLING STOCKHOLDERS
Palo Alto, California as of LISTED IN SCHEDULE B
the date first above written.
XXXXX INTERNATIONAL L.P. By:_____________________
WESTDEUTSCHE LANDESBANK GIROZENTRALE
XXXXXXXXX & XXXXX LLC
Acting on their own behalf
and as Lead Managers of the several By:_____________________
International Managers referred to in the
Attorney-in-fact
foregoing Agreement.
By: XXXXX INTERNATIONAL L.P.
By:_____________________________
Its general partner
By:_____________________________
Name:
Title:
For purposes of agreeing to the indemnification provisions set forth in Section
6 of this agreement:
SCM MICROSYSTEMS GmbH
By: _____________________________
32
33
Name:
Title:
33
34
SCHEDULE A
INTERNATIONAL MANAGERS
Number of
Firm Shares
to be
Name Purchased
---- ---------
Xxxxx International L.P. .................................
Westdeutsche Landesbank Girozentrale .....................
Xxxxxxxxx & Xxxxx LLC.....................................
Total 1,500,000
=========
35
SCHEDULE B
SELLING STOCKHOLDERS
Number of
Shares of Common Stock
to be
Name Purchased
---- ---------
[TO COME] . ........................................
...........................................
---------
Total 2,000,000
=========
36
SCHEDULE C
SUBSIDIARIES
SCM Microsystems GmbH, a German entity
SCM Microsystems (U.S.) Inc., a Delaware corporation
37
SCHEDULE D
LIST OF PARTIES EXECUTING LOCK-UP AGREEMENTS
Index Securities S.A.
Algoquin Trust S.A.
Alpinvest International B.V.
Xxxxx Xxxxxxxxx
Banque SCS Alliance S.A.
Xxxxxx Xxxx
British Bank of the Middle East
Bulk Partners AS
Xxxxxx Xxxx
CERN Pension Fund
Xxxx & Cie S.A.
Xxxxxx Xxxx
Claus Dieckell
Xxxxxxxxx Xxxxxxxx
Xxxx Xxxx
Xxxxxxx Xxxxx
Faisal Finance (Jersey) Ltd.
X. X. Xxxxx
Fidulex Management Inc.
X. Xxxxxxxxxxx
Fondation Galba
The Forum Finance Group
Genevest Consulting Group S.A.
The Xxxxxxx Fund
Xxx X. Xxxx
Xxxxx Xxxx
Xxxxxx Xxxx
Xxxxxxxxx & Xxxxx California
Hoegh Invest ACS
Xxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx
Intel Corporation
Intellicard
ITOHU Corporation
Xxxxxx Xxxxxx
KBL Founder Ventures S.C.A.
Per Xxxxxxx
X.X. Finance XX
Xxxxxxxxx Xxxx
Xxxxxx Xxxxxxxxxxxxxx
Xxxx Xxxx Xx Xxxx
Xxxx X. Xxxxx
Xxxxxx X. Xxxxxxx
Xxxxx Xxxxx
Xxxxx Xxxxxxx
38
Torsten Mayuranz
Xxxxx Xxxxx
Xxxxx Xxxxx
Merifin Capital N.V.
Mirabaud & Cie
Xxxxxxx & Company
Xxxx X. Xxxxxxxxxxx
Nippon Investment & Founders
Xxxxxxx Xxxxx
Xxxxxx Xxxxx
Jaochim Grafzu Ortenbum
Xxx X. Xxxxxx
Xxxx X. Xxxxxxxx
ppon PICTET & Cie
Xxxxxx Xxxxxxx
Xxxxxxxx Xxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxxx X. Xxxx
Xxxxx Xxxxx
Xxxxxxx Xxxx
Xxxx Xxxxx
Xxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx
Xxx Xxxxxx
Swiss Bank Corporation
Societe Financiere Mirelis S.A.
