Exhibit 1.1
_______________ Shares
FOUNDRY NETWORKS, INC.
Common Stock
($0.0001 Par Value)
EQUITY UNDERWRITING AGREEMENT
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_______________, 1999
Deutsche Bank Securities Inc.
▇. ▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Inc.
As Representatives of the
Several Underwriters
c/o Deutsche Bank Securities Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Foundry Networks, Inc., a Delaware corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as Representatives (the "Representatives") an aggregate
of __________ shares of the Company's Common Stock, $0.0001 par value (the "Firm
Shares"). The Company also proposes to sell at the Underwriters' option an
aggregate of up to __________ additional shares of the Company's Common Stock
(the "Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares."
Deutsche Bank Securities Inc. ("DBSI") has agreed to reserve a portion of
the Shares to be purchased by it under this Agreement for sale to the Company's
directors, officers, employees and business associates and other parties related
to the Company (collectively, "Participants"), as set forth in the Prospectus
under the heading "Underwriters" (the "Directed Share Program"). The Shares to
be sold by DBSI pursuant to the Directed Share Program are hereinafter referred
to as the "Directed Shares." Any Directed Shares not orally confirmed for
purchase by any
Participants by the end of the business day on which this Agreement is
executed will be offered to the public by the Underwriters as set forth in the
Prospectus.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Underwriters as follows:
(a) A registration statement on Form S-1 (File No. 333-______) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules
and Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by
the Company to you. Such registration statement, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the
Act, herein referred to as the "Registration Statement," which shall be deemed
to include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. "Prospectus" means the form of
prospectus first filed with the Commission pursuant to Rule 424(b). Each
preliminary prospectus included in the Registration Statement prior to the
time it becomes effective is herein referred to as a "Preliminary Prospectus."
Any reference herein to any Prospectus shall be deemed to include any
supplements or amendments thereto, filed with the Commission after the date of
filing of the Prospectus under Rules 424(b) or 430A, and prior to the
termination of the offering of the Shares by the Underwriters.
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. The Company is duly
qualified to transact business in all jurisdictions in which the conduct of
its business requires such qualification. The Company has no subsidiaries and
does not currently own or control, directly or indirectly, any equity interest
in any other corporation, association, or other business entity.
(c) The outstanding shares of Common Stock of the Company (including the
shares issued pursuant to the 3-for-2 stock split of its Common Stock effected
________) have been duly authorized and validly issued and are fully paid and
non-assessable; the Shares to be issued and sold by the Company have been duly
authorized and when issued and paid for as contemplated herein will be validly
issued, fully paid and non-assessable; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue and sale
thereof. Neither the filing of the Registration Statement nor the offering or
sale of the Shares as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock. The shares
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of Common Stock to be issued upon the conversion of the Company's Preferred
Stock and upon the exercise of outstanding warrants to purchase shares of
Common Stock have been duly authorized and, when issued in accordance with
applicable agreements with the Company and the Company's Certificate of
Incorporation, as amended, will be validly issued, fully paid and non-
assessable, and the issuance of such shares will not be subject to any
preemptive or similar rights created by the Company.
(d) The information set forth under the caption "Capitalization" in the
Prospectus is true and correct. All of the Shares conform to the description
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the State of Delaware.
(e) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform to the
requirements of, the Act and the Rules and Regulations. The Registration
Statement and any amendment thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact and do not omit, and will not omit, to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by
or on behalf of any Underwriter through the Representatives, specifically for
use in the preparation thereof.
(f) The financial statements of the Company, together with related notes
and schedules as set forth in the Registration Statement, present fairly the
financial position and the results of operations and cash flows of the
Company, at the indicated dates and for the indicated periods. Such financial
statements and related schedules have been prepared in accordance with
generally accepted principles of accounting, consistently applied throughout
the periods involved, except as disclosed therein, and all adjustments
necessary for a fair presentation of results for such periods have been made.
The summary financial and statistical data included in the Registration
Statement presents fairly the information shown therein and such data has been
compiled on a basis consistent with the financial statements presented therein
and the books and records of the Company.
(g) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement,
are independent public accountants as required by the Act and the Rules and
Regulations.
(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company before any court or
administrative agency or otherwise which, if determined adversely to the
Company, (i) might result in any material
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adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company or might materially
and adversely affect its properties (including intellectual property), assets
or rights or (ii) might prevent consummation of the transactions contemplated
hereby, except as set forth in the Registration.
