EXHIBIT 1.1
4,000,000 SHARES*
ESS TECHNOLOGY, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_______________, 2002
XXXXXXX & COMPANY, INC.
X. X. XXXXXXX, INC.
X.X. XXXXXXXXX, TOWBIN
SOUNDVIEW TECHNOLOGY CORPORATION
As Representatives of the several Underwriters
c/o Needham & Company, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
ESS Technology, Inc., a California corporation (the "Company"), proposes
to issue and sell 2,500,000 shares (the "Company Firm Shares") of the Company's
Common Stock, no par value per share (the "Common Stock"), and the stockholders
of the Company named in Schedule II hereto (the "Selling Stockholders") propose
to sell an aggregate of 1,500,000 shares (the "Selling Stockholder Firm Shares")
of Common Stock, in each case to you and to the several other Underwriters named
in Schedule I hereto (collectively, the "Underwriters"), for whom you are acting
as representatives (the "Representatives"). The Selling Stockholders have also
agreed to grant to you and the other Underwriters an option (the "Option") to
purchase up to an additional 600,000 shares of Common Stock (the "Option
Shares"), on the terms and for the purposes set forth in Section 1(b). The
Company Firm Shares and the Selling Stockholder Firm Shares are referred to
collectively herein as the "Firm Shares," and the Firm Shares and the Option
Shares are referred to collectively herein as the "Shares."
The Company and each of the Selling Stockholders confirm as follows their
respective agreements with the Representatives and the several other
Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties and agreements of the
Company and the Selling Stockholders herein contained and subject to all the
terms and conditions of this Agreement, (i) the Company agrees to issue and sell
the Company Firm Shares to the several Underwriters, (ii) each Selling
Stockholder, severally and not jointly, agrees to sell to the several
Underwriters the respective number of Selling Stockholder Firm Shares set forth
opposite that Selling Stockholder's name on Schedule II hereto and (iii) each of
the Underwriters, severally and not jointly, agrees to purchase from the Company
and the Selling Stockholders the respective number of Firm Shares set forth
opposite that Underwriter's name in Schedule I hereto, at the purchase price of
$____ for each Firm Share. The number of Firm Shares to be purchased by each
Underwriter from the Company and each Selling
----------
* Plus an option to purchase up to an additional 600,000 shares to cover
over-allotments.
1
Stockholder shall be as nearly as practicable in the same proportion to the
total number of Firm Shares being sold by the Company and each Selling
Stockholder as the number of Firm Shares being purchased by each Underwriter
bears to the total number of Firm Shares to be sold hereunder.
(b) Subject to all the terms and conditions of this Agreement, the Selling
Stockholders grant the Option to the several Underwriters to purchase, severally
and not jointly, up to the maximum number of Option Shares set forth in Schedule
II hereto at the same price per share as the Underwriters shall pay for the Firm
Shares. The Option may be exercised only to cover over-allotments in the sale of
the Firm Shares by the Underwriters and may be exercised in whole or in part at
any time (but not more than once) on or before the 30th day after the date of
this Agreement upon written or telegraphic notice (the "Option Shares Notice")
by the Representatives to the Company and the Selling Stockholders no later than
12:00 noon, New York City time, at least two and no more than five business days
before the date specified for closing in the Option Shares Notice (the "Option
Closing Date"), setting forth the aggregate number of Option Shares to be
purchased and the time and date for such purchase. On the Option Closing Date,
the Selling Stockholders will sell to the Underwriters the number of Option
Shares set forth in the Option Shares Notice, and each Underwriter will purchase
such percentage of the Option Shares as is equal to the percentage of Firm
Shares that such Underwriter is purchasing, as adjusted by the Representatives
in such manner as they deem advisable to avoid fractional shares.
2. Delivery and Payment. Delivery of the Firm Shares shall be made to the
Representatives for the accounts of the Underwriters against payment of the
purchase price by wire transfer or certified check to the order of the Company
for the Company Firm Shares to be sold by it and to Mellon Investor Services, as
custodian for the Selling Stockholders (the "Custodian") for the Firm Shares to
be sold by the Selling Stockholders at the office of Xxxxxxx & Company, Inc.,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m., New York City time, on
the third (or, if the purchase price set forth in Section 1(b) hereof is
determined after 4:30 p.m., Washington D.C. time, the fourth) business day
following the commencement of the offering contemplated by this Agreement, or at
such time on such other date, not later than seven business days after the date
of this Agreement, as may be agreed upon by the Company and the Representatives
(such date is hereinafter referred to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) will take
place at the offices specified above for the Closing Date at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form and shall
be registered in such names and in such denominations as the Representatives
shall request at least two business days prior to the Closing Date or the Option
Closing Date, as the case may be, by written notice to the Company. For the
purpose of expediting the checking and packaging of certificates for the Shares,
the Company agrees to make such certificates available for inspection at least
24 hours prior to the Closing Date or the Option Closing Date, as the case may
be.
The cost of original issue tax stamps and other transfer taxes, if any, in
connection with the issuance and delivery of the Shares to the respective
Underwriters shall be borne by the Company or the Selling Stockholders, as
appropriate. The Company or the Selling Stockholders, as appropriate, will pay
and save each Underwriter and any subsequent holder of the Shares harmless from
any and all liabilities with respect to or resulting from any failure or delay
in paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to such Underwriter of the Shares.
3. Representations and Warranties of the Company. The Company represents,
warrants and covenants to each Underwriter that:
(a) The Company meets the requirements for use of Form S-3 and a
registration statement (Registration No. 333-74980) on Form S-3 relating to the
Shares, including a preliminary prospectus and such amendments to such
registration statement as may have been required to the date of this Agreement,
has been prepared by the Company under the provisions of the Securities Act of
1933, as amended (the "Act"), and the rules and regulations (collectively
referred to as the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and has been filed with the
Commission. The term "preliminary prospectus" as used herein means a preliminary
prospectus, including the documents incorporated by reference therein, as
contemplated by Rule 430 or Rule 430A of the Rules and Regulations included at
any time as part of the registration
2
statement. Copies of such registration statement and amendments and of each
related preliminary prospectus have been delivered to the Representatives. If
such registration statement has not become effective, a further amendment to
such registration statement, including a form of final prospectus, necessary to
permit such registration statement to become effective will be filed promptly by
the Company with the Commission. If such registration statement has become
effective, a final prospectus containing information permitted to be omitted at
the time of effectiveness by Rule 430A of the Rules and Regulations will be
filed promptly by the Company with the Commission in accordance with Rule 424(b)
of the Rules and Regulations. The term "Registration Statement" means the
registration statement as amended at the time it becomes or became effective
(the "Effective Date"), including all documents incorporated by reference
therein, financial statements and all exhibits and schedules thereto and any
information deemed to be included by Rule 430A and includes any registration
statement relating to the offering contemplated by this Agreement and filed
pursuant to Rule 462(b) of the Rules and Regulations. The term "Prospectus"
means the prospectus, including the documents incorporated by reference therein,
as first filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or, if no such filing is required, the form of final prospectus,
including the documents incorporated by reference therein, included in the
Registration Statement at the Effective Date. Any reference herein to the terms
"amend," "amendment" or "supplement" with respect to the Registration Statement,
any preliminary prospectus or the Prospectus shall be deemed to refer to and
include the filing of any document under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the Effective Date, the date of any
preliminary prospectus or the date of the Prospectus, as the case may be, and
deemed to be incorporated therein by reference.
(b) No order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission, and no stop order suspending the
effectiveness of the Registration Statement (including any related registration
statement filed pursuant to Rule 462(b) under the Act) or any post-effective
amendment thereto has been issued, and no proceeding for that purpose has been
initiated or threatened by the Commission. On the Effective Date, the date the
Prospectus is first filed with the Commission pursuant to Rule 424(b) (if
required), during the period through and including the Closing Date and, if
later, the Option Closing Date and when any post-effective amendment to the
Registration Statement becomes effective or any amendment or supplement to the
Prospectus is filed with the Commission, the Registration Statement and the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment or supplement thereto), including the financial
statements included in the Prospectus, did and will comply with all applicable
provisions of the Act, the Exchange Act, the rules and regulations under the
Exchange Act (the "Exchange Act Rules and Regulations"), and the Rules and
Regulations and will contain all statements required to be stated therein in
accordance with the Act, the Exchange Act, the Exchange Act Rules and
Regulations, and the Rules and Regulations. On the Effective Date and when any
post-effective amendment to the Registration Statement becomes effective, no
part of the Registration Statement, the Prospectus or any such amendment or
supplement thereto did or will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading. At the Effective Date, the
date the Prospectus or any amendment or supplement to the Prospectus is filed
with the Commission and at the Closing Date and, if later, the Option Closing
Date, the Prospectus did not and will not contain 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. The foregoing representations and warranties in this Section 3(b) do
not apply to any statements or omissions made in reliance on and in conformity
with information relating to any Underwriter furnished in writing to the Company
by the Representatives specifically for inclusion in the Registration Statement
or Prospectus or any amendment or supplement thereto. The Company acknowledges
that the statements set forth in the first and second paragraphs under the
heading "Underwriting" in the Prospectus constitute the only information
relating to any Underwriter furnished in writing to the Company by the
Representatives specifically for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto.