Xxxxxx Xxxxxx
Xxxxxx Solja
Xxxxxxx Xxxxxx
Xxxxxx Xxxxxx
Telenor
TVM Eurotech Limited Partnership
Union Bank of Switzerland
Xxxxxxxxx Xxxxx
Vertex
Xxxxxxx xxx Xxxxx
Xxxxxxx xxx Xxxxx
Luitpold xxx Xxxxx
Xxxx Xxxxxx
Xxxxxxx Xxxx
WS Investments 97A
Zweite Beteiligungs Gesellschaft
39
EXHIBIT I
[Form of Accountant's Letter]
The Accountants shall confirm that they are independent accountants to the
Company within the meaning of the Securities Act and the Rules, that the
response to Item 10 of the Registration Statement is correct insofar as it
relates to them and stating that:
a. in their opinion the audited financial
statements and financial statement schedules included in the
Registration Statement and the Prospectus and reported on by them
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules and
Regulations;
b. on the basis of a reading of the amounts
included in the Registration Statement and the Prospectus under
the headings "Summary Consolidated Financial Data" and "Selected
Consolidated Financial Data," carrying out certain procedures
(but not an examination in accordance with generally accepted
auditing standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such
letter, a reading of the minutes of the meetings of the
stockholders and directors of the Company, and inquiries of
certain officials of the Company who have responsibility for
financial and accounting matters of the Company as to
transactions and events subsequent to the date of the latest
audited financial statements, except as disclosed in the
Registration Statement and the Prospectus, nothing came to their
attention which caused them to believe that:
(1) the amounts in "Summary Consolidated
Financial Data," and "Selected Consolidated Financial
Data" included in the Registration Statement and the
Prospectus do not agree with the corresponding amounts in
the audited or unaudited financial statements from which
such amounts were derived; or
(2) with respect to the Company, there were,
at a specified date not more than five business days prior
to the date of the letter, any change in the capital stock
of the Company, increase in the long-term debt of the
Company or any decreases in net income or in stockholders'
equity in the Company, as compared with the amounts shown
on the Company's audited balance sheet for the fiscal year
ended December 31, 1997 included in the Registration
Statement; and
c. they have performed certain other procedures as
may be permitted under generally acceptable auditing standards as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth in the
Registration Statement and the Prospectus and reasonably
specified by the Representatives agrees with the accounting
records of the Company; and
d. based upon the procedures set forth in clauses
(ii) and (iii) above and a reading of the amounts included in the
Registration Statement under the headings "Summary Consolidated
Financial Data" and "Selected Consolidated Financial Data"
included in the Registration Statement and Prospectus and a
reading of the financial
40
statements, from which certain of such data were derived,
nothing has come to their attention that gives them reason to
believe that the "Selected Consolidated Financial Data" included
in the Registration Statement and Prospectus do not comply as to
the form in all material respects with the applicable accounting
requirements of the Securities Act and the Rules or that the
information set forth therein is not fairly stated in relation
to the financial statements included in the Registration
Statement or Prospectus from which certain of such data were
derived are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that
of the audited financial statements included in the Registration
Statement and Prospectus.
41
Exhibit II
[Form of Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx]
1. The Company and each of the corporations set forth in Exhibit A
hereto (the "US Subsidiary") have been duly incorporated and are validly
existing and in good standing as corporations under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business and are in
good standing as foreign corporations in California which, to such counsel's
knowledge, is the only jurisdiction in which the location of the properties
owned or leased by it or in which the character of the business conducted by it
makes such qualification necessary, and have all corporate power necessary to
own or hold their respective properties and conduct their businesses as
described in the Prospectus;
2. The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and nonassessable
and all of the Shares to be issued and sold by the Company to the U.S.
Underwriters pursuant to the Underwriting Agreement and to the International
Managers pursuant to the International Underwriting Agreement have been duly and
validly authorized and, when issued and delivered against payment therefor as
provided for in the Underwriting Agreement or the International Underwriting
Agreement, as the case may be, shall be duly and validly issued, fully paid and
non-assessable and, to our knowledge, free of any pre-emptive or similar rights;
3. Other than as described in the Prospectus, to our knowledge, there
are no pre-emptive or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any of the Shares pursuant to the
Company's Certificate of Incorporation or By-Laws or pursuant to any agreement
or other instrument known to us;
4. Except as disclosed in the Prospectus, to our knowledge, there are no
legal or governmental proceedings pending to which the Company or the US
Subsidiary is a party or of which any property or assets of the Company or the
US Subsidiary is the subject which, if determined adversely to the Company or
the US Subsidiary, could, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Company and its subsidiaries
taken as a whole; and, to our knowledge, no such proceedings are threatened or
contemplated by governmental authorities or other third parties;
5. The Company has full corporate power and authority to enter into the
Underwriting Agreement and the International Underwriting Agreement and to
perform its obligations thereunder (including to issue, sell and deliver the
Shares), and each of the Underwriting Agreement and the International
Underwriting Agreement has been duly and validly authorized, executed and
delivered by the Company and is a valid and binding obligation of the Company,
enforceable against it in accordance with their respective terms.