(i) The Company has good and marketable title to all of the properties and
assets reflected in the financial statements (or as described in the
Registration Statement) hereinabove described, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind which would materially affect the
value thereof or materially interfere with the use made or to be made thereof
by it, except those reflected in such financial statements (or as described in
the Registration Statement) or which are not material in amount. The Company
occupies its leased properties under valid and binding leases conforming in
all material respects to the description thereof set forth in the Registration
Statement.
(j) The Company has filed all Federal, State, local and foreign tax
returns or extensions thereto that have been required to be filed and has paid
all taxes indicated by said returns and all assessments received by the
Company to the extent that such taxes have become due and are not being
contested in good faith and for which an adequate reserve for accrual has been
established in accordance with generally accepted accounting principles. All
tax liabilities have been adequately provided for in the financial statements
of the Company, and the Company does not know of any actual or proposed
additional material tax assessments.
(k) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, (A) there has
not been any material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company, whether or not occurring in the
ordinary course of business, (B) there has not been any material adverse
change in the capital stock or in the long-term debt of the Company, (C) the
Company has not purchased, except repurchases of stock at cost from terminated
employees, any of its outstanding capital stock nor declared, paid or made any
dividend or other distribution on its capital stock of any class or series,
and (D) there has not been any material transaction entered into by the
Company, other than transactions in the ordinary course of business and
changes and transactions described in the Registration Statement, as it may be
amended or supplemented. The Company has no material contingent obligations
that are not disclosed in the Company's financial statements that are included
in the Registration Statement.
(l) The Company is not and with the giving of notice or lapse of time or
both, will not be, in violation of or in default under its Certificate of
Incorporation or Bylaws or under any agreement, lease, contract, indenture or
other instrument or obligation to which it is a party or by which it, or any
of its properties, is bound and which default is of material significance in
respect of the business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company. The execution,
delivery and performance of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is a party or of the Certificate
of Incorporation or Bylaws of the Company or any order, rule or regulation
applicable to the Company of any court or of any
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regulatory body or administrative agency or other governmental body having
jurisdiction over the Company.
(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by
the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the "NASD")
or such additional steps as may be necessary to qualify the Shares for public
offering by the Underwriters under state securities or Blue Sky laws) has been
obtained or made and is in full force and effect.
(n) Neither the Company, nor to the Company's knowledge, any of its
affiliates, has taken or may take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
shares of Common Stock to facilitate the sale or resale of the Shares.
(o) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended (the "1940 Act"); and the rules
and regulations thereunder.
(p) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(q) The Company carries, or is covered by, insurance in such amounts and
covering such risks as is adequate for the conduct of its businesses and the
value of its properties and as is customary for companies engaged in similar
industries.
(r) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension plan" for
which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
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(s) To the Company's knowledge, there are no affiliations or associations
between any member of the NASD and any of the Company's officers, directors
or 5% or greater securityholders, except as set forth in the Registration
Statement.
(t) To the Company's knowledge, the Company has not violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), or any provisions of the
Foreign Corrupt Practices Act, or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate,
would not have a material adverse effect on the business, prospects, financial
condition or results of operation of the Company.
(u) The Company holds all material licenses, certificates and permits from
governmental authorities that are necessary to the conduct of its business.
(v) This Agreement has been duly authorized, executed and delivered by the
Company.
(w) Other than as set forth in the Prospectus, the Company owns or
possesses adequate rights in all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information, proprietary rights or processes
("Intellectual Property") necessary for its business, without any conflict
with or infringement of the interests of others, and has taken all reasonable
steps necessary to secure interests in such Intellectual Property from its
contractors. Except as set forth in the Prospectus, the Company is not aware
of outstanding options, licenses or agreements of any kind relating to the
Intellectual Property of the Company that are required to be described in the
Prospectus, and, except as set forth in the Prospectus, the Company is not a
party to or bound by any options, licenses or agreements with respect to the
Intellectual Property of any other person or entity that are required to be
set forth in the Prospectus. None of the technology employed by the Company
has been obtained or is being used by the Company in violation of any
contractual obligation binding on the Company or any of its officers,
directors, employees or otherwise in violation of the rights of any persons.
Except as disclosed in the Prospectus, the Company has not received any
written or oral communications alleging that the Company has violated,
infringed or conflicted with, or, by conducting its business as set forth in
the Prospectus, would violate, infringe or conflict with any of the
Intellectual Property of any other person or entity. The Company knows of no
material infringement by others of Intellectual Property owned by or licensed
to the Company.