(c) The documents that are incorporated by reference in the preliminary
prospectus and the Prospectus or from which information is so incorporated by
reference, when they became or become effective or were or are filed with the
Commission, as the case may be, complied or will comply in all material respects
with the requirements of the Act or the Exchange Act, as applicable, and the
Rules and Regulations or the Exchange Act Rules and Regulations, as applicable;
and any documents so filed and incorporated by reference subsequent to the
Effective Date shall, when they are filed with the Commission, comply in all
material respects with the requirements of the Act or the Exchange Act, as
applicable, and the Rules and Regulations or the Exchange Act Rules and
Regulations, as applicable.
3
(d) The Company does not own, and at the Closing Date and, if later, the
Option Closing Date, will not own, directly or indirectly, any shares of stock
or any other equity or long-term debt securities of any corporation or have any
equity interest in any corporation, firm, partnership, joint venture,
association or other entity, other than the subsidiaries listed in Exhibit 21 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000 (the "Subsidiaries"). The Company and each of its Subsidiaries is, and at
the Closing Date and, if later, the Option Closing Date, will be, a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each of its Subsidiaries has, and
at the Closing Date and, if later, the Option Closing Date, will have, full
power and authority to conduct all the activities conducted by it, to own or
lease all the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus. The Company and each
of its Subsidiaries is, and at the Closing Date and, if later, the Option
Closing Date, will be, duly licensed or qualified to do business and in good
standing as a foreign corporation in all jurisdictions in which the nature of
the activities conducted by it or the character of the assets owned or leased by
it makes such license or qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not materially and
adversely affect the Company and its Subsidiaries or its or their business,
properties, business prospects, condition (financial or other) or results of
operations, taken as a whole. All of the outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable, and owned by the Company free and clear of all claims, liens,
charges and encumbrances; there are no securities outstanding that are
convertible into or exercisable or exchangeable for capital stock of any
Subsidiary. The Company and its Subsidiaries are not, and at the Closing Date
and, if later, the Option Closing Date, will not be, engaged in any discussions
or a party to any agreement or understanding, written or oral, regarding the
acquisition of an interest in any corporation, firm, partnership, joint venture,
association or other entity where such discussions, agreements or understandings
would require amendment to the Registration Statement pursuant to applicable
securities laws. Complete and correct copies of the certificate of incorporation
and of the by-laws of the Company and each of its Subsidiaries and all
amendments thereto have been delivered to the Representatives, and no changes
therein will be made subsequent to the date hereof and prior to the Closing Date
or, if later, the Option Closing Date.
(e) All of the outstanding shares of capital stock of the Company
(including the Selling Stockholder Firm Shares and Option Shares to be sold by
the Selling Stockholders under this Agreement) have been duly authorized,
validly issued and are fully paid and nonassessable and were issued in
compliance with all applicable state and federal securities laws; the Company
Firm Shares issued or to be issued by the Company have been duly authorized and
when issued and paid for as contemplated herein will be validly issued, fully
paid and nonassessable; no preemptive or similar rights exist with respect to
any of the Shares or the issue and sale thereof. The description of the capital
stock of the Company in the Registration Statement and the Prospectus is, and at
the Closing Date and, if later, the Option Closing Date, will be, complete and
accurate in all respects. Except as set forth in the Prospectus, the Company
does not have outstanding, and at the Closing Date and, if later, the Option
Closing Date, will not have outstanding, any options to purchase, or any rights
or warrants to subscribe for, or any securities or obligations convertible into,
or any contracts or commitments to issue or sell, any shares of capital stock,
or any such warrants, convertible securities or obligations. No further approval
or authority of stockholders or the Board of Directors of the Company will be
required for the transfer and sale of the Selling Stockholder Firm Shares or the
Option Shares or the issuance and sale of the Company Firm Shares as
contemplated herein.
(f) The financial statements and schedules included or incorporated by
reference in the Registration Statement or the Prospectus present fairly the
financial condition of the Company and its consolidated Subsidiaries as of the
respective dates thereof and the results of operations and cash flows of the
Company and its consolidated Subsidiaries for the respective periods covered
thereby, all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the entire period involved, except as otherwise
disclosed in the Prospectus. No other financial statements or schedules of the
Company are required by the Act, the Exchange Act, the Exchange Act Rules and
Regulations or the Rules and Regulations to be included in the Registration
Statement or the Prospectus. PricewaterhouseCoopers LLP (the "Accountants"), who
have reported on such financial statements and schedules, are independent
accountants with respect to the Company as required by the Act and the Rules and
Regulations. The 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 in the Registration Statement.
4
(g) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus and prior to the Closing Date and,
if later, the Option Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) there has not been and will not
have been any change in the capitalization of the Company (other than in
connection with the exercise of options to purchase the Company's Common Stock
granted pursuant to the Company's stock option plans from the shares reserved
therefor as described in the Registration Statement), or any material adverse
change in the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company or any of its Subsidiaries,
arising for any reason whatsoever, (ii) neither the Company nor any of its
Subsidiaries has incurred nor will any of them incur, except in the ordinary
course of business as described in the Prospectus, any material liabilities or
obligations, direct or contingent, nor has the Company or any of its
Subsidiaries entered into nor will it enter into, except in the ordinary course
of business as described in the Prospectus, any material transactions other than
pursuant to this Agreement and the transactions referred to herein and (iii) the
Company has not and will not have paid or declared any dividends or other
distributions of any kind on any class of its capital stock.
(h) The Company is not, will not become as a result of the transactions
contemplated hereby, and will not conduct its business in a manner that would
cause it to become, an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended.
(i) Except as set forth in the Registration Statement and the Prospectus,
there are no actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company, or any of its Subsidiaries
or any of its or their officers in their capacity as such, nor any basis
therefor, before or by any Federal or state court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, wherein
an unfavorable ruling, decision or finding might materially and adversely affect
the Company, any of its Subsidiaries or the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company or any of its Subsidiaries.
(j) The Company and each Subsidiary has, and at the Closing Date and, if
later, the Option Closing Date, will have, performed all the obligations
required to be performed by it, and is not, and at the Closing Date, and, if
later, the Option Closing Date, will not be, in default, under any contract or
other instrument to which it is a party or by which its property is bound or
affected, which default might reasonably be expected to materially and adversely
affect the Company or the business, properties, business prospects, condition
(financial or other) or results of operations of the Company or any of its
Subsidiaries. To the best knowledge of the Company, no other party under any
contract or other instrument to which it or any of its Subsidiaries is a party
is in default in any respect thereunder, which default might reasonably be
expected to materially and adversely affect the Company, any of its Subsidiaries
or the business, properties, business prospects, condition (financial or other)
or results of operations of the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries is, and at the Closing Date and, if later,
the Option Closing Date, will be, in violation of any provision of its
certificate or articles of organization or by-laws or other organizational
documents.
(k) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required for the
consummation by the Company of the transactions on its part contemplated herein,
except such as have been obtained under the Act or the Rules and Regulations and
such as may be required under state securities or Blue Sky laws or the by-laws
and rules of the National Association of Securities Dealers, Inc. (the "NASD")
in connection with the purchase and distribution by the Underwriters of the
Shares.
(l) The Company has full corporate power and authority to enter into this
Agreement. This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with the terms hereof. The
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to the
terms or provisions of, or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or give any party a right to
terminate any of its obligations under, or result in the acceleration of any
obligation under, the certificate or articles of incorporation or by-laws of the
Company or any of its Subsidiaries, any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or instrument to
which the Company or any of its
5
Subsidiaries is a party or by which the Company, any of its Subsidiaries or any
of its or their properties is bound or affected, or violate or conflict with any
judgment, ruling, decree, order, statute, rule or regulation of any court or
other governmental agency or body applicable to the business or properties of
the Company or any of its Subsidiaries.