6. The execution, delivery and performance of the Underwriting Agreement
and the International Underwriting Agreement by the Company and the consummation
of the transactions contemplated by the Underwriting Agreement and the
International Underwriting Agreement by the Company will not result in a breach
or violation of (A) any of the terms or provisions of or constitute a default
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument that is filed as an exhibit to the Registration Statement, (B) the
Certificate of Incorporation or By-laws, or (C) any law, order, rule or
regulation of any U.S. court or U.S. governmental agency or body having
jurisdiction over the Company or the US Subsidiary or any of their properties or
result in the creation of a lien;
42
7. No consent, approval, authorization or order of any U.S. court or
U.S. governmental agency or body is required for the consummation by the Company
of the transactions contemplated by the Underwriting Agreement or the
International Underwriting Agreement, except such as may be required by the
National Association of Securities Dealers, Inc. (the "NASD"), the NASDAQ
National Market, the Neuer Markt of the Frankfurt Stock Exchange or under the
Securities Act or the Exchange Act or the securities or "Blue Sky" laws of any
U.S. or foreign jurisdiction in connection with the purchase and distribution of
the Shares by the U.S. Underwriters or the International Managers;
8. The Registration Statement was declared effective under the
Securities Act as of April __, 1998, the Prospectus was filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations on April __,
1998, and no stop order suspending the effectiveness of the Registration
Statement has been issued and to our knowledge no proceeding for that purpose is
pending or threatened by the Commission;
9. The Registration Statement and the Prospectus and any amendments or
supplements thereto (other than the financial statements and the notes thereto
and the schedules and other financial and statistical data included in the
Registration Statement or the Prospectus as to which we express no opinion)
comply as to form in all respects with the requirements of the Securities Act
and the Rules and Regulations and, to our knowledge, there are no contracts or
documents of a character required to be filed as exhibits to the Registration
Statement which are not filed as required;
10. Other than as described in the Prospectus and to our knowledge,
there are no contracts, agreements or understandings between the Company and any
person granting such person the right (other than rights which have been waived
or satisfied) to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities in the
securities registered pursuant to this Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act;
11. The descriptions in the Registration Statement and the Prospectus
under the captions "Risk Factors -- Concentration of Stock Ownership;
Anti-Takeover Provisions," Risk Factors -- Shares Eligible for Future Sale,"
Description of Common Stock" and "Shares Eligible for Future Sale," solely to
the extent they reflect matters of federal law arising under the laws of the
United States or of the Delaware General Corporation Law or legal conclusions
relating to such laws, accurately summarize and fairly present the legal and
regulatory matters described therein; and
12. The Company is not nor will it be immediately after receiving the
proceeds from the sale of the Shares, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
In addition, although we have not undertaken, except as otherwise
indicated herein, to determine independently, and do not assume any
responsibility for, the accuracy or completeness of the statements in the
Registration Statement, we have participated in conferences with officers and
other representatives of the Company, at which conferences representatives of
the Representatives, counsel to the Underwriters and representatives of the
independent certified public accountants of the Company were present, and at
which conferences the contents of the Registration Statement and Prospectus and
related matters were discussed, and based upon the foregoing nothing has come to
our attention that has caused us to believe that the Registration Statement at
the time the Registration Statement became effective, or the Prospectus, as of
its date and as of the date hereof, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that any
43
amendment or supplement to the Prospectus, as of its respective date, and as of
the date hereof, contained any untrue statement of a material fact or omitted 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 (it being
understood that we express no belief with respect to the financial statements
and the notes thereto and the schedules and other financial and statistical data
included in the Registration Statement or the Prospectus).
