EXHIBIT 1.1
[____________] SHARES(1)
FAROUDJA, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
, 1997
XXXXXXXXX, XXXXXXXX & COMPANY LLC
XXXXX XXXXX XXXXXX & COMPANY
As Representatives of the several Underwriters
c/x Xxxxxxxxx, Xxxxxxxx & Company LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies/Gentlemen:
Faroudja, Inc., a Delaware corporation (the "COMPANY"), and a
stockholder of the Company named in SCHEDULE B hereto (hereinafter called the
"SELLING STOCKHOLDER") address you as the Representatives of each of the
persons, firms and corporations listed in SCHEDULE A hereto (herein
collectively called the "UNDERWRITERS") and hereby confirm their respective
agreements with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
[_________] shares of its authorized and unissued Common Stock, $0.001 par
value per share, to the several Underwriters. The [_________] shares of
Common Stock, $0.001 par value per share, of the Company to be sold by the
Company are hereinafter called the "COMPANY SHARES." The Selling Stockholder
also proposes to grant to the Underwriters an option to purchase up to
[________] additional shares of the Company's Common Stock, $0.001 par value
per share (the "OPTION SHARES"), as provided in Section 7 hereof. As used
in this Agreement, the term "SHARES" shall include the Company Shares and the
Option Shares. All shares of Common Stock, $0.001 par value per share, of
the Company to be outstanding after giving effect to the sales contemplated
hereby, including the Shares, are hereinafter referred to as "COMMON STOCK."
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(1) Plus an option to purchase up to [_________] additional shares from the
Selling Stockholder of the Company to cover over-allotments.
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2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
SELLING STOCKHOLDER.
I. The Company represents and warrants to and agrees with each Underwriter
that:
(a) A registration statement on Form S-1 (File No. 333-32375) with
respect to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "ACT"), and the applicable rules and regulations
(the "RULES AND REGULATIONS") of the Securities and Exchange Commission (the
"COMMISSION") under the Act and has been filed with the Commission; such
amendments to such registration statement, such amended prospectuses subject
to completion and such abbreviated registration statements pursuant to Rule
462(b) of the Rules and Regulations as may have been required prior to the
date hereof have been similarly prepared and filed with the Commission; and
the Company will file such additional amendments to such registration
statement, such amended prospectuses subject to completion and such
abbreviated registration statements as may hereafter be required. Copies of
such registration statement and amendments, of each related prospectus
subject to completion (the "PRELIMINARY PROSPECTUSES"), and of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if Xxxxxxxxx, Xxxxxxxx &
Company LLC, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or
(c), as applicable, of the Rules and Regulations pursuant to subparagraph
(1), (4) or (7) of Rule 424(b) of the Rules and Regulations or as part of a
post-effective amendment to the registration statement (including a final
form of prospectus). If the registration statement relating to the Shares
has not been declared effective under the Act by the Commission, the Company
will prepare and promptly file an amendment to the registration statement,
including a final form of prospectus, or, if Xxxxxxxxx, Xxxxxxxx & Company
LLC, on behalf of the several Underwriters, shall agree to the utilization of
Rule 434 of the Rules and Regulations, the information required to be
included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations. The term "REGISTRATION STATEMENT"
as used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became
or becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files
a term sheet pursuant to Rule 434 of the Rules and Regulations, the
information deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and
Regulations) and, in the event of any amendment thereto or the filing of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations relating thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such
amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "PROSPECTUS" as used in this Agreement
shall mean the prospectus relating to the Shares as included in such
Registration Statement at the time it becomes effective
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(including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the
information deemed to be a part of the Registration Statement at the time it
became effective pursuant to Rule 430A(b) of the Rules and Regulations);
PROVIDED, HOWEVER, that if in reliance on Rule 434 of the Rules and
Regulations and with the consent of Xxxxxxxxx, Xxxxxxxx & Company LLC, on
behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable,
prior to the time that a confirmation is sent or given for purposes of
Section 2(10)(a) of the Act, the term "PROSPECTUS" shall mean the "prospectus
subject to completion" (as defined in Rule 434(g) of the Rules and
Regulations) last provided to the Underwriters by the Company and circulated
by the Underwriters to all prospective purchasers of the Shares (including
the information deemed to be a part of the Registration Statement at the time
it became effective pursuant to Rule 434(d) of the Rules and Regulations).