(x) There are no contracts, agreements or understandings between the
Company and any person granting such person (i) the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company, except as disclosed in the Prospectus or (ii) to
require the Company to include such securities with the Shares registered
pursuant to the Registration Statement.
(y) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers
or suppliers of the Company on the other hand, which is required by the Act to
be described in the Registration Statement or the Prospectus which is not so
described.
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(z) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or, to the Company's knowledge,
threatened against the Company before the National Labor Relations Board or
any state or local labor relations board, (ii) strike, labor dispute, slowdown
or stoppage pending or, to the Company's knowledge, threatened against the
Company, or (iii) union representation question existing with respect to the
employees of the Company, except for such actions specified in clause (i),
(ii) or (iii) above which, singly or in the aggregate, would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company. To the best of the Company's knowledge,
no collective bargaining organizing activities are taking place with respect
to the Company.
(aa) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(bb) The Company's preparedness for the Year 2000 has been accurately
described in the Registration Statement and Prospectus. The Company has
inquired of material vendors as to their preparedness for the Year 2000 and
has disclosed in the Registration Statement or Prospectus any issues that the
Company knows of that would result in any material adverse change.
(cc) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
(dd) The Company has not distributed and will not distribute prior to the
later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any preliminary prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(ee) Each officer and director of the Company and each beneficial owner
of 1% or more of the outstanding capital stock of the Company has signed a
letter or letters provided by DBSI ("Lock-up Agreement") stating that such
person will not, for a period commencing as of the date of the Lock-up
Agreement and ending one hundred eighty (180) days after the date (the
"Commencement Date") of the final prospectus relating to the Public Offering
(the "Lock-Up Period"), (A) make any offering, sale, short sale or other
disposition of any shares of Common Stock of the Company or other capital
stock of the Company or other securities convertible, exchangeable or
exercisable for Common Stock or derivative of Common Stock of the Company or
(B) request the registration for the offer or sale of any such shares of
Common Stock, capital stock or securities (or as to which such person has the
right to direct the disposition of), directly or indirectly, without the prior
written consent of DBSI, provided that the foregoing shall not apply to (X)
transfers of shares of Common Stock acquired in the open market after the
Commencement Date, provided that such shares are not acquired through the
Directed Share Program, or (Y) a distribution of shares of Common Stock to the
respective partners of such person or by transfer to any affiliate of such
person, including any trust, or to any other transferee in a private
transaction not requiring registration under the Securities Act of 1933, as
amended, or by any bona fide gift or pledge of such shares of Common Stock,
provided that such
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partner, affiliate, trustee, donee or other transferee and/or lender or
creditor acknowledges in writing that it is bound by the provisions of such
Lock-up Agreement. Furthermore, pursuant to the Lock-up Agreement, such person
has also authorized the Company to cause the Company's transfer agent to note
stop transfer restrictions on the transfer books and records of the Company
with respect to any shares of Common Stock and any securities convertible into
or exercisable or exchangeable for Common Stock for which such person is the
record holder and, in the case of any such shares or securities for which such
person is the beneficial but not the record holder, agrees to cause the record
holder to cause the transfer agent to note stop transfer restrictions on such
books and records with respect to such shares or securities. The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each security holder.
(ff) Each certificate signed by any officer of the Company and delivered
to the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
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(a) On the basis of the representations, warranties and covenants herein
contained, and subject to the conditions herein set forth, the Company agrees
to sell to the Underwriters and each Underwriter agrees, severally and not
jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in
New York Clearing House by Federal (same day) funds against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made through the facilities
of the Depository Trust Company, New York, New York at 10:00 a.m., New York
time, on the third business day after the date of this Agreement or at such
other time and date not later than five business days thereafter as you and
the Company shall agree upon, such time and date being herein referred to as
the "Closing Date." (As used herein, "business day" means a day on which the
New York Stock Exchange is open for trading and on which banks in New York are
open for business and are not permitted by law or executive order to be
closed.)