44
Exhibit III
[Form of Opinion of Issuer's German Counsel and Intellectual Property Counsel]
1. SCM Microsystems GmbH, a limited liability company (the "Subsidiary")
is duly incorporated and duly registered with the commercial register at the
local court in Neuburg an der Donau under No. HRB 90556 and is validly existing
as a limited liability company under the laws of Germany and is duly qualified
to do business in accordance with the objectives of the Subsidiary set forth in
its articles of association, and has all power and authority (corporate and
other) necessary to own or hold its properties and conduct its business in
accordance with its articles of association. The objective of the Subsidiary
pursuant to its articles of association is to develop, produce and market
electronic parts of microsystems, electronic and electric instruments, data
terminals and data processing equipment as well as to trade all related
products. The Subsidiary is also authorized to conduct all activities which are
appropriate to serve these objectives. In particular the Subsidiary is
authorized to establish, acquire or hold interest in enterprises of identical or
similar kind and to grant or acquire licenses;
2. The Subsidiary has an authorized, issued and outstanding share
capital in the nominal amount of DM 522,700 (consisting of 33 shares with
different nominal amounts). To the best of our knowledge after reasonable
investigations all of the issued shares of capital stock of the Subsidiary have
been duly and validly authorized and issued and are to the best of our knowledge
fully paid, non-assessable and are owned by SCM Microsystems Inc., a Delaware
corporation, to the best of our knowledge free and clear of all liens,
encumbrances, equities or claims;
3. Other than as described in the Prospectus after reasonable
investigations (i.e., due inquiry of the management of the Subsidiary) there are
no pre-emptive or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any of the capital stock of the
Subsidiary pursuant to the Subsidiary's organizational documents or pursuant to
any agreement or other instrument known to us providing for such rights or
restrictions;
4. Except as disclosed in the Prospectus after reasonable investigations
(i.e., due inquiry of the management of the Subsidiary), to our knowledge, there
are no legal or governmental proceedings pending to which the Subsidiary is a
party or of which any property or assets of the Subsidiary is the subject which,
if determined adversely to the Subsidiary, could individually or in the
aggregate have a material adverse effect on the Subsidiary and, to our
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or other third parties;
5. The statements in the Prospectus under the heading "Risk Factors -
Proprietary Technology and Intellectual Property" and "Business - Proprietary
Technology and Intellectual Property," insofar as such statements constitute
summary descriptions of the legal matters, documents or proceedings referred to
therein, fairly represent the information called for with respect to such legal
matters, documents or proceedings and such statements do not omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading;
6. To such counsel's knowledge, the Subsidiary owns or possesses all
patents, trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and rights described in the Prospectus as
being owned by it or necessary for the conduct of its business; and to such
counsel's knowledge, except as described in the Prospectus, the
45
Subsidiary has not received any notice of infringement of or conflict with and
such counsel knows of no infringement of or conflict with asserted rights of
others with respect to any such patents, trademarks, service marks or other
proprietary information or materials which could result in any material adverse
effect on the Subsidiary and to the knowledge of such counsel there is no
infringement or violation by others of any of the Subsidiary's patents,
licenses, trade secrets, trademarks, service marks or other proprietary
information or materials which in the judgment of such counsel could materially
affect the use thereof by the Subsidiary;
7. The patents have been licensed to the Subsidiary as described in the
Prospectus, and such licenses are valid, binding and enforceable; and the
Subsidiary has rights to the products and technology covered thereby as
described in the Prospectus;
8. The Subsidiary has full corporate power and authority to enter into
the Underwriting Agreement and the International Underwriting Agreement and to
perform its obligations thereunder, and the Underwriting Agreement and the
International Underwriting Agreement have each been duly and validly authorized,
executed and delivered by the Subsidiary;
9. The execution, delivery and performance of the Underwriting Agreement
and the International Underwriting Agreement and the consummation of the
transactions contemplated by the Underwriting Agreement and the International
Underwriting Agreement by the Subsidiary will not result in a breach or
violation of any of (A) the terms or provisions of or constitute a default under
any indenture, mortgage, deed of trust note agreement or other agreement or
instrument known to us after reasonable investigations (i.e., due inquiry of the
management of the Subsidiary) to which the Subsidiary is a party or by which any
of its properties is or may be bound, (B) the organizational documents of the
Subsidiary, or (C) any law, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Subsidiary known to us
or any of its properties nor will such execution, delivery and performance
result in the creation of a lien;
10. No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Subsidiary
of the transactions contemplated by the Underwriting Agreement or the
International Underwriting Agreement other than the approval of the German
authorities pursuant to the German Stock Exchange Act (Borsengesetz), the German
Sale Prospectus Act "Verkaufsprospektgesetz", the Stock Exchange Regulation
("Borsenordnung") and the Rules and Regulations of the New Market "(Regelwerk
Neuer Markt").
11. The Prospectus used in connection with the application to list the
Stock on the Neuer Markt of the Frankfurt Stock Exchange and any amendments or
supplements thereto comply as to form in all respects with the requirements of
German law and the Frankfurt Stock Exchange.