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of
the Shares that differs from the prospectus referred to in the immediately
preceding sentence (whether or not such revised prospectus is required to be
filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations), the term "PROSPECTUS" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such
use. If in reliance on Rule 434 of the Rules and Regulations and with the
consent of Xxxxxxxxx, Xxxxxxxx & Company LLC, on behalf of the several
Underwriters, the Company shall have provided to the Underwriters a term
sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Act,
the Prospectus and the term sheet, together, will not be materially different
from the prospectus in the Registration Statement.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings
for that purpose, and each such Preliminary Prospectus has conformed in all
material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up
to and on the Closing Date (hereinafter defined) and on any later date on
which Option Shares are to be purchased, (i) the Registration Statement and
the Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act
and the Rules and Regulations and will in all material respects conform to
the requirements of the Act and the Rules and Regulations, (ii) the
Registration Statement, and any amendments or supplements thereto, did not
and will not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that none of the
representations and warranties contained in this subparagraph (b) shall apply
to information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation
thereof.
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(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation with full power and
authority (corporate and other) to own, lease and operate its properties and
conduct its business as described in the Prospectus; the Company owns all of
the outstanding capital stock of its subsidiaries free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest;
each of the Company and its subsidiaries is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction in which
the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or
be in good standing would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise;
no proceeding has been instituted in any such jurisdiction revoking, limiting
or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification; each of the Company and its subsidiaries is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all
of which are valid and in full force and effect; neither the Company nor any
of its subsidiaries is in violation of its respective charter or bylaws or in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material bond, debenture,
note or other evidence of indebtedness, or in any material lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of its subsidiaries or their respective
properties may be bound; and neither the Company nor any of its subsidiaries
is in material violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over the Company or
any of its subsidiaries or over their respective properties of which it has
knowledge. The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than those listed on EXHIBIT
21.1 to the Registration Statement.
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and
is a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may
be limited by applicable law and except as the enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles; the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any bond, debenture, note or other evidence
of indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which it or any
of its subsidiaries or their respective properties may be bound, (ii) the
charter or bylaws of the Company or any of its subsidiaries, or (iii) any
law, order, rule, regulation, writ, injunction, judgment or decree of any
court, government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or over their
respective properties. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties is required for
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the execution and delivery of this Agreement and the consummation by the
Company or any of its subsidiaries of the transactions herein contemplated,
except such as may be required under the Act, the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") or under state or other securities or
Blue Sky laws, all of which requirements have been satisfied in all material
respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company,
any of its subsidiaries or any of their respective officers or any of their
respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over
the Company or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in any material adverse change
in the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise or might materially and adversely affect their properties, assets
or rights, (ii) might prevent consummation of the transactions contemplated
hereby or (iii) is required to be disclosed in the Registration Statement or
Prospectus and is not so disclosed; and there are no agreements, contracts,
leases or documents of the Company or any of its subsidiaries of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement by the
Act or the Rules and Regulations which have not been accurately described in
all material respects in the Registration Statement or Prospectus or filed as
exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company
(including the Option Shares) have been duly authorized and validly issued
and are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, were not issued in violation of or subject
to any preemptive rights or other rights to subscribe for or purchase
securities, and the authorized and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "CAPITALIZATION" and
conforms in all material respects to the statements relating thereto
contained in the Registration Statement and the Prospectus (and such
statements correctly state the substance of the instruments defining the
capitalization of the Company); the Company Shares and the Option Shares have
been duly authorized for issuance and sale to the Underwriters pursuant to
this Agreement and, when issued and delivered by the Company and the Selling
Stockholder against payment therefor in accordance with the terms of this
Agreement, will be duly and validly issued and fully paid and nonassessable,
and will be sold free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; and no preemptive right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Company Shares or the Option
Shares or the issuance and sale thereof other than those that have been
expressly waived prior to the date hereof and those that will automatically
expire upon and will not apply to the consummation of the transactions
contemplated on the Closing Date and any later date on which the Option
Shares are to be purchased. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for
the issuance and sale or transfer of the Shares except as may be required
under the Act, or under state or other securities or Blue Sky laws. All
issued and outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, and were not issued in violation of or subject to any
preemptive right, or other rights to subscribe for or purchase shares and are
owned by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest.