(m) The Company and its Subsidiaries have good and marketable title to all
properties and assets described in the Prospectus as owned by them, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
described in the Prospectus or are not material to the business of the Company
or its Subsidiaries. The Company and its Subsidiaries have valid, subsisting and
enforceable leases for the properties described in the Prospectus as leased by
them. The Company and its Subsidiaries own or lease all such properties as are
necessary to their operations as now conducted or as proposed to be conducted,
except where the failure to so own or lease would not materially and adversely
affect the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company or its Subsidiaries.
(n) There is no document, contract, permit or instrument of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement which is not described or
filed as required. All such contracts to which the Company or any of its
Subsidiaries is a party have been duly authorized, executed and delivered by the
Company or such Subsidiary, constitute valid and binding agreements of the
Company or such Subsidiary and are enforceable against and by the Company or
such Subsidiary in accordance with the terms thereof.
(o) No statement, representation, warranty or covenant made by the Company
in this Agreement or made in any certificate or document required by Section 6
of this Agreement to be delivered to the Representatives was or will be, when
made, inaccurate, untrue or incorrect.
(p) The Company has not distributed and will not distribute prior to the
later of (i) the Closing Date or, if later, the Option Closing Date, 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. Neither the Company nor any of its directors,
officers or controlling persons has taken, directly or indirectly, any action
designed, or which might reasonably be expected, to cause or result, under the
Act or otherwise, in, or which has constituted, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Shares.
(q) No holder of securities of the Company has rights to the registration
of any securities of the Company because of the filing of the Registration
Statement, which rights have not been waived by the holder thereof as of the
date hereof.
(r) The Company's Common Stock is included on the Nasdaq National Market
("NNM"), and the Shares to be sold by the Company hereunder have been approved
for inclusion, subject to such official notice of issuance of such Shares. The
Shares to be sold by the Selling Stockholders hereunder are included on the NNM.
(s) Except as disclosed in or specifically contemplated by the Prospectus
(i) the Company and its Subsidiaries have sufficient trademarks, trade names,
patents, patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct their businesses as now conducted and to
the Company's knowledge, none of the foregoing intellectual property rights
owned or licensed by the Company is invalid or unenforceable, (ii) the Company
has no knowledge of any infringement by it or any of its Subsidiaries of
trademarks, trade name rights, patents, patent rights, mask work rights,
copyrights, licenses, trade secrets or other similar rights of others, where
such infringement could have a material and adverse effect on the Company, any
of its Subsidiaries or the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company or any of its
Subsidiaries, (iii) the Company is not aware of any infringement,
misappropriation or violation by others of, or conflict by others with rights of
the Company or its Subsidiaries with respect to, any of the foregoing
intellectual property rights, and (iv) there is no claim being made against the
Company or any of its Subsidiaries, or to the best of the Company's knowledge,
any employee of the Company or any of its Subsidiaries, regarding trademark,
trade name, patent, mask work, copyright, license, trade secret or other
infringement which could have a material and adverse effect on the Company, any
of its Subsidiaries or the
6
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company or any of its Subsidiaries.
(t) The Company and each of its Subsidiaries has filed all federal, state,
local and foreign income tax returns which have been required to be filed and
has paid all taxes and assessments received by it to the extent that such taxes
or assessments have become due. Neither the Company nor any of its Subsidiaries
has any tax deficiency which has been or, to the best knowledge of the Company,
might be asserted or threatened against it which could have a material and
adverse effect on the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company or any of its
Subsidiaries, singly or taken as a whole.
(u) The Company or its Subsidiaries owns or possesses all authorizations,
approvals, orders, licenses, registrations, other certificates and permits of
and from all governmental regulatory officials and bodies, necessary to conduct
their respective businesses as contemplated in the Prospectus, except where the
failure to own or possess all such authorizations, approvals, orders, licenses,
registrations, other certificates and permits would not materially and adversely
affect the Company, any of its Subsidiaries or the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company or any of its Subsidiaries. There is no proceeding pending or
threatened (or any basis therefor known to the Company) which may cause any such
authorization, approval, order, license, registration, certificate or permit to
be revoked, withdrawn, cancelled, suspended or not renewed; and the Company and
each of its Subsidiaries is conducting its business in compliance with all laws,
rules and regulations applicable thereto (including, without limitation, all
applicable federal, state and local environmental laws and regulations) except
where such noncompliance would not materially and adversely affect the Company,
any of its Subsidiaries or the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the Company or
any of its Subsidiaries.
(v) The Company and each of its Subsidiaries maintains insurance of the
types and in the amounts generally deemed adequate for its business, including,
but not limited to, insurance covering real and personal property owned or
leased by the Company and its Subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
(w) Neither the Company nor any of its Subsidiaries has nor, to the best
of the Company's knowledge, any of its or their respective employees or agents
at any time during the last five 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 or foreign
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.
(x) The Company and each of its Subsidiaries is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any Subsidiary would have any liability; neither
the Company nor any Subsidiary has incurred or expects to incur liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company or any
Subsidiary would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects, and nothing
has occurred, whether by action or by failure to act, which would cause the loss
of such qualification.
4. Representations, Warranties and Covenants of the Selling Stockholders.
Each Selling Stockholder, severally and not jointly, represents, warrants and
covenants to each Underwriter that:
(a) All consents, approvals, authorizations and orders necessary for the
execution and delivery by such Selling Stockholder of this Agreement and the
Power-of-Attorney and Custody Agreement (hereinafter referred to as a
"Stockholders' Agreement") hereinafter referred to, and for the sale and
delivery of the Selling Stockholder Firm Shares and Selling Stockholder Option
Shares to be sold by such Selling Stockholder hereunder, have been obtained; and
such Selling Stockholder has full right, power and authority to enter into this
Agreement and the
7
Stockholders' Agreement, to make the representations, warranties and agreements
hereunder and thereunder, and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder hereunder.
(b) Certificates in negotiable form representing all of the Selling
Stockholder Firm Shares and Selling Stockholder Option Shares to be sold by such
Selling Stockholder have been placed in custody under the Stockholders'
Agreement, in the form heretofore furnished to you, duly executed and delivered
by such Selling Stockholder to the Custodian, and such Selling Stockholder has
duly executed and delivered a power-of-attorney, in the form heretofore
furnished to you and included in the Stockholders' Agreement (the
"Power-of-Attorney"), appointing Xxxxxx X. Xxxxx and Xxxxx X. Xxxx, or either of
them, as such Selling Stockholder's attorney-in-fact (the "Attorneys-in-Fact")
with authority to execute and deliver this Agreement on behalf of such Selling
Stockholder, to determine (subject to the provisions of the Stockholders'
Agreement) the purchase price to be paid by the Underwriters to the Selling
Stockholders as provided in Section 2 hereof, to authorize the delivery of the
Selling Stockholder Firm Shares and Selling Stockholder Option Shares to be sold
by such Selling Stockholder hereunder and otherwise to act on behalf of such
Selling Stockholder in connection with the transactions contemplated by this
Agreement and the Stockholders' Agreement.
(c) Such Selling Stockholder specifically agrees that the Selling
Stockholder Firm Shares and Selling Stockholder Option Shares represented by the
certificates held in custody for such Selling Stockholder under the
Stockholders' Agreement are for the benefit of and coupled with and subject to
the interests of the Underwriters, the Custodian, the Attorneys-in-Fact, each
other Selling Stockholder and the Company, that the arrangements made by such
Selling Stockholder for such custody, and the appointment by such Selling
Stockholder of the Attorneys-in-Fact by the Power-of-Attorney, are to that
extent irrevocable, and that the obligations of such Selling Stockholder
hereunder shall not be terminated by operation of law, whether by the death,
disability, incapacity, liquidation or dissolution of any Selling Stockholder or
by the occurrence of any other event. If any individual Selling Stockholder or
any executor or trustee for a Selling Stockholder should die or become
incapacitated, or if any Selling Stockholder that is an estate or trust should
be terminated, or if any Selling Stockholder that is a partnership or
corporation should be dissolved, or if any other such event should occur, before
the delivery of the Selling Stockholder Firm Shares or Selling Stockholder
Option Shares hereunder, certificates representing the Selling Stockholder Firm
Shares and Selling Stockholder Option Shares shall be delivered by or on behalf
of the Selling Stockholders in accordance with the terms and conditions of this
Agreement and of the Stockholders' Agreement, and actions taken by the
Attorneys-in-Fact pursuant to the Powers-of-Attorney shall be as valid as if
such death, incapacity, termination, dissolution or other event had not
occurred, regardless of whether or not the Custodian, the Attorneys-in-Fact, or
any of them, shall have received notice of such death, incapacity, termination,
dissolution or other event.