12. The Stock has been approved for listing on the Neuer Markt of the
Frankfurt Stock Exchange.
46
Exhibit IV
[Form of Intellectual Property Counsel Opinion]
1. The statements in the Prospectus under the heading "Risk Factors -
Proprietary Technology and Intellectual Property" and "Business - Proprietary
Technology and Intellectual Property," insofar as such statements constitute
summary descriptions of the legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect to such legal
matters, documents or proceedings and such statements do not omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading;
2. To such counsel's knowledge, the Company owns or possesses all
patents, trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and rights described in the Prospectus as
being owned by it or necessary for the conduct of its business; and to such
counsel's knowledge, except as described in the Prospectus, the Company has not
received any notice of infringement of or conflict with and such counsel knows
of no infringement of or conflict with asserted rights of others with respect to
any such patents, trademarks, service marks or other proprietary information or
materials which could result in any material adverse effect on the Company and
to the knowledge of such counsel there is no infringement or violation by others
of any of the Company's patents, licenses, trade secrets, trademarks, service
marks or other proprietary information or materials which in the judgment of
such counsel could materially affect the use thereof by the Company; and
3. The patents have been licensed to the Company as described in the
Prospectus, and such licenses are valid, binding and enforceable; and the
Company has rights to the products and technology covered thereby as described
in the Prospectus.
47
Exhibit V
[Form of Opinion of Selling Stockholders' Counsel]
1. [Corporate Selling Stockholder] Each of ______, ________ and ______
has full corporate power and authority to enter into the Underwriting Agreement,
the International Underwriting Agreement, the Custody Agreement and the Power of
Attorney and to perform its obligations thereunder (including to issue, sell and
deliver the Shares), and each of the Underwriting Agreement, the International
Underwriting Agreement, the Custody Agreement and the Power of Attorney has been
duly and validly authorized, executed and delivered by the Company and is a
valid and binding obligation of ________, _________ and ______, enforceable
against it in accordance with their respective terms.
2. [Individual Selling Stockholder] The Underwriting Agreement, the
International Underwriting Agreement, the Custody Agreement, the Power of
Attorney and the Lock-Up Agreement to be executed by the Selling Stockholders
each have been duly and validly executed and delivered by or on behalf of each
Selling Stockholder.
3. The Underwriting Agreement, the International Underwriting Agreement,
the Custody Agreement, the Power of Attorney and the Lock-Up Agreement executed
and delivered by the Selling Stockholders each contains a valid choice of New
York law.
4. [Individual Selling Stockholder - To our knowledge after reasonable
investigations,] each of the Selling Stockholders has full legal right and power
to enter into the Underwriting Agreement and the International Underwriting
Agreement and to sell, transfer and deliver in the manner provided in the
Underwriting Agreement and the International Underwriting Agreement the Shares
to be sold by the Selling Stockholders.
5. Each of the Selling Stockholders is the record owner of and has
marketable title to the Shares to be sold by such Selling Stockholder.
6. All of the Selling Stockholders' rights in the Shares to be sold by
such Selling Stockholder, have been transferred to the Underwriters who have
severally purchased such Shares, free and clear of adverse claims, assuming that
the Underwriters purchased the same in good faith without notice of any adverse
claims.
7. The transfer and sale by the Selling Stockholders of the Shares to be
sold by the Selling Stockholders as contemplated in the Underwriting Agreement
and the International Underwriting Agreement will not violate any agreement,
judgment, decree, order, statute, rule or regulation which, to our knowledge,
the Selling Stockholders are a party or by which either Selling Stockholder is
bound or subject.
8. To our knowledge, no consent, approval, authorization, license,
certificate, permit or order of any court, governmental or regulatory agency,
authority or body or financial institution is required in connection with the
performance of the Underwriting Agreement or the International Underwriting
Agreement by such Selling Stockholder or the consummation of the transactions
contemplated therein, including the delivery and sale of the Shares to be
delivered and sold by such Selling Stockholder, except such as have been
obtained and except such as may be required under state securities or blue sky
laws in connection with the purchase and distribution of the Shares by the
several Underwriters and the provisions
48
of German law including the German Stock Exchange Act (Borsengesetz), the German
Stock Exchange Regulation (Borsenordnung), the Rules and Regulations for the New
Market (Regelwerk Neuer Markt) and the Sales Prospectus Act
(Verkaufsprospektgesetz).