(c) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of
this Section 2. The option granted hereby may be exercised in whole or in part
by giving written notice (i) at any time before the Closing Date and (ii) only
once thereafter within thirty (30) days after the date of this Agreement, by
you, as Representatives of the several Underwriters, to the Company setting
forth the number of Option Shares as to which the several Underwriters are
exercising the option, the names and denominations in which the Option Shares
are to be registered and the time and date at which such certificates are to
be delivered. The time and date at which certificates for Option Shares are to
be delivered shall be determined by the Representatives but shall not be
earlier than three (3) nor later than ten (10) full business days after the
exercise of such option, nor in any event prior to the Closing Date (such time
and date
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being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the
notice of exercise shall set the Closing Date as the Option Closing Date. The
number of Option Shares to be purchased by each Underwriter shall be in the
same proportion to the total number of Option Shares being purchased as the
number of Firm Shares being purchased by such Underwriter bears to the total
number of Firm Shares, adjusted by you in such manner as to avoid fractional
shares. The option with respect to the Option Shares granted hereunder may be
exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters. You, as Representatives of the several Underwriters, may cancel
such option at any time prior to its expiration by giving written notice of
such cancellation to the Company. To the extent, if any, that the option is
exercised, payment for the Option Shares shall be made on the Option Closing
Date in Federal (same day) funds through the facilities of the Depository
Trust Company in New York, New York drawn to the order of the Company.
3. OFFERING BY THE UNDERWRITERS.
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It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY.
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The Company covenants and agrees with the several Underwriters that:
(a) The Company will (A) use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the Rules
and Regulations is followed, to prepare and timely file with the Commission
under Rule 424(b) of the Rules and Regulations a Prospectus in a form approved
by the Representatives containing information previously omitted at the time
of effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall
not previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(b) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C) of
any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of the
institution of any proceedings for that purpose. The Company will use its best
efforts to prevent the issuance of any such stop
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order preventing or suspending the use of the Prospectus and to obtain as soon
as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representatives in endeavoring to
qualify the Shares for sale under the securities laws of such jurisdictions as
the Representatives may reasonably have designated in writing and will make
such applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so qualified or
required to file such a consent. The Company will, from time to time, prepare
and file such statements, reports, and other documents, as are or may be
required to continue such qualifications in effect for so long a period as the
Representatives may reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representatives such number of copies of
the Registration Statement (including such number of copies of the exhibits
filed therewith that may reasonably be requested), and of all amendments
thereto, as the Representatives may reasonably request.
(e) The Company will comply with the Act and the Rules and Regulations,
and the Exchange Act, and the rules and regulations of the Commission
thereunder, so as to permit the completion of the distribution of the Shares
as contemplated in this Agreement and the Prospectus. If during the period in
which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of the Underwriters, it becomes necessary
to amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, not misleading, or, if it is necessary at any time
to amend or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission an appropriate amendment to
the Registration Statement or supplement to the Prospectus so that the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with the law.
(f) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than fifteen
(15) months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period
of at least twelve (12) consecutive months beginning after the effective date
of the Registration Statement, which earning statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so
made available.
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(g) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim financial statements of the Company
for any period subsequent to the period covered by the most recent financial
statements appearing in the Registration Statement and the Prospectus.
(h) No offering, sale, short sale or other disposition of any shares of
Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of Common
Stock (or agreement for such) will be made for a period of 180 days after the
date of this Agreement, directly or indirectly, by the Company otherwise than
hereunder or with the prior written consent of DBSI except (i) the Company's
issuance of Common Stock upon the exercise of warrants and stock options that
are presently outstanding and described as such in the Prospectus, or any
other issuance of options or Common Stock hereafter under the option or equity
incentive plans described in the Prospectus, provided that no such issuance of
Common Stock results from any acceleration of vesting of any such security and
(ii) the Company's issuance of Common Stock under the employee stock purchase
plan described in the Prospectus.
(i) The Company will use its best efforts to list, subject to notice of
issuance, the Shares on the NASDAQ Stock Market.
(j) Prior to the Closing Date, the Company will provide to counsel for the
Underwriters true, accurate and complete copies of all Lock-up Agreements
presently in effect or effected hereby. The Company will not release any of
its officers, directors or other stockholders from any Lock-up Agreements
currently existing or hereafter effected without the prior written consent of
DBSI.
(k) The Company shall apply the net proceeds of its sale of the Shares
as set forth in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the proceeds received
by the Company from its sale of the Shares in such a manner as would require
the Company to register as an investment company under the 1940 Act.
(m) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar for the Common
Stock.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute the stabilization or manipulation of the price of any
securities of the Company.