(d) This Agreement and the Stockholders' Agreement have each been duly
authorized, executed and delivered by such Selling Stockholder and each such
document constitutes a valid and binding obligation of such Selling Stockholder,
enforceable in accordance with its terms.
(e) No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with the sale of the Selling Stockholder Firm Shares or Selling
Stockholder Option Shares by such Selling Stockholder or the consummation by
such Selling Stockholder of the transactions on its part contemplated by this
Agreement and the Stockholders' Agreement, except such as have been obtained
under the Act or the Rules and Regulations and such as may be required under
state securities or Blue Sky laws or the by-laws and rules of the NASD in
connection with the purchase and distribution by the Underwriters of the Shares
to be sold by such Selling Stockholder.
(f) The sale of the Selling Stockholder Firm Shares and Selling
Stockholder Option Shares to be sold by such Selling Stockholder hereunder and
the performance by such Selling Stockholder of this Agreement and the
Stockholders' Agreement and the consummation of the transactions contemplated
hereby and thereby will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of such Selling Stockholder
pursuant to the terms or provisions of, or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or give any
party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, any indenture, mortgage, deed of trust,
voting trust agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or instrument to
which such Selling Stockholder is a party or by which such Selling Stockholder
or any of its properties is bound
8
or affected, or violate or conflict with any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or body
applicable to such Selling Stockholder or, if such Selling Stockholder is a
corporation, partnership or other entity, the organizational documents of such
Selling Stockholder.
(g) Such Selling Stockholder has, and at the Closing Date and, if later,
the Option Closing Date, will have, good and marketable title to the Selling
Stockholder Firm Shares and Selling Stockholder Option Shares to be sold by such
Selling Stockholder hereunder, free and clear of all liens, encumbrances,
equities or claims whatsoever; and, upon delivery of such Selling Stockholder
Firm Shares and payment therefor pursuant hereto, good and marketable title to
such Selling Stockholder Firm Shares, free and clear of all liens, encumbrances,
equities or claims whatsoever, will be delivered to the Underwriters.
(h) On the Closing Date or, if later, the Option Closing Date, all stock
transfer or other taxes (other than income taxes) that are required to be paid
in connection with the sale and transfer of the Shares to be sold by such
Selling Stockholder to the several Underwriters hereunder will have been fully
paid or provided for by such Selling Stockholder and all laws imposing such
taxes will have been fully complied with.
(i) Other than as permitted by the Act and the Rules and Regulations, such
Selling Stockholder has not distributed and will not distribute any preliminary
prospectus, the Prospectus or any other offering material in connection with the
offering and sale of the Shares. Such Selling Stockholder has not taken and will
not at any time take, directly or indirectly, any action designed, or which
might reasonably be expected, to cause or result in, or which will constitute,
stabilization of the price of shares of Common Stock to facilitate the sale or
resale of any of the Shares.
(j) All information with respect to such Selling Stockholder contained in
the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto complied or will comply in all material respects
with all applicable requirements of the Act and the Rules and Regulations and
does not and will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(k) Such Selling Stockholder has no knowledge of any material fact or
condition not set forth in the Registration Statement or the Prospectus that has
adversely affected, or may adversely affect, the business, properties, business
prospects, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, and the sale of the Shares proposed to be sold by
such Selling Stockholder is not prompted by any such knowledge.
(l) Such Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in Section 3 hereof are
not true and correct.
(m) In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, such Selling
Stockholder agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof).
(n) Such Selling Stockholder, directly or indirectly, has not entered into
any commitment, transaction or other arrangement, including any prepaid forward
contract, 10b5-1 plan or similar agreement, which transfers or may transfer any
of the legal or beneficial ownership or any of the economic consequences of
ownership of Common Stock of the Company, except as has been previously
disclosed in writing to the Representatives.
9
5. Agreements of the Company and the Selling Stockholders. Each of the
Company and the Selling Stockholders respectively covenants and agrees with the
several Underwriters as follows:
(a) The Company will not, either prior to the Effective Date or thereafter
during such period as the Prospectus is required by law to be delivered in
connection with sales of the Shares by an Underwriter or dealer, file any
amendment or supplement to the Registration Statement or the Prospectus, unless
a copy thereof shall first have been submitted to the Representatives within a
reasonable period of time prior to the filing thereof and the Representatives
shall not have objected thereto in good faith.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective, and will notify the Representatives promptly, and
will confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective, (ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose or the threat thereof, (iv) of the happening of any event
during the period mentioned in the second sentence of Section 5(e) that in the
judgment of the Company makes any statement made in the Registration Statement
or the Prospectus untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in the light of the circumstances in which they are made, not
misleading and (v) of receipt by the Company or any representative or attorney
of the Company of any other communication from the Commission relating to the
Company, the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. If the Company has omitted any information from the
Registration Statement pursuant to Rule 430A of the Rules and Regulations, the
Company will comply with the provisions of and make all requisite filings with
the Commission pursuant to said Rule 430A and notify the Representatives
promptly of all such filings. If the Company elects to rely upon Rule 462(b)
under the Act, the Company shall file a registration statement under Rule 462(b)
with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the time of
filing either pay to the Commission the filing fee for such Rule 462(b)
registration statement or give irrevocable instructions for the payment of such
fee pursuant to the Rules and Regulations.
(c) The Company will furnish to each Representative, without charge, one
signed copy of each of the Registration Statement and of any pre- or
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Representatives, without
charge, for transmittal to each of the other Underwriters, a copy of the
Registration Statement and any pre- or post-effective amendment thereto,
including financial statements and schedules but without exhibits.
(d) The Company will comply with all the provisions of any undertakings
contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to time, the Company
will deliver to each of the Underwriters, without charge, as many copies of the
Prospectus or any amendment or supplement thereto as the Representatives may
reasonably request. The Company consents to the use of the Prospectus or any
amendment or supplement thereto by the several Underwriters and by all dealers
to whom the Shares may be sold, both in connection with the offering or sale of
the Shares and for any period of time thereafter during which the Prospectus is
required by law to be delivered in connection therewith. If during such period
of time any event shall occur which in the judgment of the Company or counsel to
the Underwriters should be set forth in the Prospectus in order to make any
statement therein, in the light of the circumstances under which it was made,
not misleading, or if it is necessary to supplement or amend the Prospectus to
comply with law, the Company will forthwith prepare and duly file with the
Commission an appropriate supplement or amendment thereto, and will deliver to
each of the Underwriters, without charge, such number of copies of such
supplement or amendment to the Prospectus as the Representatives may reasonably
request. The Company will not file any document under the Exchange Act or the
Exchange Act Rules and Regulations before the termination of the offering of the
Shares by the Underwriters, if such document would be deemed to be incorporated
by reference into the Prospectus, that is not approved by the Representatives
after reasonable notice thereof.
10
(f) Prior to any public offering of the Shares, the Company will cooperate
with the Representatives and counsel to the Underwriters in connection with the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives may
request; provided, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not now so subject.
(g) The Company will, so long as required under the Rules and Regulations,
furnish to its stockholders as soon as practicable after the end of each fiscal
year an annual report (including a balance sheet and statements of income,
stockholders' equity and cash flow of the Company and its consolidated
Subsidiaries, if any, certified by independent public accountants) and, as soon
as practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and its Subsidiaries, if any, for such quarter in reasonable detail.
(h) During the period of five years commencing on the Effective Date, the
Company will furnish to the Representatives and each other Underwriter who may
so request copies of such financial statements and other periodic and special
reports as the Company may from time to time distribute generally to the holders
of any class of its capital stock, and will furnish to the Representatives and
each other Underwriter who may so request a copy of each annual or other report
it shall be required to file with the Commission.
(i) The Company will make generally available to holders of its securities
as soon as may be practicable but in no event later than the Availability Date
(as defined below), an earning statement (which need not be audited but shall be
in reasonable detail) covering a period of 12 months commencing after the
Effective Date, which will satisfy the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations). For the purpose of the
preceding sentence, "Availability Date" means the 45th day after the end of the
fourth fiscal quarter following the fiscal quarter that includes such Effective
Date, except that if such fourth fiscal quarter is the last quarter of the
Company's fiscal year, "Availability Date" means the 90th day after the end of
such fourth fiscal quarter.
