2,250,000 SHARES (1)
INTEGRATED SENSOR SOLUTIONS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
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____________, 1998
CRUTTENDEN XXXX INCORPORATED
XXXXXXXXX SUMMIT SECURITIES LLC
As Representatives of the several Underwriters
c/o Cruttenden Xxxx Incorporated
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Integrated Sensor Solutions, Inc., a Delaware corporation (the
"Company") addresses you as the Representatives of each of the persons, firms
and corporations listed in SCHEDULE A hereto (herein collectively called the
"Underwriters") and hereby confirms its agreement with the several
Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
2,250,000 shares of its authorized and unissued Common Stock, $.001 par value
per share, (the "Firm Shares") to the several Underwriters. The Company also
proposes to grant to the Underwriters an option to purchase up to 337,500
additional shares of the Company's Common Stock, $.001 par value per share
(the "Option Shares"), as provided in Section 7 hereof. As used in this
Agreement, the term "Shares" shall include the Firm Shares and the Option
Shares. Further, the Company proposes to issue to the Representatives
warrants for the purchase of a total of 225,000 shares of its authorized and
unissued Common Stock, $.001 par value per share (the "Warrants"). The
shares of Common Stock issuable upon exercise of the Warrants are referred to
as the "Warrant Shares." All shares of Common Stock, $.001 par value, of the
Company to be outstanding after giving effect to the sales contemplated
hereby, including the Shares and Warrant Shares, are hereinafter referred to
as "Common Stock."
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(1) Plus an option to purchase up to 337,500 additional shares from the
Company to cover over-allotments.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with each
Underwriter that:
(a) A registration statement on Form SB-2 (File No.
333-41351) with respect to the Shares, including a prospectus, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the applicable rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Act and has been filed with the Commission; such
amendments to such registration statement, such amended prospectuses and such
abbreviated registration statements pursuant to Rule 462(b) of the Rules and
Regulations as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company will file
such additional amendments to such registration statement, such amended
prospectuses and such abbreviated registration statements as may hereafter be
required. Copies of such registration statement and amendments together with
each exhibit filed therewith, of each related prospectus contained or filed
as part of any preeffective amendment to such registration statement or filed
pursuant to Rule 424(a) (the "Preliminary Prospectuses") and of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations have been delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare
and promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if the Representatives on
behalf of the several Underwriters, shall agree to the utilization of Rule
434 of the Rules and Regulations, the information required to be included in
any term sheet filed pursuant to Rule 434(b) or (c), as applicable, of the
Rules and Regulations pursuant to subparagraph (1), (4) or (7) of Rule 424(b)
of the Rules and Regulations or as part of a post-effective amendment to the
registration statement (including a final form of prospectus). If the
registration statement relating to the Shares has not been declared effective
under the Act by the Commission, the Company will prepare and promptly file
an amendment to the registration statement, including a final form of
prospectus, or, if the Representatives, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement, including financial statements, schedules and
exhibits (including exhibits incorporated by reference), in the form in which
it became or becomes, as the case may be, effective (including, if the
Company omitted information from the registration statement pursuant to Rule
430A(a) or files a term sheet pursuant to Rule 434 of the Rules and
Regulations, the information deemed to be a part of the registration
statement at the time it became effective pursuant to Rule 430A(b) or Rule
434(d) of the Rules and Regulations) and, in the event of any amendment
thereto or the filing of any abbreviated registration statement pursuant to
Rule 462(b) of the Rules and Regulations relating thereto after the effective
date of such registration statement, shall also mean (from and after the
effectiveness of such amendment or the filing of such abbreviated
registration statement) such registration statement as so amended,
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together with any such abbreviated registration statement. The term
"Prospectus" as used in this Agreement shall mean the prospectus relating to
the Shares as included in such Registration Statement at the time it becomes
effective (including, if the Company omitted information from the
Registration Statement pursuant to Rule 430A(a) of the Rules and Regulations,
the information deemed to be a part of the Registration Statement at the time
it became effective pursuant to Rule 430A(b) of the Rules and Regulations);
PROVIDED, HOWEVER, that if in reliance on Rule 434 of the Rules and
Regulations and with the consent of the Representatives, on behalf of the
several Underwriters, the Company shall have provided to the Underwriters a
term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time
that a confirmation is sent or given for purposes of Section 2(10)(a) of the
Act, the term "Prospectus" shall mean the "prospectus subject to completion"
(as defined in Rule 434(g) of the Rules and Regulations) last provided to the
Underwriters by the Company and circulated by the Underwriters to all
prospective purchasers of the Shares (including the information deemed to be
a part of the Registration Statement at the time it became effective pursuant
to Rule 434(d) of the Rules and Regulations). Notwithstanding the foregoing,
if any revised prospectus shall be provided to the Underwriters by the
Company for use in connection with the offering of the Shares that differs
from the prospectus referred to in the immediately preceding sentence
(whether or not such revised prospectus is required to be filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time
it is first provided to the Underwriters for such use. If in reliance on Rule
434 of the Rules and Regulations and with the consent of the Representatives,
on behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable,
prior to the time that a confirmation is sent or given for purposes of
Section 2(10)(a) of the Act, the Prospectus and the term sheet, together,
will not be materially different from the prospectus in the Registration
Statement.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings
for that purpose, and each such Preliminary Prospectus has conformed in all
material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up
to and on the Closing Date (hereinafter defined) and on any later date on
which Option Shares are to be purchased, (i) the Registration Statement and
the Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act
and the Rules and Regulations and will in all material respects conform to
the requirements of the Act and the Rules and Regulations, (ii) the
Registration Statement, and any amendments or supplements thereto, did not
and will not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED,
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HOWEVER, that none of the representations and warranties contained in this
subparagraph (b) shall apply to information contained in or omitted from the
Registration Statement or Prospectus, or any amendment or supplement thereto,
in reliance upon, and in conformity with, written information relating to any
Underwriter furnished to the Company by such Underwriter specifically for use
in the preparation thereof.
(c) The Company and the Subsidiary (as defined below) are
duly incorporated and validly existing as corporations in good standing under
the laws of the jurisdiction of their incorporation with full power and
authority (corporate and other) to own, lease and operate their properties
and conduct their business as described in the Prospectus; the Company and
the Subsidiary are duly qualified to do business as foreign corporations and
in good standing in each jurisdiction in which the ownership or leasing of
their properties or the conduct of their business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company or the Subsidiary; no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; the Company and the
Subsidiary are in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities that are material to the
conduct of their business, all of which are valid and in full force and
effect; the Company and the Subsidiary are not in violation of their charter
or bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness, or in any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture
or other agreement or instrument to which the Company (or any of the
Subsidiary) are a party or by which their properties may be bound; and the
Company and the Subsidiary are not in material violation of any law, order,
rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company, the Subsidiary or over their properties. The
Company does not own or control, directly or indirectly, any corporation,
association or other entity other than ISS-Nagano, GmbH, its majority-owned
subsidiary (the "Subsidiary").