49
Exhibit VI
[Form of Lock-Up Agreement]
-----------------------
Print Stockholder Name
SCM MICROSYSTEMS, INC.
LOCK-UP AGREEMENT
Xxxxx & Company
Xxxxxxxxx & Xxxxx LLC
Xxxxxxx, Xxxxxx & Xxxxxxxxx, L.L.C.
As representatives of the
several Underwriters
x/x Xxxxx & Xxxxxxx
Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: SCM Microsystems, Inc.
Ladies and Gentlemen:
In order to induce Xxxxx & Company ("Cowen"), Xxxxxxxxx & Xxxxx LLC and Xxxxxxx,
Xxxxxx & Xxxxxxxxx, L.L.C. (together, the "Representatives"), to enter into a
certain underwriting agreement with SCM Microsystems, Inc., a Delaware
corporation (the "Company"), with respect to the public offering of shares of
the Company's Common Stock, par value $ 0.001 per share ("Common Stock"), the
undersigned hereby agrees that for a period of 90 days following the date of the
final prospectus filed by the Company with the Securities and Exchange
Commission in connection with such public offering, the undersigned will not,
without the prior written consent of Cowen, directly or indirectly, (i) offer,
sell, assign, transfer, encumber, pledge, contract to sell, grant an option to
purchase or otherwise dispose of, other than by operation of law, any shares of
Common Stock (including, without limitation, Common Stock which may be deemed to
be beneficially owned by the undersigned in accordance with the rules and
regulations promulgated under the Securities Act of 1933, as the same may be
amended or supplemented from time to time (such shares, the "Beneficially Owned
Shares") or (ii) enter into any swap or similar agreement that transfers, in
whole or in part, the economic risk of ownership of the 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.
Notwithstanding the foregoing, this Lock-Up Agreement (the "Agreement") shall
not apply to shares of the Company's Common Stock acquired on the open market
and that shares so acquired may be sold or otherwise disposed of without regard
to this Agreement.
Notwithstanding the foregoing, if the undersigned is an individual, he or she
may transfer any Shares either during his or her lifetime or on death by will or
intestacy to his or her immediate family or to a trust the beneficiaries of
which are exclusively the undersigned and/or a member of his or her immediate
family or to a charitable organization; provided, however, that in any such case
it shall be a condition to the transfer
50
that the transferee execute an agreement stating that the transferee is
receiving and holding the Shares transferred subject to the provisions of this
Agreement, and there shall be no further transfer of such Shares except in
accordance with this Agreement. For purposes of this Agreement, "immediate
family" shall mean spouse, lineal descendant, father, mother, brother or sister
of the transferor and "charitable organization" shall mean an organization
described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
Notwithstanding the foregoing, if the undersigned is a partnership, the
partnership may transfer any Shares to a partner of such partnership or a
retired partner of such partnership who retires after the date hereof, or to the
estate of any such partner or retired partner, and any partner who is an
individual may transfer such Shares by gift, will or intestate succession to his
or her spouse or lineal descendants or ancestors; and if the undersigned is a
corporation, the corporation may transfer such Shares to any stockholder or
subsidiary of such corporation and any stockholder who is an individual may
transfer Shares by gift, will or intestate succession to his or her immediate
family or to a charitable organization; provided, however, that in any such
case, it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding the Shares
subject to the provisions of this Agreement, and there shall be no further
transfer of such Shares except in accordance with this Agreement.
The undersigned agrees that the provisions of this Agreement shall be binding
also upon the successors, assigns, heirs and personal representatives of the
undersigned. The undersigned agrees and consents to the placing of legends
and/or the entry of stop transfer instructions with the Company's transfer agent
against the transfer of any shares of Common Stock or Beneficially Owned Shares
held by the undersigned except in compliance with this Agreement.
It is understood that, if the Underwriting Agreement does not become effective,
or if the Underwriting Agreement (other than the provisions thereof which
survive termination) shall terminate or be terminated prior to payment for and
delivery of the Shares, you will release us from our obligations under this
Agreement.
This Agreement shall terminate and be of no further force or effect in the event
that the offering contemplated by the Underwriting Agreement is not completed on
or before August 31, 1998.
-------------------------------
Very truly yours,
-------------------------------
(Signature)
-------------------------------
(Title)
-------------------------------
(Date)