(j) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company and, unless otherwise
paid by the Company, the Selling Stockholders will pay or reimburse if paid by
the Representatives, in such proportions as they may agree upon themselves, all
costs and expenses incident to the performance of the obligations of the Company
and the Selling Stockholders under this Agreement and in connection with the
transactions contemplated hereby, including but not limited to costs and
expenses of or relating to (i) the preparation, printing and filing of the
Registration Statement and exhibits to it, each preliminary prospectus,
Prospectus and any amendment or supplement to the Registration Statement or
Prospectus, (ii) the preparation and delivery of certificates representing the
Shares, (iii) the printing of this Agreement, the Agreement Among Underwriters,
any Selected Dealer Agreements, any Underwriters' Questionnaires, the
Stockholders' Agreements, any Underwriters' Powers of Attorney, and any
invitation letters to prospective Underwriters, (iv) furnishing (including costs
of shipping and mailing) such copies of the Registration Statement, the
Prospectus and any preliminary prospectus, and all amendments and supplements
thereto, as may be requested for use in connection with the offering and sale of
the Shares by the Underwriters or by dealers to whom Shares may be sold, (v) the
listing of the Shares on the NNM, (vi) any filings required to be made by the
Underwriters with the NASD, and the fees, disbursements and other charges of
counsel for the Underwriters in connection therewith, (vii) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of such jurisdictions designated pursuant to Section 5(f), including the
fees, disbursements and other charges of counsel to the Underwriters in
connection therewith, and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (viii) fees, disbursements and other
charges of counsel to the Company (but not those of counsel for the
Underwriters, except as otherwise provided herein) and (ix) the transfer agent
for the Shares. The Underwriters may deem the Company to be the primary obligor
with respect to all costs, fees and expenses to be paid by the Company and by
the Selling Stockholders. The Selling Stockholders will pay (directly or by
reimbursement) all fees and expenses incident to the performance of their
obligations under this Agreement that are not otherwise specifically provided
for herein, including but not limited to any fees and expenses of counsel for
such Selling Stockholders, any fees and expenses of the Attorneys-in-Fact and
the Custodian, and all expenses and taxes incident to the sale and delivery of
the Shares to be sold by such Selling Stockholders to the Underwriters
hereunder.
11
(k) The Company and the Selling Stockholders will not at any time,
directly or indirectly, take any action designed or which might reasonably be
expected to cause or result in, or which will constitute, stabilization of the
price of the shares of Common Stock to facilitate the sale or resale of any of
the Shares.
(l) The Company will apply the net proceeds from the offering and sale of
the Shares to be sold by the Company in the manner set forth in the Prospectus
under "Use of Proceeds."
(m) During the period beginning from the date hereof and continuing to and
including the date 180 days after the date of the Prospectus, without the prior
written consent of Xxxxxxx & Company, Inc., the Company will not (1) offer,
sell, contract to sell, pledge, grant options, warrants or rights to purchase or
otherwise dispose of any equity securities of the Company or any other
securities convertible into or exchangeable for its Common Stock or other equity
security (other than pursuant to employee stock option plans disclosed in the
Prospectus or pursuant to the conversion of convertible securities or the
exercise of warrants in each case outstanding on the date of this Agreement) or
(2) enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of ownership
of shares of Common Stock, whether any such transaction described in clause (1)
or (2) above is to be settled by delivery of Common Stock or other securities,
in cash or otherwise.
(n) During the period of 180 days after the date of the Prospectus, the
Company will not, without the prior written consent of Xxxxxxx & Company, Inc.,
grant options to purchase shares of Common Stock at a price less than the
initial public offering price. During the period of 180 days after the date of
the Prospectus, the Company will not file with the Commission or cause to become
effective any registration statement relating to any securities of the Company
without the prior written consent of Xxxxxxx & Company, Inc.
(o) The Selling Stockholders will, and the Company will cause certain of
its stockholders designated by the Representatives to, enter into lock-up
agreements with the Representatives to the effect that they will not, without
the prior written consent of Xxxxxxx & Company, Inc., sell, contract to sell or
otherwise dispose of any shares of Common Stock or rights to acquire such shares
according to the terms set forth in Schedule III hereto.
6. Conditions of the Obligations of the Underwriters. The obligations of
each Underwriter hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has become effective
shall be received by the Representatives not later than 5:00 p.m., New York City
time, on the date of this Agreement or at such later date and time as shall be
consented to in writing by the Representatives and all filings required by Rule
424 and Rule 430A of the Rules and Regulations shall have been made. If the
Company has elected to rely upon Rule 462(b), the registration statement filed
under Rule 462(b) shall have become effective by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or threatened by the Commission, (ii) no order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in effect and no proceeding for such purpose shall be pending before or
threatened or contemplated by the Commission or the authorities of any such
jurisdiction, (iii) any request for additional information on the part of the
staff of the Commission or any such authorities shall have been complied with to
the satisfaction of the staff of the Commission or such authorities, (iv) after
the date hereof no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted to
the Representatives and the Representatives do not object thereto in good faith,
and (v) the Representatives shall have received certificates, dated the Closing
Date and, if later, the Option Closing Date and signed by the Chief Executive
Officer and the Chief Financial Officer of the Company (who may, as to
proceedings threatened, rely upon the best of their information and belief), to
the effect of clauses (i), (ii) and (iii) of this paragraph.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change in the general affairs, business, business prospects,
properties, management, condition (financial or otherwise) or results of
operations of the Company or any
12
of its Subsidiaries, whether or not arising from transactions in the ordinary
course of business, in each case other than as described in or contemplated by
the Registration Statement and the Prospectus, and (ii) the Company shall not
have sustained any material loss or interference with its business or properties
from fire, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not described in the Registration
Statement and the Prospectus, if in the judgment of the Representatives any such
development makes it impracticable or inadvisable to consummate the sale and
delivery of the Shares by the Underwriters at the initial public offering price.
(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company, any of its Subsidiaries, or
any of its or their officers or directors in their capacities as such, before or
by any Federal, state or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, in which
litigation or proceeding an unfavorable ruling, decision or finding would, in
the judgment of the Representatives, materially and adversely affect the
business, properties, business prospects, condition (financial or otherwise) or
results of operations of the Company or any of its Subsidiaries.
(e) Each of the representations and warranties of the Company and the
Selling Stockholders contained herein shall be true and correct in all material
respects at the Closing Date and, with respect to the Option Shares, at the
Option Closing Date, and all covenants and agreements contained herein to be
performed on the part of the Company or the Selling Stockholders and all
conditions contained herein to be fulfilled or complied with by the Company or
the Selling Stockholders at or prior to the Closing Date and, with respect to
the Option Shares, at or prior to the Option Closing Date, shall have been duly
performed, fulfilled or complied with.
(f) The Representatives shall have received an opinion, dated the Closing
Date and, with respect to the Option Shares, the Option Closing Date,
satisfactory in form and substance to the Representatives and counsel for the
Underwriters from Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, counsel to the Company and
the Selling Stockholders, with respect to the following matters:
(i) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation; has full corporate power and authority to
conduct all the activities conducted by it, to own or lease all the assets
owed or leased by it and to conduct its business as described in the
Registration Statement and Prospectus; and is duly licensed or qualified
to do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of the activities conducted by it or the
character of the assets owned or leased by it makes such license or
qualification necessary and where the failure to be licensed or qualified
would have a material and adverse effect on the business or financial
condition of the Company.
(ii) All of the outstanding shares of capital stock of the Company
(including the Selling Stockholder Firm Shares and the Selling Stockholder
Option Shares) have been duly authorized, validly issued and are fully
paid and nonassessable, to such counsel's knowledge, were issued pursuant
to exemptions from the registration and qualification requirements of
federal and applicable state securities laws, and were not issued in
violation of or subject to any preemptive or, to such counsel's knowledge,
similar rights;
(iii) The specimen certificate evidencing the Common Stock filed as
an exhibit to the Registration Statement is in due and proper form under
California law, the Shares to be sold by the Company hereunder have been
duly authorized and, when issued and paid for as contemplated by this
Agreement, will be validly issued, fully paid and nonassessable; and no
preemptive or similar rights exist with respect to any of the Shares or
the issue and sale thereof.