(d) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement
hereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; the making and performance of
this Agreement by the Company and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (i) any bond, debenture, note
or other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument
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to which the Company or the Subsidiary is a party or by which their
properties may be bound, (ii) the charter or bylaws of the Company or the
Subsidiary or (iii) any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, administrative agency, regulatory body,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company, the Subsidiary or any of their respective
properties. No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or its properties is required
for the execution and delivery of this Agreement and the consummation by the
Company of the transactions herein contemplated, except such as may be
required under the Act, by the National Association of Securities Dealers,
Inc. (the "NASD"), the rules of the Nasdaq National Market, or under state or
other securities or Blue Sky laws, all of which requirements have been
satisfied in all material respects.
(e) There is not pending or, to the Company's knowledge,
threatened, any action, suit, claim or proceeding against the Company or the
Subsidiary, any of its officers, any of its properties, assets or rights
before any court, administrative agency, regulatory body, government or
governmental agency or body, domestic or foreign, having jurisdiction over
the Company, its officers, its properties, the Subsidiary or otherwise which
(i) might, individually or in the aggregate, result in any material adverse
change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company or might materially and
adversely affect the Company's properties, assets or rights, (ii) might
prevent consummation of the transactions contemplated hereby or (iii) is
required to be disclosed in the Registration Statement or Prospectus and is
not so disclosed; and there are no agreements, contracts, leases or documents
of the Company of a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement by the Act or the Rules and Regulations which have not
been accurately described in all material respects in the Registration
Statement or Prospectus or filed as exhibits to the Registration Statement.
The Company and the Subsidiary are not parties or subject to the provisions
of any injunction, judgment, decree or order of any court, regulatory body,
administrative agency, government or governmental agency or body domestic or
foreign, that could be expected to result in a material adverse change in the
condition (financial or other), earnings, operations, business or business
prospects of the Company. The Company and the Subsidiary have conducted and
are conducting their businesses in compliance with all applicable Federal,
state, local and foreign statutes, laws, rules, regulations, ordinances,
codes, decisions, decrees, directives and orders, except where the failure to
do so would not, singly or in the aggregate, have a material adverse effect
on the condition (financial or other) earnings, operations, business or
business prospects of the Company.
(f) All outstanding shares of capital stock of the Company and the
Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities,
and the authorized and outstanding capital stock of the Company is as set
forth in the Prospectus under the caption "Capitalization" and conforms in
all material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus (and such statements correctly
state
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the substance of the instruments defining the capitalization of the Company);
the Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement, and, when issued and delivered by
the Company against payment therefor in accordance with the terms of this
Agreement, will be duly and validly issued and fully paid and nonassessable,
and will be sold free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; and no preemptive right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Shares or the issuance and
sale thereof other than those that have been satisfied or expressly waived
prior to the date hereof and those that will automatically expire upon and
will not apply to the consummation of the transactions contemplated on or
before the Closing Date. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for
the issuance and sale of the Shares except as may be required under the Act
or under state or other securities or Blue Sky laws. Except as disclosed in
the Registration Statement, Prospectus and the financial statements of the
Company, and the related notes thereto included in the Prospectus, the
Company has no outstanding options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option and other stock
plans or arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus fairly and accurately presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(g) The Warrants and the Warrant Shares have been duly
authorized. The Warrants, when issued and delivered to you, will constitute
valid and binding obligations of the Company in accordance with their terms,
except as enforceability may be limited by the application of bankruptcy,
insolvency, moratorium or similar laws affecting the rights of creditors
generally and by judicial limitations on the right of specific performance.
The Warrant Shares when issued in accordance with the terms of this Agreement
and pursuant to the Warrants, will not be subject to any preemptive rights or
similar rights on the part of any person or entity. A sufficient number of
shares of the Company have been reserved for issuance by the Company upon
exercise of the Warrants.
(h) Ernst & Young LLP, Independent Auditors, which has
examined the financial statements of the Company, together with the related
schedules and notes, as of December 31, 1997 for each of the fiscal years in
the three (3) years in the period ended March 31, 1997 filed with the
Commission as a part of the Registration Statement, which are included in the
Prospectus, are independent accountants within the meaning of the Act and the
Rules and Regulations; the audited financial statements of the Company,
together with the related schedules and notes, and the unaudited financial
information, forming part of the Registration Statement and Prospectus,
fairly present the financial position and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply; and all audited financial statements of the Company, together with the
related schedules and notes, and the unaudited financial information, filed
with the Commission as part of the Registration Statement, have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved except as may be
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otherwise stated therein. The selected and summary financial and statistical
data included in the Registration Statement present fairly the information
shown therein and have been compiled on a basis consistent with the audited
financial statements presented therein. No other financial statements or
schedules are required to be included in the Registration Statement.
(i) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has
not been (i) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company or the Subsidiary, (ii) any transaction that is material to the
Company or the Subsidiary, (iii) any obligation, direct or contingent, that
is material to the Company or the Subsidiary, incurred by the Company or the
Subsidiary, except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or outstanding indebtedness of the
Company or the Subsidiary, (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or the Subsidiary,
(vi) any default in the payment of principal of or interest on any
outstanding debt obligations, or (vii) any loss or damage (whether or not
insured) to the property of the Company or the Subsidiary which has been
sustained or will have been sustained which has a material adverse effect on
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company.
(j) Except as set forth in the Registration Statement and
Prospectus, (i) the Company and the Subsidiary have good and marketable
title to all properties and assets described in the Registration Statement
and Prospectus as owned by them, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would
not have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company, (ii) the
agreements to which either the Company or the Subsidiary is a party described
in, or filed as exhibits to, the Registration Statement and Prospectus are
valid agreements, enforceable by the Company and the Subsidiary, as the case
may be, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the Company's knowledge, the other contracting party or
parties thereto are not in material breach or material default under any of
such agreements, and (iii) the Company and the Subsidiary has valid and
enforceable leases for all properties described in the Registration Statement
and Prospectus as leased by it, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. Except as set forth in the Registration
Statement and Prospectus, the Company and the Subsidiary owns or leases all
such properties as are necessary to their operations as now conducted or as
proposed to be conducted.
(k) The Company and the Subsidiary have timely filed all
necessary federal, state and foreign income and franchise tax returns and
have paid all taxes shown thereon as due, and there is no tax deficiency that
has been or, to the Company's knowledge, might be asserted against the
Company (or the Subsidiary) that might have a material adverse effect on the
condition (financial
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or otherwise), earnings, operations, business or business prospects of the
Company; and all tax liabilities are adequately provided for on the books of
the Company.
(l) The Company maintains insurance with insurers of
recognized financial responsibility of the types and in the amounts generally
deemed prudent for the business of the Company and the Subsidiary and
consistent with insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, insurance covering real and
personal property owned or leased by the Company or the Subsidiary against
theft, damage, destruction, acts of vandalism, products liability, errors and
omissions, and all other risks customarily insured against, all of which
insurance is in full force and effect; the Company has not been refused any
insurance coverage sought or applied for; and the Company does not have any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue the business of the Company
or any Subsidiary at a cost that would not materially and adversely affect
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company.