5. COSTS AND EXPENSES.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company; the cost
of printing and delivering to, or as requested by, the
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Underwriters copies of the Registration Statement, Preliminary Prospectuses,
the Prospectus, this Agreement, the Underwriters' Invitation Letter, the
Listing Application, the Blue Sky Survey and any supplements or amendments
thereto; the filing fees of the Commission; the filing fees and expenses
(including legal fees and disbursements) incident to securing any required
review by the NASD of the terms of the sale of the Shares; the Listing Fee of
the NASDAQ Stock Market; and the expenses, including the fees and
disbursements of counsel for the Underwriters, incurred in connection with the
qualification of the Shares under State securities or Blue Sky laws. The
Company agrees to pay all costs and expenses of the Underwriters, including
the fees and disbursements of counsel for the Underwriters, incident to the
offer and sale of Directed Shares of the Common Stock by the Underwriters to
employees and persons having business relationships with the Company.
Notwithstanding the foregoing, the Company shall not, however, be required to
pay for the expenses of any of the Underwriters (other than those related to
qualification under NASD regulation and State securities or Blue Sky laws)
except that, if this Agreement shall not be consummated because the conditions
in Section 6 hereof are not satisfied, or because this Agreement is terminated
by the Representatives pursuant to Section 11 hereof, or by reason of any
failure, refusal or inability on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement or to comply with any
of the terms hereof on its part to be performed, unless such failure to
satisfy said condition or to comply with said terms be due to the default or
omission of any Underwriter, then the Company shall reimburse the several
Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with
investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company shall
not in any event be liable to any of the several Underwriters for damages on
account of loss of anticipated profits from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company contained
herein, and to the performance by the Company of its covenants and obligations
hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments thereto
shall have become effective and any and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission and no injunction, restraining order, or order
of any nature by a Federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the issuance of the
Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Venture Law Group, a
Professional Corporation ("VLG"), counsel for the Company dated the Closing
Date or the Option Closing Date, as the
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case may be, addressed to the Underwriters (and stating that it may be relied
upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement; and the
Company has no subsidiaries and does not currently own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity.
(ii) The Company has authorized and outstanding capital
stock as set forth under the caption "Capitalization" in the Prospectus as of
the date and based on the assumptions stated therein; the authorized shares of
the Company's Common Stock have been duly authorized; the outstanding shares
of the Company's Common Stock have been duly authorized and validly issued and
are non-assessable and, to such counsel's knowledge, fully-paid; all of the
authorized capital stock of the Company and all of the Shares conform in all
material respects to the description thereof contained in the Prospectus; the
certificates for the Shares, assuming they are in the form filed with the
Commission, are in due and proper form in all material respects; the shares of
Common Stock, including the Option Shares, if any, to be sold by the Company
pursuant to this Agreement have been duly authorized and will be validly
issued, fully paid and non-assessable when issued and paid for as contemplated
by this Agreement; and, to such counsel's knowledge, no preemptive rights of
stockholders exist with respect to any of the Shares or the issue or sale
thereof.
(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no outstanding
securities of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and, except as described in or contemplated by the Prospectus, to such
counsel's knowledge, there are no outstanding or authorized options, warrants
or rights of any character obligating the Company to issue any shares of its
capital stock or any securities convertible or exchangeable into or evidencing
the right to purchase or subscribe for any shares of such stock; and except as
described in the Prospectus, to the knowledge of such counsel, no holder of
any securities of the Company or any other person has the right, contractual
or otherwise, which has not been satisfied or effectively waived, to cause the
Company to sell or otherwise issue to them, or to permit them to underwrite
the sale of, any of the Shares or the right to have any Common Shares or other
securities of the Company included in the Registration Statement or the right,
as a result of the filing of the Registration Statement, to require
registration under the Act of any shares of Common Stock or other securities
of the Company.
(iv) Based solely upon oral advice of the Staff of the
Commission, the Registration Statement has become effective under the Act and,
to the knowledge of such counsel, no stop order proceedings with respect
thereto have been instituted or are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects
with the requirements of the Act and the applicable rules and regulations
thereunder (except that such counsel need express no opinion as to the
financial statements and related schedules therein).
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(vi) The statements under the captions "Description of
Capital Stock," "Shares Eligible for Future Sale," "Certain Transactions," and
"Management" in the Prospectus and Items 14 and 15 of Part II of the
Registration Statement, insofar as such statements constitute a summary of
documents referred to therein or matters of law, fairly summarize in all
material respects the information called for with respect to such documents
and matters.