(iv) The authorized and outstanding capital stock of the Company is
as set forth in the Registration Statement and the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement or pursuant to
reservations, agreements, employee benefit plans or the exercise of
convertible securities, options or warrants referred to in the
Prospectus). To such counsel's knowledge, except as disclosed in or
specifically contemplated by the Prospectus, there are no outstanding
options, warrants or other rights calling for the
13
issuance of, and no commitments, plans or arrangements to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company. The
description of the capital stock of the Company in the Registration
Statement and the Prospectus conforms in all material respects to the
terms thereof.
(v) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened to which the Company or any of its
Subsidiaries is a party or to which any of their respective properties is
subject that are required to be described in the Registration Statement or
the Prospectus but are not so described.
(vi) No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body is required
for the consummation by the Company of the transactions on its part
contemplated under this Agreement, except such as have been obtained or
made under the Act or the Rules and Regulations and such as may be
required under state securities or Blue Sky laws or the by-laws and rules
of the NASD in connection with the purchase and distribution by the
Underwriters of the Shares.
(vii) The Company has full corporate power and authority to enter
into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company.
(viii)The execution and delivery of this Agreement, the compliance
by the Company with all of the terms hereof and the consummation of the
transactions contemplated hereby does not contravene any provision of
applicable law or the Articles of Incorporation or By-Laws of the Company
or any of its Subsidiaries, and to the best of such counsel's knowledge
will not result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of the Company or any of its
Subsidiaries pursuant to the terms and provisions of, result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, or give any party a right to terminate any of its obligations
under, or result in the acceleration of any obligation under, any
indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument known to
such counsel to which the Company or any of its Subsidiaries is a party or
by which the Company, any of its Subsidiaries, or any of their respective
properties is bound or affected, or violate or conflict with (i) any
judgment, ruling, decree or order known to such counsel or (ii) any
statute, rule or regulation of any court or other governmental agency or
body, applicable to the business or properties of the Company or any of
its Subsidiaries.
(ix) To such counsel's knowledge, there is no document or contract
of a character required to described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
which is not described or filed or incorporated by reference as required,
and each description of such contracts and documents that is contained in
the Registration Statement and Prospectus fairly presents in all material
respects the information required under the Act and the Rules and
Regulations.
(x) The statements under the captions "Risk Factors - We may not be
able to adequately protect our intellectual property rights from
unauthorized use and we may be subject to claims of infringement of
third-party intellectual property rights," "Vialta Spin-Off,"
"Business-Proprietary Technology," "Business-Legal Proceedings," "Certain
Relationships and Related Transactions" and "Principal and Selling
Shareholders" in the Prospectus, insofar as the statements constitute a
summary of documents referred to therein or matters of law, are accurate
summaries and fairly and correctly present, in all material respects, the
information called for with respect to such documents and matters
(provided, however, that such counsel may rely on representations of the
Company and the Selling Stockholders, as appropriate, with respect to the
factual matters contained in such statements, and provided further that
such counsel shall state that nothing has come to the attention of such
counsel which leads them to believe that such representations are not true
and correct in all material respects).
(xi) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended.
14
(xii) The Shares to be sold by the Selling Shareholders are duly
listed on the NNM and the Shares to be sold by the Company have been duly
authorized for listing on the NNM, subject to notice of issuance.
(xiii)To such counsel's knowledge, no holder of securities of the
Company has rights, which have not been waived or satisfied, to require
the register with the Commission shares of Common Stock or other
securities, as part of the offering contemplated hereby.
(xiv) The Registration Statement has become effective under the Act,
and to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or is pending, threatened
or contemplated.
(xv) The Registration Statement and the Prospectus comply as to form
in all material respects with the requirements of the Act and the Rules
and Regulations (other than the financial statements, schedules and other
financial data contained or incorporated by reference in the Registration
Statement or the Prospectus, as to which such counsel need express no
opinion).
(xvi) Such counsel has participated in the preparation of the
Registration Statement and Prospectus and has no reason to believe that,
as of the Effective Date the Registration Statement, or any amendment or
supplement thereto, (other than the financial statements, schedules and
other financial data contained or incorporated by reference 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 that the Prospectus, or any amendment or supplement thereto, as of its
date and the Closing Date and, if later, the Option Closing Date,
contained or contains any untrue statement of a material fact or omitted
or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (other than the financial statements, schedules and other
financial data contained or incorporated by reference therein, as to which
such counsel need express no opinion).
(xvii)The documents incorporated by reference in the Prospectus
(other than the financial statements, schedules and other financial data
contained therein, as to which such counsel need express no opinion), when
they were filed with the Commission, complied as to form in all material
respects with the requirements of the Exchange Act and the Exchange Act
Rules and Regulations.
(xviii) This Agreement and the Stockholders' Agreement have each
been duly executed and delivered by or on behalf of each Selling
Stockholder; the Stockholders' Agreement constitutes a valid and binding
agreement of such Selling Stockholder in accordance with its terms, except
as enforceability may be limited by the application of bankruptcy,
insolvency or other laws affecting creditors' rights generally or by
general principles of equity; the Attorneys-in-Fact and the Custodian have
been duly authorized by such Selling Stockholder to deliver the Shares on
behalf of such Selling Stockholder in accordance with the terms of this
Agreement; and the sale of the Shares to be sold by such Selling
Stockholder hereunder, the performance by such Selling Stockholder of this
Agreement and the Stockholders' Agreement and, to the best of such
counsel's knowledge, the consummation of the transactions contemplated
hereby and thereby will not result in a breach or violation of any of the
terms or provisions of, or constitute a default under, or give any party a
right to terminate any of its obligations under, or result in the
acceleration of any obligation under any indenture, mortgage, deed of
trust, voting trust agreement, loan agreement, bond, debenture, note
agreement or other evidence of indebtedness, lease, contract or other
agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or any of its properties is bound or
affected, or violate or conflict with any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or
body applicable to such Selling Stockholder or, if such Selling
Stockholder is a corporation, partnership or other entity, the
organizational documents of such Selling Stockholder.
(xix) No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body is required
for the consummation by the Selling Stockholders of the transactions on
their part contemplated by this Agreement, except such as have been
obtained or made
15
under the Act or the Rules and Regulations and such as may be required
under state securities or Blue Sky laws or the by-laws and rules of the
NASD in connection with the purchase and distribution by the Underwriters
of the Shares.
(xx) Each Selling Stockholder has full legal right, power and
authority to enter into this Agreement and the Stockholders' Agreement and
to sell, assign, transfer and deliver the Shares to be sold by such
Selling Stockholder hereunder and, upon payment for such Shares and
assuming that the Underwriters are purchasing such Shares in good faith
and without notice of any other adverse claim within the meaning of the
Uniform Commercial Code, the Underwriters will have acquired all rights of
such Selling Stockholder in such Shares free of any adverse claim, any
lien in favor of the Company and any restrictions on transfer imposed by
the Company.
In rendering the opinions in subparagraphs (xix) - (xxi), such counsel may
rely upon opinions of other counsel retained by the Selling Stockholders
reasonably acceptable to the Representatives and as to matters of fact on
certificates of the Selling Stockholders, officers of the Company and
governmental officials and the representations and warranties of the Company and
the Selling Stockholders contained in this Agreement and the Stockholders'
Agreement, provided that the opinion of counsel to the Company and Selling
Stockholders shall state that they are doing so, that they have no reason to
believe that they and the Underwriters are not entitled to rely on such opinions
or certificates and that copies of such opinions or certificates are to be
attached to the opinion.
In rendering such opinion, such counsel may rely upon as to matters of
local law on opinions of counsel satisfactory in form and substance to the
Representatives and counsel for the Underwriters, provided that the opinion of
counsel to the Company and the Selling Stockholders shall state that they are
doing so, that they have no reason to believe that they and the Underwriters are
not entitled to rely on such opinions and that copies of such opinions are to be
attached to the opinion.
(g) The representatives shall have received an opinion, dated the Closing
Date and the Option Closing Date, from Xxxx Xxxxxxx LLP, counsel to the
Underwriters, with respect to the Registration Statement, the Prospectus and
this Agreement, which opinion shall be satisfactory in all respects to the
Representatives.