(m) To the Company's knowledge, no labor disturbance by the
employees of the Company or the Subsidiary exists or is imminent; and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, subcontractors, authorized
dealers or international distributors that might be expected to result in a
material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company. No collective
bargaining agreement exists with any of the Company's employees and, to the
Company's knowledge, no such agreement is imminent.
(n) The Company and the Subsidiary own or possess exclusive
rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct their business as now conducted and as described in the
Registration Statement and Prospectus; except as set forth in the
Registration Statement and the Prospectus, the expiration of any patents,
patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company or the Subsidiary; neither the Company nor the
Subsidiary has received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company or the
Subsidiary by others with respect to any patent, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names or
copyrights; and the Company and the Subsidiary have not received any notice
of, nor has it any knowledge of, any infringement of or conflict with
asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names
or copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a material adverse effect
on the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company.
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(o) The Common Stock is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
is approved for quotation on the Nasdaq National Market, and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the
Common Stock from the Nasdaq National Market, nor has the Company received
any notification that the Commission or the NASD is contemplating terminating
such registration or listing.
(p) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its affairs in such a manner as to ensure that it is not
and will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the 1940 Act and such rules and
regulations.
(q) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option
Shares are to be purchased, as the case may be, and (ii) completion of the
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any Preliminary Prospectuses, the
Prospectus, the Registration Statement and other materials, if any, permitted
by the Act.
(r) Neither the Company nor the Subsidiary have at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar public
or quasi-public duties, other than payments required or permitted by the laws
of the United States or any jurisdiction thereof.
(s) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(t) Except as otherwise set forth in the Registration
Statement and the Prospectus, each officer and director of the Company, and
each stockholder that holds capital stock of the Company has agreed in
writing that such person will not, except as described below, for a period of
180 days from the date of the final Prospectus (the "Lock-Up Period"), sell,
offer to sell, solicit an offer to buy, contract to sell, loan, pledge, grant
any option to purchase, or otherwise transfer or dispose of (collectively, a
"Disposition"), any shares of Common Stock, or any securities convertible
into or exercisable or exchangeable for Common Stock (collectively,
"Securities"), now owned or hereafter acquired by such person or with respect
to which such person has or hereafter acquires the power of disposition
otherwise than (i) on exercise (on a cash or cashless basis, whether in a
traditional cashless exercise or in a "brokers" cashless exercise), of Common
Stock options or warrants outstanding, it being understood, however, that the
shares of Common Stock received (net of shares sold by or on behalf of such
person in a "brokers" cashless exercise or shares delivered to the Company in
a traditional cashless exercise thereof) by such person upon exercise thereof
shall be
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subject to the terms of the Lock-Up Agreement (as defined below), (ii) on the
transfer of shares of Common Stock or Securities during such person's
lifetime by BONA FIDE gift or upon death by will or intestacy, provided that
any transferee agrees to be bound by the Lock-Up Agreement, and (iii) on the
transfer or other disposition of shares of Common Stock or Securities as a
distribution to limited partners or stockholders of such person, provided
that the distributees thereof agree to be bound by the terms of the Lock-Up
Agreement. The foregoing restriction has been expressly agreed to preclude
the holder of the Securities from engaging in any hedging, pledge or other
transaction which is designed to or may reasonably be expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such stockholder. Such
prohibited hedging, pledge or other transactions would include, without
limitation, any short sale (whether or not against the box) any pledge of
shares covering an obligation that matures, or could reasonably mature during
the Lock-Up Period, or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or
index) that includes, relates to or derives any significant part of its value
from Securities. Furthermore, such person has also agreed and consented to
the entry of stop transfer instructions with the Company's transfer agent
against the transfer of the Securities held by such person except in
compliance with this restriction. The Company has provided to counsel for
the Underwriters a complete and accurate list of all securityholders of the
Company as of _______, 1998 and the number and type of securities held by
each securityholder. The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the agreements
pursuant to which its officers, directors and stockholders have agreed to
such or similar restrictions (the "Lock-up Agreements") presently in effect
or effected hereby. The Company hereby represents and warrants that it will
not release any of its officers, directors or other stockholders from any
Lock-up Agreements currently existing or hereafter effected without the prior
written consent of the Representatives.
(u) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access
to assets is permitted only in accordance 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.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus.
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(w) Other than the Representatives, on behalf of the several
Underwriters, no person is or will be owed any finders fee or commission or
similar payment in connection with the transactions contemplated by this
Agreement.
(x) All offers and sales of capital stock of the Company and
the Subsidiary prior to the date hereof were at all relevant times duly
registered or exempt from the registration requirements of the Act and were
duly registered or subject to an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws.
(y) To the knowledge of the Company, if any full-time
employee identified in the Prospectus has entered into any non-competition,
non-disclosure, confidentiality or other similar agreement with any party
other than the Company or the Subsidiary, such employee is neither in
violation thereof nor is expected to be in violation thereof as a result of
the business conducted or expected to be conducted by the Company or the
Subsidiary as described in the Prospectus or such person's performance of his
obligations to the Company or the Subsidiary; neither the Company nor the
Subsidiary has received written notice that any consultant or scientific
advisor of the Company or the Subsidiary is in violation of any
noncompetition, non-disclosure, confidentiality or similar agreement.
(z) The Company and the Subsidiary: (i) are in material
compliance with any and all applicable foreign, United States, state and
local environmental laws, rules, regulations, treaties, statutes and codes
promulgated by any and all governmental authorities relating to the
protection of human health and safety, the environment or toxic substances or
wastes, pollutants or contaminates ("Environmental Laws"); (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their business as currently conducted; and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permit licenses or other approvals would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise) earnings, operations, business or business
prospects of the Company or the Subsidiary. No action, proceeding,
revocation proceeding, writ, injunction or claim is pending or threatened
against the Company or the Subsidiary relating to the Environmental Laws or
to the activities of the Company or the Subsidiary involving Hazardous
Materials. The terms "Hazardous Materials" as used in this Agreement means
any material or substance that: (i) is prohibited or regulated by any
environmental law, rule, regulation, order, treaty, statute or code
promulgated by any governmental authority, or any amendment or modification
thereto; or (ii) has been designated or regulated by any governmental
authority as radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment.
(aa) Neither the Company nor the Subsidiary is engaged in the
generation, use, manufacture, transportation or storage of any Hazardous
Materials on any of the properties of the Company or the Subsidiary or former
properties, except where such use, manufacture, transportation or storage is
in compliance with Environmental Laws. No Hazardous Materials have
-11-
been treated or disposed of on any properties of the Company or the
Subsidiary or on properties formerly owned or leased by the Company or the
Subsidiary during the time of such ownership or lease, except in compliance
with Environmental Laws. No spills, discharges, releases, deposits,
emplacements, leaks or disposal of any Hazardous Materials have occurred on
or under or have emanated from any of the Company's properties or former
properties of the Company or any subsidiary for which the cost of remediation
would materially and adversely affect the Company.