(vii) Such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are not so
filed or described as required, and such contracts and documents as are
summarized in the Registration Statement or the Prospectus are fairly
summarized in all material respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company except as set forth in
the Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and, as of the
Closing Date, will not conflict with or result in a breach of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage, deed
of trust or other agreement or instrument filed as an exhibit to the
Registration Statement pursuant to Item 601 of Regulation S-K, to which the
Company is a party or by which the Company may be bound, or under the
Certificate of Incorporation or Bylaws of the Company or, to the knowledge of
such counsel, any order, rule or regulation applicable to the Company of any
court or of any regulatory body or administrative agency or other governmental
body having jurisdiction over the Company.
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative
or other governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by
State securities and Blue Sky laws as to which such counsel need express no
opinion) except such as have been obtained or made.
(xii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, required
to register as an investment company under the 1940 Act.
In rendering such opinion VLG may rely as to matters governed by the laws
of states other than Delaware, California or Federal laws on local counsel in
such jurisdictions, provided that in each case VLG shall state that they believe
that they and the Underwriters are justified in relying on such other counsel.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be,
-14-
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel may exclude from
the scope of its statement the financial statements, the notes and schedules
thereto and the other financial or statistical information in the Prospectus),
and (ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules or statistical information therein). With respect to
such statement, VLG may state that their belief is based upon the procedures
set forth therein, but is without independent check and verification.
(c) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇"), patent counsel for the Company dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the
effect that:
(i) Such counsel represents the Company in certain matters
relating to intellectual property, including patents and trade secrets.
(ii) Such counsel is familiar with the technology used by
the Company in its business and the manner of its use and has read the
portions of the Registration Statement and the Prospectus entitled "Risk
Factors - We may be subject to intellectual property infringement claims that
are costly to defend and could limit out ability to use certain technologies
in the future" and "Business -Intellectual Property" (collectively, the
"Intellectual Property Portion").
(iii) Other than as disclosed in the Prospectus, such counsel
knows of no notification, pending or threatened action, suit, proceeding or
claim by others or governmental authorities that the Company is infringing or
otherwise violating any patents, copyrights, trademarks, trade secrets or
intellectual property not owned or licensed by the Company.
(iv) Nothing has come to the attention of such counsel which
causes such counsel to believe that the information contained in the
statements of the Intellectual Property Portion in (a) the Registration
Statement, or any amendments thereof, contained or contains an untrue
statement of a material fact, or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (b) the Prospectus, or any amendments thereof, contained or
contains an untrue statement of a material fact or omitted or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Representatives shall have received from Pillsbury Madison &
Sutro LLP ("PM&S"), counsel for the Underwriters, an opinion dated the Closing
Date or the Option Closing Date, as the case may be, with respect to the
incorporation of the Company, the validity of the Shares, the Registration
Statement and the Prospectus and such other related matters as it may
reasonably request, and the Company shall have furnished to such counsel such
documents
-15-
as they may reasonably request for the purposes of enabling them to pass upon
such matters. In rendering such opinion PM&S may rely as to all matters
governed other than by the laws of the State of Delaware or Federal laws on
the opinion of counsel referred to in Paragraph (b) of this Section 6. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Prospectus, or any supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and as
of the Closing Date or the Option Closing Date, as the case may be, contained
an untrue statement of a material fact or omitted to state a material fact,
necessary in order to make the statements, in the light of the circumstances
under which they are made, not misleading (except that such counsel need
express no view as to financial statements, schedules and statistical
information therein). With respect to such statement, PM&S may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(e) The Representatives shall have received at or prior to the Closing
Date from PM&S a memorandum or summary, in form and substance satisfactory to
the Representatives, with respect to the qualification for offering and sale
by the Underwriters of the Shares under the State securities or Blue Sky laws
of such jurisdictions as the Representatives may reasonably have designated to
the Company.
(f) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in
form and substance satisfactory to you, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP confirming that
they are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material respects
with the applicable accounting requirements of the Act and the related
published Rules and Regulations; and containing such other statements and
information as is ordinarily included in accountants' "comfort letters" to
Underwriters with respect to the financial statements and certain financial
and statistical information contained in the Registration Statement and
Prospectus.
(g) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case
may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under
the Act and no stop order suspending the effectiveness of the Registrations
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his knowledge, contemplated by the Commission;
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(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or
the Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to
Rules 424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the
Registration Statement were true and correct, and such Registration Statement
and Prospectus did not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
and since the effective date of the Registration Statement, no event has
occurred which should have been set forth in a supplement to or an amendment
of the Prospectus which has not been so set forth in such supplement or
amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company,
whether or not arising in the ordinary course of business.