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Except as disclosed in the Prospectus and the financial statements of the
Company, and the related notes thereto, included in the Prospectus, neither
the Company nor any subsidiary has outstanding any options to purchase, or
any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's
stock option, stock bonus and other stock plans or arrangements, and the
options or other rights granted and exercised thereunder, set forth in the
Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
(g) Ernst & Young LLP, which has examined the consolidated
financial statements of the Company, together with the related schedules and
notes, as of December 31, 1995, December 31, 1996 and June 30, 1997 and for
each of the years in the three (3) years ended December 31, 1996 and the six
months ended June 30, 1997 filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are independent
accountants within the meaning of the Act and the Rules and Regulations; the
audited consolidated financial statements of the Company, together with the
related schedules and notes, and the unaudited consolidated financial
information, forming part of the Registration Statement and Prospectus,
fairly present the financial position and the results of operations of the
Company and its subsidiaries at the respective dates and for the respective
periods to which they apply; and all audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, filed with the Commission
as part of the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration Statement
present fairly the information shown therein and have been compiled on a
basis consistent with the audited financial statements presented therein. No
other financial statements or schedules are required to be included in the
Registration Statement.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i)
any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (ii) any transaction that is
material to the Company and its subsidiaries considered as one enterprise,
except transactions entered into in the ordinary course of business, (iii)
any obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or outstanding indebtedness of the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries considered as one enterprise, (v) any dividend or distribution
of any kind declared, paid or made on the capital stock of the Company or any
of its subsidiaries, or (vi) any loss or damage (whether or not insured) to
the property of the Company or any of its subsidiaries which has been
sustained or will have been sustained which has a material adverse effect on
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise.
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(i) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its subsidiaries has good and
marketable title to all properties and assets described in the Registration
Statement and Prospectus as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest, other than such
as would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise, (ii) the
agreements to which the Company or any of its subsidiaries is a party
described in the Registration Statement and Prospectus are valid agreements,
enforceable by the Company and its subsidiaries (as applicable), except as
the enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and, to the
best of the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any of such
agreements, and (iii) each of the Company and its subsidiaries has valid and
enforceable leases for all properties described in the Registration Statement
and Prospectus as leased by it, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. Except as set forth in the Registration
Statement and Prospectus, the Company owns or leases all such properties as
are necessary to its operations as now conducted or as proposed to be
conducted.
(j) The Company and its subsidiaries have timely filed all
necessary federal, state and foreign income and franchise tax returns and
have paid all taxes shown thereon as due, and there is no tax deficiency that
has been or, to the best of the Company's knowledge, might be asserted
against the Company or any of its subsidiaries that might have a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise; and all tax liabilities are
adequately provided for on the books of the Company and its subsidiaries.
(k) The Company and its subsidiaries maintain insurance with
insurers of recognized financial responsibility of the types and in the
amounts generally deemed adequate for their respective businesses and
consistent with insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, insurance covering real and
personal property owned or leased by the Company or 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; neither
the Company nor any such subsidiary has been refused any insurance coverage
sought or applied for; and neither the Company nor any such subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
at a cost that would not materially and adversely affect the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise.
(l) To the best of Company's knowledge, no labor disturbance by
the employees of the Company or any of its subsidiaries exists or is
imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers,
subassemblers, value added resellers, subcontractors, original equipment
manufacturers, authorized dealers or international distributors
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that might be expected to result in a material adverse change in the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise. No collective bargaining agreement exists with any of the
Company's employees and, to the best of the Company's knowledge, no such
agreement is imminent.
(m) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration
Statement and Prospectus; the expiration of any patents, patent rights, trade
secrets, trademarks, service marks, trade names or copyrights would not have
a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise; except as set forth in the
Registration Statement and Prospectus, the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of the Company by others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights; and the Company has not received any notice of, and has
no knowledge of, any infringement of or conflict with asserted rights of
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(n) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
(o) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 ACT"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to
conduct, its affairs in such a manner as to ensure that it will not become an
"INVESTMENT COMPANY" or a company "CONTROLLED" by an "INVESTMENT COMPANY"
within the meaning of the 1940 Act and such rules and regulations.
(p) 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.
(q) Neither the Company nor any of its subsidiaries has at any
time during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar public
or quasi-public duties, other than payments required or permitted by the laws
of the United States or any jurisdiction thereof.