(bb) No relationship, direct or indirect, exists between or
among the Company and the Subsidiary on the one hand and the directors,
officers, stockholders, customers or suppliers of the Company and the
Subsidiary on the other hand, that is required by the Act or 1934 Act or the
Rules and Regulations to be described in the Registration Statement and the
Prospectus or documents incorporated by reference therein that is not
described as so required.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares which is set forth opposite the name of such
Underwriter in SCHEDULE A hereto (subject to adjustment as provided in
Section 10).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made
against payment of the purchase price therefor by the several Underwriters by
wire transfer to the account specified by the Company, at the offices of Xxxx
Xxxx Xxxx & Freidenrich LLP, 000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000
(or at such other place as may be agreed upon between the Representative and
the Company, at 7:00 A.M. Pacific standard time, (a) on the third (3rd) full
business day following the first day that Shares are traded, (b) if this
Agreement is executed and delivered after 1:30 P.M. Pacific standard time,
the fourth (4th) full business day following the day that this Agreement is
executed and delivered or (c) at such other time and date not later than
seven (7) full business days following the first day that Shares are traded
as the Representative and the Company may determine (or at such time and date
to which payment and delivery shall have been postponed pursuant to Section
10 hereof), such time and date of payment and delivery being herein called
the "Closing Date"; PROVIDED, HOWEVER, that if the Company has not made
available to the Representatives copies of the Prospectus within the time
provided in Section 4(d) hereof, the Representatives may, in their sole
discretion, postpone the Closing Date until no later than two (2) full
business days following delivery of copies of the Prospectus to the
Representatives. The certificates for the Firm Shares to be so delivered
will be made available to you at such office or such other location
including, without limitation, in San Jose, California, as you may reasonably
request for checking at least one (1) full business day prior to the Closing
Date and will be in such names and denominations as you may request, such
request to be made at least two (2) full business days prior to the Closing
Date. If the Representatives so elect, delivery of the Firm Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
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It is understood that each of you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior
to the Closing Date for the Firm Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such
Underwriter or Underwriters of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make a public offering (as such term is described in
Section 11 hereof) of the Firm Shares at a public offering price of $_____
per share. After the public offering, the several Underwriters may, in their
discretion, vary the public offering price.
The information set forth on the front cover page (insofar as such
information relates to the Underwriters) concerning stabilization and
over-allotment by the Underwriters, and under the first, fourth and ninth
paragraphs under the caption "Underwriting" in any Preliminary Prospectus and
in the Prospectus constitutes the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement, and you, on behalf of the
respective Underwriters, represent and warrant to the Company that the
statements made therein do not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto, to become effective as promptly as possible; the Company will use its
best efforts to cause any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations as may be required subsequent to the date
the Registration Statement is declared effective to become effective as
promptly as possible; the Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus and term sheet meeting the requirements of Rule 434(b) or
(c), as applicable, of the Rules
-13-
and Regulations have been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (7) of Rule 424(b) of the Rules and
Regulations; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to you that the Prospectus contains such information
and has been filed with the Commission within the time period prescribed; it
will notify you promptly of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information; promptly upon your request, it will prepare and file
with the Commission any amendments or supplements to the Registration
Statement or Prospectus which, in the opinion of counsel for the several
Underwriters ("Underwriters' Counsel"), may be necessary or advisable in
connection with the distribution of the Shares by the Underwriters; it will
promptly prepare and file with the Commission, and promptly notify you of the
filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if,
at any time when a prospectus relating to the Shares is required to be
delivered under the Act, any event shall have occurred as a result of which
the Prospectus or any other prospectus relating to the Shares as then in
effect would include any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in case any
Underwriter is required to deliver a prospectus nine (9) months or more after
the effective date of the Registration Statement in connection with the sale
of the Shares, it will prepare promptly upon request, but at the expense of
such Underwriter, such amendment or amendments to the Registration Statement
and such prospectus or prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Act; and it will file no
amendment or supplement to the Registration Statement or Prospectus which
shall not previously have been submitted to you a reasonable time prior to
the proposed filing thereof or to which you shall reasonably object in
writing, subject, however, to compliance with the Act and the Rules and
Regulations and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of
the initiation or threat of any proceeding for that purpose; and it will
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order
should be issued.
(c) The Company will use its best efforts (including by
providing full cooperation with your counsel, whose services in this matter
are required and which you and the Company will seek to expedite) to qualify
the Shares for offering and sale under the securities laws of such
jurisdictions as you may designate and to continue such qualifications in
effect for so long as may be required for purposes of the distribution of the
Shares, except that the Company shall not be required in connection therewith
or as a condition thereof to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction in which it is not
otherwise required to be so qualified or to so execute a general consent to
service of process. In each jurisdiction in which the Shares shall have been
qualified as above provided, the Company will make and file such
-14-
statements and reports in each year as are or may be required by the laws of
such jurisdiction for such purpose.
(d) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term
sheet under Rule 434, in no event later than the first full business day
following the first day that Shares are traded, copies of the Registration
Statement (two of which will be signed and which will include all exhibits),
each Preliminary Prospectus, the Prospectus and any amendments or supplements
to such documents, including any prospectus prepared to permit compliance
with Section 10(a)(3) of the Act, all in such quantities as you may from time
to time reasonably request. Notwithstanding the foregoing, if the
Representatives, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall
provide to you copies of a Preliminary Prospectus updated in all respects
through the date specified by you in such quantities as you may from time to
time reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement, an earnings statement (which will be in reasonable
detail but need not be audited) complying with the provisions of Section
11(a) of the Act and covering a twelve (12) month period beginning after the
effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof,
the Company will furnish to its stockholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and, upon request by a
stockholder, unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will furnish to you and the other
several Underwriters hereunder, upon request (i) concurrently with furnishing
such reports to its stockholders, statements of operations of the Company for
each of the first three (3) quarters in the form furnished to the Company's
stockholders, (ii) concurrently with furnishing to its stockholders, a
balance sheet of the Company as of the end of such fiscal year, together with
statements of operations, of stockholders' equity, and of cash flows of the
Company for such fiscal year, accompanied by a copy of the certificate or
report thereon of independent certified public accountants, (iii) as soon as
they are available, copies of all reports (financial or other) mailed to
stockholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any
securities exchange or the NASD, (v) every material press release and every
material news item or article in respect of the Company or its affairs which
was generally released to stockholders or prepared by the Company, and (vi)
any additional information of a public nature concerning the Company, or its
business which you may reasonably request. During such five (5) year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts
of the Company and such subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
-15-
(g) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(i) If at any time during the ninety (90) day period after
the Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, forthwith prepare, consult with you concerning the substance of
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication
or event.
(j) During the Lock-up Period, the Company will not, without
the prior written consent of the Representatives, effect the Disposition of,
directly or indirectly, any Securities other than the sale of the Firm Shares
and the Option Shares hereunder and the Company's issuance of options or
Common Stock under the Company's presently authorized stock option and stock
purchase plans described in the Registration Statement and the Prospectus.