(h) The Company shall have furnished to the Representatives such further
certificates and documents confirming the representations and warranties,
covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the NASDAQ Stock Market.
(j) The Lock-up Agreements described in Section 4(j) are in full force and
effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and to PM&S, counsel for the
Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
--------------------------------------------
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the
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Closing Date or the Option Closing Date, as the case may be, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.
8. INDEMNIFICATION.
---------------
(a) The Company agrees:
(1) To indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities to which such Underwriter or any such
controlling person may become subject under the Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances under which they were made, or (iii) any alleged act
or failure to act by any Underwriter in connection with, or relating in any
manner to, the Shares or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii)
above (provided, that the Company shall not be liable under this clause
(iii) to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or action
resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence or
willful misconduct); provided, however, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement, or omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by or through the Representatives specifically for
use in the preparation thereof; and provided further that the foregoing
indemnity agreement with respect to any Preliminary Prospectus shall not
inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person at or prior to the written confirmation of the
sale of the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such losses,
claims, damages or liabilities, unless such failure is the result of non-
compliance by the Company with Section 4(d) hereof.
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(2) to reimburse each Underwriter and each such controlling
person upon demand for any legal or other out-of-pocket expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding. In the event
that it is finally judicially determined that the Underwriters were not
entitled to receive payments for legal and other expenses pursuant to this
subparagraph, the Underwriters will promptly return all sums that had been
advanced pursuant hereto together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial lending rate
for borrowers of the highest credit standing) announced from time to time
by Bank of America NT&SA, San Francisco, California (the "Prime Rate").
(3) to indemnify and hold harmless DBSI and each person, if
any, who controls, or is controlled by, DBSI within the meaning of Section
15 of the Act and Section 20 of the Exchange Act (the "DBSI Entities"),
against any losses, claims, damages or liabilities to which such DBSI
Entity or any such controlling person may become subject under the Act or
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto,
distributed to Participants in connection with the Directed Share Program,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading any act or failure to act, (iii) caused by the failure of an
Participant to pay for and accept delivery of Directed Shares that the
Participant agreed to purchase or (iv) any alleged act or failure to act by
any DBSI Entity in connection with, or relating in any manner to, the
Directed Share Program, other than any loss, claim, damage, liability or
action that are finally judicially determined to have resulted from the bad
faith, gross negligence or willful misconduct of the DBSI Entities;
provided, however that the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement, or omission
or alleged omission made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or such amendment or supplement, in reliance
upon and in conformity with written information furnished to the Company by
or through the Representatives specifically for use in the preparation
thereof; and provided further that the foregoing indemnity agreement with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages
or liabilities purchased Shares, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto)
was not sent or given by or on behalf of such Underwriter to such person at
or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have
cured
-19-
the defect giving rise to such losses, claims, damages or liabilities,
unless such failure is the result of non-compliance by the Company with
Section 4(d) hereof.
(4) to reimburse each DBSI Entity upon demand for any legal or
other out-of-pocket expenses reasonably incurred by such DBSI Entity in
connection with investigating or defending any such loss, claim, damage or
liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Directed Shares,
whether or not such DBSI Entity is a party to any action or proceeding. In
the event that it is finally judicially determined that the DBSI Entities
were not entitled to receive payments for legal and other expenses pursuant
to this subparagraph, the DBSI Entities will promptly return all sums that
had been advanced pursuant hereto together with interest, compounded daily,
determined on the basis of the prime rate (or other commercial lending rate
for borrowers of the highest credit standing) announced from time to time
by Bank of America NT&SA, San Francisco, California (the "Prime Rate").