(h) Concurrently with the execution and delivery of this Agreement, the
Accountants shall have furnished to the Representatives a letter, dated the date
of its delivery, addressed to the Representatives and in form and substance
satisfactory to the Representatives, confirming that they are independent
accountants with respect to the Company and its Subsidiaries as required by the
Act and the Exchange Act and the Rules and Regulations and with respect to
certain financial and other statistical and numerical information contained or
incorporated by reference in the Registration Statement. At the Closing Date
and, as to the Option Shares, the Option Closing Date, the Accountants shall
have furnished to the Representatives a letter, dated the date of its delivery,
which shall confirm, on the basis of a review in accordance with the procedures
set forth in the letter from the Accountants, that nothing has come to their
attention during the period from the date of the letter referred to in the prior
sentence to a date (specified in the letter) not more than three days prior to
the Closing Date and the Option Closing Date, as the case may be, which would
require any change in their letter dated the date hereof if it were required to
be dated and delivered at the Closing Date and the Option Closing Date.
(i) Concurrently with the execution and delivery of this Agreement and at
the Closing Date and, as to the Option Shares, the Option Closing Date, there
shall be furnished to the Representatives a certificate, dated the date of its
delivery, signed by each of the Chief Executive Officer and the Chief Financial
Officer of the Company, in form and substance satisfactory to the
Representatives, to the effect that:
(i) Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus (including any documents filed
under the Exchange Act and deemed to be incorporated by reference into the
Prospectus) and (A) as of the date of such certificate, such documents are
true and correct in all material respects and do not omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not untrue or misleading and (B) in the case of the
certificate delivered at the Closing Date and the Option Closing Date,
since the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Prospectus in order to make the
statements therein not untrue or misleading.
16
(ii) Each of the representations and warranties of the Company
contained in this Agreement were, when originally made, and are, at the
time such certificate is delivered, true and correct.
(iii) Each of the covenants required to be performed by the Company
herein on or prior to the date of such certificate has been duly, timely
and fully performed and each condition herein required to be satisfied or
fulfilled on or prior to the date of such certificate has been duly,
timely and fully satisfied or fulfilled.
(j) Concurrently with the execution and delivery of this Agreement and at
the Closing Date and, as to the Option Shares, the Option Closing Date, there
shall be furnished to the Representatives a certificate, dated the date of its
delivery, signed by the Selling Stockholders (or the Attorneys-in-Fact on their
behalf), in form and substance satisfactory to the Representatives, to the
effect that the representations and warranties of the Selling Stockholders
contained herein are true and correct in all material respects on and as of the
date of such certificate as if made on and as of the date of such certificate,
and each of the covenants and conditions required herein to be performed or
complied with by the Selling Stockholders on or prior to the date of such
certificate has been duly, timely and fully performed or complied with.
(k) On or prior to the Closing Date, the Representatives shall have
received the executed agreements referred to in Section 5(o).
(l) The Shares shall be qualified for sale in such jurisdictions as the
Representatives may reasonably request and each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
or the Option Closing Date.
(m) The Company and the Selling Stockholders shall have furnished to the
Representatives such certificates, in addition to those specifically mentioned
herein, as the Representatives may have reasonably requested as to the accuracy
and completeness at the Closing Date and the Option Closing Date of any
statement in the Registration Statement or the Prospectus, as to the accuracy at
the Closing Date and the Option Closing Date of the representations and
warranties of the Company and the Selling Stockholders herein, as to the
performance by the Company and the Selling Stockholders of its and their
respective obligations hereunder, or as to the fulfillment of the conditions
concurrent and precedent to the obligations hereunder of the Representatives.
7. Indemnification.
(a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter, the directors,
officers, employees and agents of each Underwriter and each person, if any, who
controls each Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any and all losses, claims,
liabilities, expenses and damages (including any and all investigative, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding or any claim asserted), to
which they, or any of them, may become subject under the Act, the Exchange Act
or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based on any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus, the Registration
Statement or the Prospectus or any amendment or supplement to the Registration
Statement or the Prospectus, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading in the light of the circumstances in which
they were made, or arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Company or the Selling
Stockholders contained herein or any failure of the Company or the Selling
Stockholders to perform its or their obligations hereunder or under law in
connection with the transactions contemplated hereby; provided, however, that
(i) the Company and the Selling Stockholders will not be liable to the extent
that such loss, claim, liability, expense or damage arises from the sale of the
Shares in the public offering to any person by an Underwriter that is based on
an untrue statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to such Underwriter
furnished in writing to the Company by the Representatives, on behalf of such
Underwriter, expressly for inclusion in the Registration Statement or the
Prospectus; (ii) the Company and the Selling Stockholders will not be liable to
any Underwriter, the directors, officers, employees or agents of such
Underwriter
17
or any person controlling such Underwriter with respect to any loss, claim,
liability, expense, or damage arising out of or based on any untrue statement or
omission or alleged untrue statement or omission or alleged omission to state a
material fact in the preliminary prospectus which is corrected in the Prospectus
if the person asserting any such loss, claim, liability, charge or damage
purchased Shares from such Underwriter but was not sent or given a copy of the
Prospectus at or prior to the written confirmation of the sale of such Shares to
such person and if copies of the Prospectus were timely delivered to such
Underwriter pursuant to Section 5 hereof; and (iii) the liability of each
Selling Stockholder under this Section 7(a) shall not exceed the product of the
purchase price for each Share set forth in Section 1(a) hereof multiplied by the
number of Shares sold by such Selling Stockholder hereunder. The Company and the
Selling Stockholders acknowledge that the statements set forth in the first and
second paragraphs under the heading "Underwriting" in the Prospectus constitute
the only information relating to any Underwriter furnished in writing to the
Company by the Representatives on behalf of the Underwriters expressly for
inclusion in the Registration Statement, the preliminary prospectus or the
Prospectus. This indemnity agreement will be in addition to any liability that
the Company and the Selling Stockholders might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, and each Selling
Stockholder to the same extent as the foregoing indemnity from the Company and
each Selling Stockholder to each Underwriter, as set forth in Section 7(a), but
only insofar as losses, claims, liabilities, expenses or damages arise out of or
are based on any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to any
Underwriter furnished in writing to the Company by the Representatives, on
behalf of such Underwriter, expressly for use in the Registration Statement or
the Prospectus. The Company and the Selling Stockholders acknowledge that the
statements set forth in the first and second paragraphs under the heading
"Underwriting" in the Prospectus constitute the only information relating to any
Underwriter furnished in writing to the Company by the Representatives on behalf
of the Underwriters expressly for inclusion in the Registration Statement, the
preliminary prospectus or the Prospectus. This indemnity will be in addition to
any liability that each Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be indemnified under
this Section 7 shall, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 7, notify each such
indemnifying party in writing of the commencement of such action, enclosing with
such notice a copy of all papers served, but the omission so to notify such
indemnifying party will not relieve it from any liability that it may have to
any indemnified party under the foregoing provisions of this Section 7 unless,
and only to the extent that, such omission results in the loss of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense, the indemnifying party will not be
liable to the indemnified party for any legal or other expenses except as
provided below and except for the reasonable costs of investigation incurred by
the indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (i) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (ii) the indemnified
party has concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, (iii) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (iv) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as
18
they are incurred. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement (i) includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action and (ii) does not include a statement as to, or an admission of,
fault, culpability or a failure to act by or on behalf of an indemnified party.
An indemnifying party will not be liable for any settlement of any action or
claim effected without its written consent (which consent will not be
unreasonably withheld or delayed).
(d) If the indemnification provided for in this Section 7 is applicable in
accordance with its terms but for any reason is held to be unavailable to or
insufficient to hold harmless an indemnified party under paragraphs (a), (b) and
(c) of this Section 7 in respect of any losses, claims, liabilities, expenses
and damages referred to therein, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company or the Selling Stockholders from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who also may be liable for contribution) by such indemnified
party as a result of such losses, claims, liabilities, expenses and damages in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders, on the one hand, and the
Underwriters, on the other hand. The relative benefits received by the Company
and the Selling Stockholders, on the one hand, and the Underwriters, on the
other hand, shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Stockholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. If, but only if, the allocation provided by
the foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company and the Selling Stockholders, on the one hand, and
the Underwriters, on the other hand, with respect to the statements or omissions
which resulted in such loss, claim, liability, expense or damage, or action in
respect thereof, as well as any other relevant equitable considerations with
respect to such offering. Such relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by
the Company, the Selling Stockholders or the Representatives on behalf of the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this Section 7(d) were to
be determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss claim,
liability, expense or damage, or action in respect thereof, referred to above in
this Section 7(d) shall be deemed to include, for purposes of this Section 7(d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(d), no Underwriter shall be
required to contribute any amount in excess of the underwriting discounts
received by it and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this Section 7(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 7(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against any such party in respect of which a claim for contribution may be made
under this Section 7(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 7(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this Section 7
and the representations and warranties of the Company and the Selling
Stockholders contained in this Agreement shall remain operative and in
19
full force and effect regardless of (i) any investigation made by or on behalf
of the Underwriters, (ii) acceptance of any of the Shares and payment therefor
or (iii) any termination of this Agreement.