(k) The Company shall reimburse and pay to the
Representatives a nonaccountable expense allowance equal to $150,000.
5. EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and
exhibits), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky Survey
and any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and
Power of Attorney, and any instruments related to any of the foregoing; the
issuance and delivery of the Shares hereunder to the several Underwriters,
including transfer taxes, if any, the cost of all certificates representing
the Shares and transfer agents' and registrars' fees; the fees and
disbursements of counsel for the Company; all fees and other charges of the
Company's independent certified public accountants; the cost of furnishing to
the several Underwriters copies of the Registration Statement (including
appropriate exhibits), Preliminary Prospectus and the Prospectus, and any
amendments or supplements to any of the foregoing; NASD filing fees and the
cost of qualifying the Shares under the laws of such jurisdictions
-16-
as you may designate (including filing fees and fees and disbursements of
Underwriters' Counsel in connection with such NASD filings and Blue Sky
qualifications); and all other expenses directly incurred by the Company in
connection with the performance of its obligations hereunder. The provisions
of this Section 5(a)(i) are intended to relieve the Underwriters from the
payment of the expenses and costs which the Company hereby agrees to pay.
(ii) In addition to its other obligations under
Section 8(a) hereof, the Company agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(a) hereof, it will reimburse the Underwriters on a
monthly 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 obligation to reimburse the Underwriters 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 Underwriters
shall promptly return such payment to the Company 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) listed
from time to time in THE WALL STREET JOURNAL which represents the base rate
on corporate loans posted by a substantial majority of the nation's thirty
(30) largest banks (the "Prime Rate"). Any such interim reimbursement
payments which are not made to the Underwriters within thirty (30) days of a
request for reimbursement shall bear interest at the Prime Rate from the date
of such request.
(b) In addition to their other obligations under Section 8(b)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(b) hereof, they will reimburse the
Company on a monthly 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 Underwriters' obligation to reimburse the Company 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 shall
promptly return such payment to the Underwriters 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.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(a)(ii) and 5(b) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the basis
on which such amounts shall be apportioned among the reimbursing parties,
shall be settled by arbitration conducted pursuant to the Code of Arbitration
Procedure of the NASD. Any such
-17-
arbitration must be commenced by service of a written demand for arbitration
or a 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.
Any such arbitration will be limited to the operation of the interim
reimbursement provisions contained in Sections 5(a)(ii) and 5(b) hereof and
will not resolve the ultimate propriety or enforceability of the obligation
to indemnify for expenses which is created by the provisions of Sections 8(a)
and 8(b) hereof or the obligation to contribute to expenses which is created
by the provisions of Section 8(d) hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date
and any later date on which Option Shares are to be purchased, as the case
may be, of the representations and warranties of the Company herein, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective
not later than 2:00 P.M., Pacific standard time, on the date following the
date of this Agreement, or such later date and time as shall be consented to
in writing by you; 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 any Underwriter, threatened
by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the satisfaction of
Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and such counsel shall have been furnished with such papers and information
as they may reasonably have requested to enable them to pass upon the matters
referred to in this Section.
(c) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, or any later date on which Option
Shares are to be purchased, as the case may be, there shall not have been any
change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment, impracticable
or inadvisable to proceed with the public offering of the Shares as
contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be,
the following opinion of counsel for the Company dated the Closing Date or
such later date on which Option Shares are to be purchased
-18-
addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
Delaware;
(ii) The Company has the corporate power and authority
to own, lease and operate its properties and to conduct its business
as described in the Prospectus;
(iii) The Company is duly qualified to do business
as a foreign corporation and is in good standing in the State of
California. The Company is not required to be qualified to do
business as a foreign corporation in any other jurisdiction. To such
counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity other than
ISS-Nagano, GmbH;
(iv) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under the
caption "Capitalization" as of the dates stated therein, the issued
and outstanding shares of capital stock of the Company have been duly
and validly issued and are fully paid and nonassessable, and will not
have been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other
similar right and all offers and sales of the Company's capital stock
were at all relevant times exempt from the registration or
qualification requirements of the Act;
(v) The Firm Shares or the Option Shares, as the case
may be, to be issued by the Company pursuant to the terms of this
Agreement have been duly authorized and, upon issuance and delivery
against payment therefor in accordance with the terms hereof, will be
duly and validly issued and fully paid and nonassessable and will not
have been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other
similar right contained in the Company's charter or bylaws or in any
other agreement or contract to which the Company is a party; and the
forms of certificates evidencing the Common Stock comply with Delaware
law;
(vi) The Company has the corporate power and authority
to enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it hereunder;
(vii) This Agreement has been duly authorized by
all necessary corporate action on the part of the Company and has been
duly executed and delivered
-19-
by the Company and, assuming due authorization, execution and
delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except insofar as
indemnification provisions may be limited by applicable law and
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(viii) The Registration Statement has become
effective under the Act and, to such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted
or are pending or threatened under the Act;
(ix) The Registration Statement and the Prospectus, and
each amendment or supplement thereto (other than the financial
statements (including supporting schedules), financial data derived
therefrom and other financial and statistical information included
therein as to which such counsel need express no opinion), as of the
effective date of the Registration Statement, complied as to form in
all material respects with the requirements of the Act and the
applicable Rules and Regulations;
(x) The information in the Prospectus under the
captions "Limitations of Directors' Liability and Indemnification,"
"Description of Capital Stock," and "Shares Eligible for Future Sale"
to the extent that it constitutes matters of law or legal conclusions,
has been reviewed by such counsel and is a fair summary of such
matters and conclusions;
(xi) The description in the Registration Statement
and the Prospectus of the charter and bylaws of the Company and of
statutes are accurate and fairly present the information required
to be presented by the Act and the applicable Rules and Regulations;
(xii) To such counsel's knowledge, there are no
agreements, contracts, leases or documents to which the Company or the
Subsidiary is a party of a character required to be described or
referred to in the Registration Statement or Prospectus or to be filed
as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
(xiii) The performance of this Agreement and the
consummation of the transactions herein contemplated (other than
performance of the Company's indemnification obligations hereunder,
concerning which no opinion need be expressed) will not (a) result in
any violation of the charter or bylaws of the Company or (b) result in
a material breach or violation of any of the terms and
-20-
provisions of, or constitute a default under, any material bond,
debenture, note or other evidence of indebtedness, or any material
lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which
the Company or the Subsidiary is a party or by which their
respective properties are bound, or any applicable statute, rule or
regulation generally applicable to transactions of the type
contemplated hereunder or any order, writ or decree known to us of
any court, government or governmental agency or body having
jurisdiction over the Company, the Subsidiary or any of their
respective properties or operations; provided, however, that such
counsel need not express any opinion or belief with respect to
state securities or Blue Sky laws;
(xiv) No consent, approval, authorization or order
of or qualification with any court, government or governmental agency
or body having jurisdiction over the Company or any of its properties
or operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except such as have
been obtained under the Act or such as may be required under state or
other securities or Blue Sky laws in connection with the purchase and
the distribution of the Shares by the Underwriters;
(xv) To such counsel's best knowledge, there are no
legal or governmental proceedings pending or threatened against the
Company or the Subsidiary of a character required to be disclosed in
the Registration Statement or the Prospectus by the Act or the Rules
and Regulations, other than those described therein;
(xvi) Neither the Company nor the Subsidiary is in
violation of their respective charter or bylaws.