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or any such director, officer, or controlling person may become subject
under the Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, or controlling person in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; provided, however,
that each Underwriter will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability that such Underwriter
may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise
-20-
than on account of the provisions of Section 8(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party and shall
pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred (or within 30 days of presentation) the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under Section 8(a)(1),
(a)(2) or (b) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law then each indemnifying party shall contribute to such amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, (or actions or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total
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underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter, and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless a DBSI Entity under Section 8(a)(3) or
(a)(4) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then the Company
shall contribute to the amount paid or payable by such DBSI Entity as a result
of such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the DBSI Entity on the
other from the offering of the Directed Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then the Company shall contribute to such amount in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the DBSI Entity on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the DBSI Entities on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Directed Shares (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
DBSI Entity in connection therewith. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the DBSI
Entity on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
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The Company and the DBSI Entities agree that it would not be just and
equitable if contributions pursuant to this Section 8(e) were determined by pro
rata allocation (even if the DBSI Entities were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(e). The amount
paid or payable by a DBSI Entity as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(e) shall be deemed to include any legal or other expenses
reasonably incurred by such DBSI Entity in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
subsection (e), (i) no DBSI Entity shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Directed
Shares purchased by such DBSI Entity, and (ii) no DBSI Entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company, you, as Representatives of
the Underwriters, shall use your reasonable efforts to procure within thirty-six
(36) hours thereafter one or more of the other Underwriters, or any others, to
purchase from the Company such amounts as may be agreed upon and upon the terms
set forth herein, the Firm Shares or Option Shares, as the case may be, which
the defaulting Underwriter or Underwriters failed to purchase. If during such
thirty-six (36) hours you, as such Representatives, shall not have procured such
other Underwriters, or any others, to purchase the Firm Shares or Option Shares,
as the case may be, agreed to be purchased by the defaulting
-23-
Underwriter or Underwriters, then (a) if the aggregate number of shares with
respect to which such default shall occur does not exceed 10% of the Firm Shares
or Option Shares, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of Firm
Shares or Option Shares, as the case may be, which they are obligated to
purchase hereunder, to purchase the Firm Shares or Option Shares, as the case
may be, which such defaulting Underwriter or Underwriters failed to purchase, or
(b) if the aggregate number of shares of Firm Shares or Option Shares, as the
case may be, with respect to which such default shall occur exceeds 10% of the
Firm Shares or Option Shares, as the case may be, covered hereby, the Company or
you as the Representatives of the Underwriters will have the right, by written
notice given within the next thirty-six (36)-hour period to the parties to this
Agreement, to terminate this Agreement without liability on the part of the non-
defaulting Underwriters or of the Company except to the extent provided in
Section 8 hereof. In the event of a default by any Underwriter or Underwriters,
as set forth in this Section 9, the Closing Date or Option Closing Date, as the
case may be, may be postponed for such period, not exceeding seven (7) days, as
you, as Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. NOTICES.
-------
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: (a) if to the Underwriters, to Deutsche Bank Securities
Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:_________________;
with a copy to Deutsche Bank Securities Inc., One Bankers Trust Plaza, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel and (b) if
to the Company, to Foundry Networks, Inc. ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President and Chief Executive
Officer.
11. TERMINATION.
-----------
(a) This Agreement may be terminated by you by notice to the Company at
any time prior to the Closing Date if any of the following has occurred: (i)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or any development
involving a prospective material adverse change in or affecting the condition,
financial or otherwise, of the Company or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company, whether or not arising in the ordinary course of
business, (ii) any outbreak or escalation of hostilities or declaration of war
or national emergency or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable or inadvisable to market the Shares or to enforce contracts for
the sale of the Shares, or (iii) suspension of trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree or
other promulgation of any
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statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects or may materially and
adversely affect the business or operations of the Company, (v) declaration of a
banking moratorium by United States or New York State authorities, (vi) any
downgrading, or placement on any watch list for possible downgrading, in the
rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Exchange Act); (vii) the suspension of trading of the Company's common stock
by the NASDAQ Stock Market, the Commission, or any other governmental authority
or (viii) the taking of any action by any governmental body or agency in respect
of its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(b) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
-----------
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
------------------------------------
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. MISCELLANEOUS.
-------------
The reimbursement, indemnification and contribution agreements contained in
this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
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Very truly yours,
FOUNDRY NETWORKS, INC.
By __________________
Name __________________
Title __________________
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
DEUTSCHE BANK SECURITIES INC.
▇. ▇. ▇▇▇▇▇▇ SECURITIES INC.
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇ INC.
As Representatives of the several
Underwriters listed on Schedule I
By: Deutsche Bank Securities Inc.
By:____________________________________
Authorized Officer
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SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------
Deutsche Bank Securities Inc.
▇. ▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Inc.
__________
Total __________
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SCHEDULE II
SCHEDULE OF OPTION SHARES
Maximum Number Percentage of
of Option Shares to Total Number
Name of Seller be Sold of Option Shares
------------------------------ ---------------------- ----------------------
Foundry Networks, Inc. 100%
---------------------- ----------------------
Total 100%
====================== ======================
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