8. Reimbursement of Certain Expenses. In addition to its other obligations
under Section 7(a) of this Agreement, the Company hereby agrees to reimburse on
a quarterly basis the Underwriters for all reasonable legal and other expenses
incurred in connection with investigating or defending any claim, action,
investigation, inquiry or other proceeding arising out of or based upon, in
whole or in part, any statement or omission or alleged statement or omission, or
any inaccuracy in the representations and warranties of the Company or the
Selling Stockholder contained herein or failure of the Company or the Selling
Stockholders to perform its or their respective obligations hereunder or under
law, all as described in Section 7(a), notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the obligations under
this Section 8 and the possibility that such payment might later be held to be
improper; provided, however, that, to the extent any such payment is ultimately
held to be improper, the persons receiving such payments shall promptly refund
them.
9. Termination. The obligations of the several Underwriters under this
Agreement may be terminated at any time on or prior to the Closing Date (or,
with respect to the Option Shares, on or prior to the Option Closing Date), by
notice to the Company and the Selling Stockholders from the Representatives,
without liability on the part of any Underwriter to the Company if, prior to
delivery and payment for the Firm Shares or Option Shares, as the case may be,
in the sole judgment of the Representatives, (i) trading in any of the equity
securities of the Company shall have been suspended by the Commission or by The
Nasdaq Stock Market, (ii) trading in securities generally on The Nasdaq Stock
Market shall have been suspended or limited or minimum or maximum prices shall
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall
have been imposed upon trading in securities generally by such exchange, by
order of the Commission or any court or by The Nasdaq Stock Market, (iii) a
general banking moratorium shall have been declared either Federal or New York
authorities or (iv) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
in the United States or any outbreak or material escalation of hostilities or
other calamity or crisis shall have occurred, the effect of which is such as to
make it, in the sole judgment of the Representatives, impracticable or
inadvisable to proceed with completion of the public offering or the delivery of
and payment for the Shares.
If this Agreement is terminated pursuant to Section 10 hereof, neither the
Company nor any Selling Stockholder shall be under any liability to any
Underwriter except as provided in Sections 5(j), 7 and 8 hereof; but, if for any
other reason the purchase of the Shares by the Underwriters is not consummated
or if for any reason the Company shall be unable to perform its obligations
hereunder, the Company and the Selling Stockholders, in addition to any
liability under Sections 5(j), 7 and 8 or otherwise hereunder, will reimburse
the several Underwriters for all out-of-pocket expenses (including the fees,
disbursements and other charges of counsel to the Underwriters) incurred by them
in connection with the offering of the Shares.
10. Substitution of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Firm Shares which it or they have
agreed to purchase hereunder, and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Shares, the other
Underwriters shall be obligated, severally, to purchase the Firm Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase, in the proportions which the number of Firm Shares which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of Firm Shares which all such non-defaulting Underwriters have so agreed
to purchase, or in such other proportions as the Representatives may specify;
provided that in no event shall the maximum number of Firm Shares which any
Underwriter has become obligated to purchase pursuant to Section 1 be increased
pursuant to this Section 10 by more than one-ninth of such number of Firm Shares
without the prior written consent of such Underwriter. In any such case either
the Representatives or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. If any Underwriter or
Underwriters shall fail or refuse to purchase any Firm Shares and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase exceeds one-tenth of the aggregate number of
the Firm Shares and arrangements satisfactory to the Representatives and the
Company for the purchase of such Firm Shares are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the
20
Selling Stockholders for the purchase or sale of any Shares under this
Agreement. Any action taken pursuant to this Section 10 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
11. Miscellaneous. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company or the Selling Stockholders, at the office of
the Company, ESS Technology, Inc., 00000 Xxxxxxx Xxxx., Xxxxxxx, Xxxxxxxxxx
00000, Attention: Chief Financial Officer, with a copy to Xxxxx Xxxx, Esq.,
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, or (b) if to the Underwriters, to the
Representatives at the offices of Xxxxxxx & Company, Inc., 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Corporate Finance Department, with a copy to
Xxxxx X. Xxxxxx, Esq., Xxxx Xxxxxxx LLP. Any such notice shall be effective only
upon receipt. Any notice under such Section 9 or 10 may be made by telecopier or
telephone, but if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company, the Selling Stockholders and the controlling persons,
directors and officers referred to in Section 7, and their respective successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" as used in this
Agreement shall not include a purchaser, as such purchaser, of Shares from any
of the several Underwriters.
Any action required or permitted to be made by the Representatives under
this Agreement may be taken by them jointly or by Xxxxxxx & Company, Inc.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
THE COMPANY AND THE UNDERWRITERS EACH HEREBY WAIVE ANY RIGHT THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
21
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
ESS TECHNOLOGY, INC.
By:
-------------------------------------
Title:
SELLING STOCKHOLDERS
(named in Schedule II hereto)
By:
-------------------------------------
Attorney-in-Fact
Confirmed as of the date first
above mentioned:
XXXXXXX & COMPANY, INC.
X.X. XXXXXXX, INC.
X.X. XXXXXXXXX, TOWBIN
SOUNDVIEW TECHNOLOGY CORPORATION
Acting on behalf of themselves
and as the Representatives of
the other several Underwriters
named in Schedule I hereto.
By: XXXXXXX & COMPANY, INC.
By:
--------------------------------
Title:
22
SCHEDULE I
UNDERWRITERS
NUMBER OF FIRM
SHARES TO BE
UNDERWRITERS PURCHASED
Xxxxxxx & Company, Inc. ...................................
X. X. Xxxxxxx, Inc. ........................................
X.X. Xxxxxxxxx, Towbin......................................
Soundview Technology Corporation............................
---------
Total ............................................... 4,000,000
=========
23
SCHEDULE II
Total Number Total Number of
of Firm Shares Option Shares
to be Sold to be Sold
---------- ----------
ESS Technology, Inc. .................. 2,500,000
[Xxxxx X.X. Xxxx]...................... 1,500,000 600,000
[One or more Chan family trusts].......
--------- -------
TOTALS .......................... 4,000,000 600,000
========= =======
24
SCHEDULE III
FORM OF LOCK-UP AGREEMENT
AND DIRECTORS, OFFICERS AND STOCKHOLDERS
OF THE COMPANY WHO SHALL SIGN SUCH AGREEMENT
The undersigned is a holder of securities of ESS Technology, Inc., a
California corporation (the "Company"), and wishes to facilitate the public
offering of shares of the Common Stock (the "Common Stock") of the Company (the
"Offering"). The undersigned recognizes that such Offering will be of benefit to
the undersigned and may, to the extent set forth in the Offering, be a Selling
Stockholder in the Offering.
In consideration of the foregoing and in order to induce you to act as
underwriters in connection with the Offering, the undersigned hereby agrees that
he, she or it will not, without the prior written approval of Xxxxxxx & Company,
Inc., acting on its own behalf and/or on behalf of other representatives of the
underwriters, (i) directly or indirectly, offer, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, make any short sale,
pledge, or otherwise dispose of, or enter into any hedging transaction that may
result in a transfer of, any shares of Common Stock, options to acquire shares
of Common Stock or securities exchangeable for or convertible into shares of
Common Stock of the Company which he, she or it may own, or (2) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of Common Stock of the Company which he,
she or it may own, whether any such transaction described in clause 1 or 2 above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise, for a period commencing as of the date hereof and ending on the
date which is one hundred eighty (180) days after the date of the final
Prospectus relating to the Offering. The undersigned confirms that he, she or it
understands that the underwriters and the Company will rely upon the
representations set forth in this Agreement in proceeding with the Offering. The
undersigned further confirms that the agreements of the undersigned are
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns. The undersigned agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent
against the transfer of securities held by the undersigned except in compliance
with this Agreement.
This Agreement shall be binding on the undersigned and his, her or its
respective successors, heirs, personal representatives and assigns.
25