(xvii) The Company is not required to register as an
"investment company" under the Investment Company Act of 1940, as
amended.
(xviii) To the best of their knowledge and
information, the Company is in compliance with, and conducts its
respective businesses in conformity with, all applicable laws and
regulations relating to the operation of its business as described in
the Registration Statement, except to the extent that any failure so
to comply or conform would not have a material adverse effect on the
condition (financial or other), earnings, operations, business or
business prospects of the Company.
(xix) Except as set forth in the Registration
Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, holders of securities of the Company have
rights to registration of such shares of Common Stock or other
securities, because
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of the filing of the Registration Statement by the Company (except
such rights as have been waived or otherwise complied with); and
(xx) Except as set forth in the Registration Statement
and the Prospectus, such counsel has no knowledge of any actual or
threatened action, suit, claim or proceeding relating to patents,
patent rights or licenses, trademarks or trademark rights, copyrights,
collaborative research, licenses or royalty arrangements or agreements
or trade secrets, know-how or proprietary techniques or technology,
including, processes and substances, owned by or affecting the
business operations of the Company which are pending or threatened
against the Company or any Subsidiary and which action, suit, claim or
proceeding would have a material adverse effect on the condition
(financial or other), earnings, operations, business or business
prospects of the Company.
In addition, such counsel shall state that such counsel has
acted as outside corporate legal counsel to the Company and participated in
conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the
statements contained in the Registration Statement or the Prospectus, nothing
has come to the attention of such counsel which leads such counsel to believe
that, at the time the Registration Statement became effective and at all
times subsequent thereto up to and on the Closing Date and on any later date
on which Option Shares are to be purchased, the Registration Statement and
any amendment or supplement thereto (other than the financial statements
including supporting schedules, other financial information derived
therefrom and other financial and statistical information included therein,
as to which such counsel need express no opinion) contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
or at the Closing Date or any later date on which the Option Shares are to be
purchased, as the case may be, the Registration Statement, the Prospectus and
any amendment or supplement thereto (except as aforesaid) contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States, the State of
California or the corporate laws of the State of Delaware upon opinions of
local counsel, and as to questions of fact upon representations or
certificates of officers of the Company, and of government officials, in
which case their opinion is to state that they are so relying and that they
have no knowledge of any material misstatement or inaccuracy in any such
opinion, representation or certificate. Copies of any opinion, representation
or certificate so relied upon shall be delivered to you, as Representatives
of the Underwriters, and to Underwriters' Counsel.
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(e) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, an
opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, in form and substance reasonably
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the
Company shall have furnished to such counsel such documents as they may have
requested for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
letter from Ernst & Young LLP, Independent Auditors ("E&Y"), addressed to
the Underwriters, dated the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be (in each case, the "Bring Down
Letter"), confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in a
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more
than five (5) business days prior to the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, (i) confirming,
to the extent true, that the statements and conclusions set forth in the
Original Letter are accurate as of the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, and (ii) setting
forth any revisions and additions to the statements and conclusions set forth
in the Original Letter that are necessary to reflect any changes in the facts
described in the Original Letter since its date, or to reflect the
availability of more recent financial statements, data or information. The
Bring Down Letter shall not disclose any change in the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in
your sole judgment, impracticable or inadvisable to proceed with the public
offering of the Shares as contemplated by the Prospectus. The Original
Letter from E&Y shall be addressed to or for the use of the Underwriters in
form and substance satisfactory to the Underwriters and shall (i) represent,
to the extent true, that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations, (ii) set forth their opinion with respect to
their examination of the balance sheet of the Company as of December 31, 1997
and related statements of operations, stockholders' equity and cash flows for
the twelve (12) months ended Xxxxx 00, 0000, (xxx) state that E&Y has
performed the procedures set out in Statement on Auditing Standards No. 71
("SAS 71") for a review of interim financial information and providing the
report of E&Y as described in SAS 71 on the financial statements for the
three-quarter period ended December 31, 1997 (the "Quarterly Financial
Statements"), (iv) state that in the course of such review, nothing came to
their attention that leads them to believe that any material modifications
need to be made to any of the Quarterly Financial Statements in order for
them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented, (v) state that nothing
came to their attention that caused them to believe that the financial
statements included in the Registration Statement and Prospectus do not
comply as to form in all material respects with the applicable
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accounting requirements of Rule 11-02 of Regulation S-X and that any
adjustments thereto have not been properly applied to the historical amounts
in the compilation of such statements, and (vi) address other matters agreed
upon by E&Y and you. In addition, you shall have received from E&Y a letter
addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's financial statements as of
December 31, 1997, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, signed by the
Chief Executive Officer and Chief Financial Officer of the Company, to the
effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company
in this Agreement are true and correct in all material respects, as if
made on and as of the Closing Date or any later date on which Option
Shares are to be purchased, as the case may be, and the Company has
complied in all material respects with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date or any later date on which Option
Shares are to be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became
effective and at all times subsequent thereto up to the delivery of
such certificate, the Registration Statement and the Prospectus, and
any amendments or supplements thereto, contained all material
information required to be included therein by the Act and the Rules
and Regulations, and in all material respects conformed to the
requirements of the Act and the Rules and Regulations, the
Registration Statement, and any amendment or supplement thereto, did
not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the
Prospectus, and any amendment or supplement thereto, did not and does
not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and,
since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth; and
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(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
there has not been (a) any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company, (b) any transaction that is material to the
Company, except transactions entered into in the ordinary course of
business, (c) any obligation, direct or contingent, that is material
to the Company, incurred by the Company, except obligations incurred
in the ordinary course of business, (d) any change in the capital
stock or outstanding indebtedness of the Company that is material to
the Company or is out of the ordinary course of business of the
Company, (e) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company, or (f) any loss or damage
(whether or not insured) to the property of the Company which has been
sustained or will have been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company.
(h) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company, each stockholder of
the company and each entity that is affiliated with an officer or director of
the Company in writing prior to the date hereof that such person will not,
except as described below, during the Lock-Up Period, effect the Disposition
of any Securities now owned or hereafter acquired by such person or with
respect to which such person has or hereafter acquires the power of
disposition, otherwise than (i) on exercise (on a cash or cashless basis,
whether in a traditional cashless exercise or in a "brokers" cashless
exercise), of Common Stock options or warrants outstanding, it being
understood, however, that the shares of Common Stock received (net of shares
sold by or on behalf of such person in a "brokers" cashless exercise or
shares delivered to the Company in a traditional cashless exercise thereof)
by such person upon exercise thereof shall be subject to the terms of the
Lock-Up Agreement, (ii) on the transfer of shares of Common Stock or
Securities during such person's lifetime by BONA FIDE gift or upon death by
will or intestacy, provided that any transferee agrees to be bound by the
Lock-Up Agreement, and (iii) on the transfer or other disposition of shares
of Common Stock or Securities as a distribution to limited partners or
stockholders of such person, provided that the distributees thereof agree to
be bound by the terms of the Lock-Up Agreement. The foregoing restriction
shall have been expressly agreed to preclude the holder of the Securities
from engaging in any hedging, pledge or other transaction which is designed
to or may reasonably be expected to lead to or result in a Disposition of
Securities during the Lock-Up Period, even if such Securities would be
disposed of by someone other than the such holder. Such prohibited hedging,
pledge or other transactions would include, without limitation, any short
sale (whether or not against the box), any pledge of shares covering an
obligation that matures or could reasonably mature during the Lock-Up Period,
or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from Securities.
Furthermore, such person will have also agreed and consented to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction.
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(i) The Company shall have furnished you a warrant for
the purchase of up to 225,000 shares of Common Stock at an exercise price per
share equal to 120% of the offering price per share of the Shares, in the
form attached hereto as EXHIBIT A.
(j) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company) as to the accuracy of the
representations and warranties of the Company herein, as to the performance
by the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company will furnish you with
such number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants to the several Underwriters, for the
purpose of covering over-allotments in connection with the distribution and
sale of the Firm Shares only, a nontransferable option to purchase up to an
aggregate of 337,500 Option Shares at the purchase price per share for the
Firm Shares set forth in Section 3 hereof. Such option may be exercised by
the Representatives on behalf of the several Underwriters on one (1) or more
occasions in whole or in part during the period of thirty (30) days after the
date on which the Firm Shares are initially offered to the public by giving
written notice (the "Option Notice") to the Company. The number of Option
Shares to be purchased by each Underwriter upon the exercise of such option
shall be the same proportion of the total number of Option Shares to be
purchased by the several Underwriters pursuant to the exercise of such option
as the number of Firm Shares purchased by such Underwriter (set forth in
SCHEDULE A hereto) bears to the total number of Firm Shares purchased by the
several Underwriters (set forth in SCHEDULE A hereto), adjusted by the
Representatives in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to
be purchased by the several Underwriters pursuant to the exercise of the
option granted by this Section 7 shall be made against payment of the
purchase price therefor by the several Underwriters by wire transfer to the
account specified by the Company. Such delivery and payment shall take place
at the offices of Xxxx Xxxx Xxxx & Freidenrich LLP, 000 Xxxxxxxx Xxxxxx, Xxxx
Xxxx, Xxxxxxxxxx 00000, or at such other place as may be agreed upon between
the Representatives and the Company (i) on the Closing Date, if written
notice of the exercise of such option is received by the Company at least two
(2) full business days prior to the Closing Date, or (ii) on a date which
shall not be later than the third (3rd) full business day following the date
the Company receives written notice of the exercise of such
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option, if such notice is received by the Company after the date two (2) full
business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will
be made available to you at such office or such other location including,
without limitation, in San Jose, California, as you may reasonably request
for checking at least one (1) full business day prior to the date of payment
and delivery and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to such
date of payment and delivery. If the Representatives so elect, delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior
to the date of payment and delivery for the Option Shares to be purchased by
such Underwriter or Underwriters. Any such payment by you shall not relieve
any such Underwriter or Underwriters of any of its or their obligations
hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment
and delivery for such Option Shares) to the accuracy of and compliance with
the representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, to the conditions set forth in Section 6 hereof, and
to the condition that all proceedings taken at or prior to the payment date
in connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and
you shall have been furnished with all such documents, certificates and
opinions as you may request in order to evidence the accuracy and
completeness of any of the representations, warranties or statements, the
performance of any of the covenants or agreements of the Company or the
satisfaction of any of the conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD),
under the Act, the Exchange Act or otherwise arising out of or based upon (i)
any breach of any representation, warranty, agreement or covenant of the
Company herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) any
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untrue statement or alleged untrue statement of any material fact contained
in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each Underwriter for any legal
or other expenses reasonably incurred by it in connection with investigating
or defending any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such Preliminary
Prospectus or the Prospectus, or any such amendment or supplement thereto, in
reliance upon, and in conformity with, written information relating to any
Underwriter furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof and, PROVIDED FURTHER,
that the indemnity agreement provided in this Section 8(a) with respect to
any Preliminary Prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any losses, claims, damages, liabilities or
actions based upon any untrue statement or alleged untrue statement of
material fact or omission or alleged omission to state therein a material
fact purchased Shares, if a copy of the Prospectus in which such untrue
statement or alleged untrue statement or omission or alleged omission was
corrected had not been sent or given to such person within the time required
by the Act and the Rules and Regulations, unless such failure is the result
of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages
or liabilities, joint or several, to which the Company may become subject
under the Act or otherwise arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Underwriter herein
contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(b) to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter, directly or through you, specifically for
use in the preparation thereof, and agrees to reimburse the Company for
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any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such loss, claim, damage, liability or
action.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each
director of the Company, and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act. This indemnity agreement
shall be in addition to any liabilities which each Underwriter may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 8 except to the extent that it has
been prejudiced by such omission. In case any such action is brought against
any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it which are different from or
additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of
notice from the indemnifying party to such indemnified party of the
indemnifying party's election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not
be liable for the expenses of more than one separate counsel (together with
appropriate local counsel) approved by the indemnifying party representing
all the indemnified parties under Section 8(a) or 8(b) hereof who are parties
to such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event
shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved
the terms of such settlement; PROVIDED that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnification could have been sought
hereunder by such
-29-
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on all claims that are the
subject matter of such proceeding.
(d) In order to provide for just and equitable contribution
in any action in which a claim for indemnification is made pursuant to this
Section 8 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that this Section 8
provides for indemnification in such case, all the parties hereto shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so
that the Underwriters severally and not jointly are responsible pro rata for
the portion represented by the percentage that the underwriting discount
bears to the public offering price, and the Company is responsible for the
remaining portion, PROVIDED, HOWEVER, that (i) no Underwriter shall be
required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Shares purchased by such Underwriter
exceeds the amount of damages which such Underwriter has otherwise been
required to pay and (ii) no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section 8(d) shall
extend upon the same terms and conditions to, and shall inure to the benefit
of, each person, if any, who controls any Underwriter or the Company within
the meaning of the Act or the Exchange Act and each officer of the Company
who signed the Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel
during the negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 8, and are fully informed
regarding said provisions. They further acknowledge that the provisions of
this Section 8 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure that
adequate disclosure is made in the Registration Statement and Prospectus as
required by the Act and the Exchange Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter within the meaning of the Act or the Exchange
Act, or by or on behalf of the Company, or any of its officers, directors or
controlling persons within the meaning of the Act or the Exchange Act, and
shall survive the delivery of the Shares to the several Underwriters
hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such
Firm Shares in accordance with the terms hereof, and if the aggregate
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number of Firm Shares which such defaulting Underwriter or Underwriters so
agreed but failed to purchase does not exceed 10% of the Firm Shares, the
remaining Underwriters shall be obligated, severally in proportion to their
respective commitments hereunder, to take up and pay for the Firm Shares of
such defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters
agreed but failed to take up and pay for exceeds 10% of the Firm Shares, the
remaining Underwriters shall have the right, but shall not be obligated, to
take up and pay for (in such proportions as may be agreed upon among them)
the Firm Shares which the defaulting Underwriter or Underwriters so agreed
but failed to purchase. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase, the Closing
Date shall be postponed for twenty-four (24) hours to allow the several
Underwriters the privilege of substituting within twenty-four (24) hours
(including non-business hours) another underwriter or underwriters (which may
include any nondefaulting Underwriter) satisfactory to the Company. If no
such underwriter or underwriters shall have been substituted as aforesaid by
such postponed Closing Date, the Closing Date may, at the option of the
Company, be postponed for a further twenty-four (24) hours, if necessary, to
allow the Company the privilege of finding another underwriter or
underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If
it shall be arranged for the remaining Underwriters or substituted
underwriter or underwriters to take up the Firm Shares of the defaulting
Underwriter or Underwriters as provided in this Section 10, (i) the Company
shall have the right to postpone the time of delivery for a period of not
more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement, supplements to
the Prospectus or other such documents which may thereby be made necessary,
and (ii) the respective number of Firm Shares to be purchased by the
remaining Underwriters and substituted underwriter or underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so agreed to
be purchased by the defaulting Underwriter or Underwriters or substitute
another underwriter or underwriters as aforesaid and the Company shall not
find or shall not elect to seek another underwriter or underwriters for such
Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, then, other than as set forth in the
Letter Agreement, the Company shall not be liable to any Underwriter (except
as provided in Sections 5 and 8 hereof) nor shall any Underwriter (other than
an Underwriter who shall have failed, otherwise than for some reason
permitted under this Agreement, to purchase the number of Firm Shares agreed
by such Underwriter to be purchased hereunder, which Underwriter shall remain
liable to the Company and the other Underwriters for damages, if any,
resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
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The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., Pacific standard time, on the first full business day
following the effective date of the Registration Statement, or (ii) the time
of the public offering of any of the Shares by the Underwriters after the
Registration Statement becomes effective. The time of the public offering
shall mean the time of the release by you, for publication, of the first
newspaper advertisement relating to the Shares, or the time at which the
Shares are first generally offered by the Underwriters to the public by
letter, telephone, telegram or telecopy, whichever shall first occur. By
giving notice as set forth in Section 12 before the time this Agreement
becomes effective, you, as Representatives of the several Underwriters, or
the Company, may prevent this Agreement from becoming effective without
liability of any party to any other party, except as provided in Sections
4(i) and 8 hereof.
(b) You, as Representatives of the several Underwriters,
shall have the right to terminate this Agreement by giving notice as
hereinafter specified at any time on or prior to the Closing Date or on or
prior to any later date on which Option Shares are to be purchased, as the
case may be, (i) if the Company shall have failed, refused or been unable to
perform any agreement on its part to be performed, or because any other
condition of the Underwriters' obligations hereunder required to be fulfilled
is not fulfilled, including, without limitation, any change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse, or (ii) if
additional governmental restrictions, not in force and effect on the date
hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq market or in
the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall
have sustained a loss by strike, fire, flood, earthquake, accident or other
calamity of such character as to interfere materially with the conduct of the
business and operations of the Company regardless of whether or not such loss
shall have been insured, or (iv) if there shall have been a material adverse
change in the general political or economic conditions or financial markets
as in your judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency
which, in the opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus. In the event of termination pursuant to subparagraph (i)
above, the Company shall remain obligated to pay costs and expenses pursuant
to Sections 4(i), 5 and 8 hereof. Any termination pursuant to any of
subparagraphs
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(ii) through (v) above shall be without liability of any party to any other
party except as provided in Sections 4(i) and 8 hereof.
If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11, you shall
promptly notify the Company by telephone, telecopy or telegram, in each case
confirmed by letter with a copy to [XXXXXXX X. XXXXX AT XXXX XXXX XXXX &
FRIEDENRICH]. If the Company shall elect to prevent this Agreement from
becoming effective, the Company shall promptly notify you by telephone,
telecopy or telegram, in each case, confirmed by letter with a copy to
Xxxxxxx, Phleger & Xxxxxxxx LLP, 0000 XxxXxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx,
XX 00000-0000 Attention: Xxxxx X. Xxxxxx, Esq.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the
Representatives shall be mailed, delivered, telegraphed (and confirmed by
letter) or telecopied (and confirmed by letter) to Cruttenden Xxxx
Incorporated, 00000 Xxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000,
telecopier number (000) 000-0000, Attention: General Counsel and to
Xxxxxxxxx Summit Securities LLC, Suite 500, 000 Xxxxxx Xxxxxx Xxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, Attention: Xxxxxx X. Xxxxxxx, with a copy
to Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 0000 XxxXxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, XX 00000-0000, Attention: Xxxxx Xxxxxx; and if sent to the Company,
such notice shall be mailed, delivered, telegraphed (and confirmed by letter)
or telecopied (and confirmed by letter) to Integrated Sensor Solutions, Inc.
000 Xxxxx Xxxx Xxxxxxx, Xxx Xxxx, XX 00000, telecopier number (408)
324-1033, Attention: President, with a copy to Xxxx Xxxx Xxxx & Freidenrich
LLP, 000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, XX 00000, Attention: Xxxxxxx X. Xxxxx.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling
persons within the meaning of the Act or the Exchange Act, officers and
directors referred to in Section 8 hereof, any legal or equitable right,
remedy or claim in respect of this Agreement or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors and assigns
and said controlling persons and said officers and directors, and for the
benefit of no other person or entity. No purchaser of any of the Shares from
any Underwriter shall be construed a successor or assign by reason merely of
such purchase.
In all dealings with the Company under this Agreement, you shall
act on behalf of each of the several Underwriters, and the Company shall be
entitled to act and rely upon any statement, request, notice or agreement
made or given by you jointly or by Cruttenden Xxxx Incorporated on behalf of
you.
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14. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
15. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between the Company and the several Underwriters.
Very truly yours,
INTEGRATED SENSOR SOLUTIONS, INC.
By: _______________________________
Its:_______________________________
Accepted as of the date first above written:
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By: CRUTTENDEN XXXX INCORPORATED
By: _______________________________
Authorized Signatory
By: XXXXXXXXX SUMMIT SECURITIES LLC
By: _______________________________
Authorized Signatory
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SCHEDULE A
Number of
Firm Shares
To Be
Underwriters Purchased
------------ -----------
Cruttenden Xxxx Incorporated
Xxxxxxxxx Summit Securities LLC
Total......................... 2,250,000
A-1