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(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(s) Each officer and director of the Company, the Selling
Stockholder and each beneficial owner of shares of Common Stock has agreed in
writing that such person will not, for a period of 180 days after the date of
the Prospectus (the "LOCK-UP PERIOD"), offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "DISPOSITION") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "SECURITIES")
now owned or hereafter acquired directly by such person or with respect to
which such person has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a
distribution to partners, limited liability company members or stockholders
of such person, provided that the distributees thereof agree in writing to be
bound by the terms of this restriction, or (iii) with the prior written
consent of Xxxxxxxxx, Xxxxxxxx & Company LLC. The foregoing restriction has
been expressly agreed to preclude the holder of the Securities from engaging
in any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a Disposition of Securities during the
Lock-up Period, even if such Securities would be disposed of by someone other
than such holder. Such prohibited hedging or other transactions would
include, without limitation, any short sale (whether or not against the box)
or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from Securities.
Furthermore, each such person has also agreed and consented to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction. The Company has provided to counsel for the Underwriters a
complete and accurate list of all securityholders of the Company and the
number and type of securities held by each securityholder. The Company has
provided to counsel for the Underwriters true, accurate and complete copies
of all of the agreements pursuant to which its officers, directors and
stockholders have agreed to such or similar restrictions (the "LOCK-UP
AGREEMENTS") presently in effect or effected hereby. The Company hereby
represents and warrants that it will not release any of its officers,
directors or other stockholders from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of
Xxxxxxxxx, Xxxxxxxx & Company LLC.
(t) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("ENVIRONMENTAL LAWS")
which are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the
Registration Statement and the Prospectus, (iii) to the best of the
Company's knowledge, the Company will not be required to make future material
capital expenditures to comply with Environmental Laws and (iv) to the best
of the Company's knowledge, no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and
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Liability Act of 1980, as amended (42 U.S.C. Section 9601, ET SEQ.), or
otherwise designated as a contaminated site under applicable state or local
law.
(u) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus.
II. The Selling Stockholder represents and warrants to and agrees with each
Underwriter and the Company that:
(a) The Selling Stockholder now has and on the Closing Date, and
on any later date on which Option Shares are purchased, will have valid
marketable title to the Option Shares to be sold by the Selling Stockholder,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than pursuant to this Agreement; and upon delivery
of such Option Shares hereunder and payment of the purchase price as herein
contemplated, each of the Underwriters will obtain valid marketable title to
the Option Shares purchased by it from the Selling Stockholder, free and
clear of any pledge, lien, security interest pertaining to the Selling
Stockholder or the Selling Stockholder's property, encumbrance, claim or
equitable interest, including any liability for estate or inheritance taxes,
or any liability to or claims of any creditor, devisee, legatee or
beneficiary of the Selling Stockholder.
(b) The Selling Stockholder has duly authorized (if applicable),
executed and delivered, in the form heretofore furnished to the
Representatives, an irrevocable Power of Attorney (the "POWER OF ATTORNEY")
appointing Xxxxxxx X. Xxxxx and Xxxxxxx X. Xxxxxx as attorneys-in-fact
(collectively, the "ATTORNEYS" and individually, an "ATTORNEY") and a Letter
of Transmittal and Custody Agreement (the "CUSTODY AGREEMENT") with Stock
Transfer Corporation, as custodian (the "CUSTODIAN"); each of the Power of
Attorney and the Custody Agreement constitutes a valid and binding agreement
on the part of the Selling Stockholder, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; and the Selling Stockholder's Attorneys, acting alone, is
authorized to execute and deliver this Agreement and the certificate referred
to in Section 6(j) hereof on behalf of the Selling Stockholder, to determine
the purchase price to be paid by the several Underwriters to the Selling
Stockholder as provided in Section 3 hereof, to authorize the delivery of the
Option Shares to be sold by the Selling Stockholder under this Agreement and
to duly endorse (in blank or otherwise) the certificate or certificates
representing such Option Shares or a stock
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power or powers with respect thereto, to accept payment therefor, and
otherwise to act on behalf of the Selling Stockholder in connection with this
Agreement.
(c) All consents, approvals, authorizations and orders required
for the execution and delivery by the Selling Stockholder of the Power of
Attorney and the Custody Agreement, the execution and delivery by or on
behalf of the Selling Stockholder of this Agreement and the sale and delivery
of the Option Shares to be sold by the Selling Stockholder under this
Agreement (other than, at the time of the execution hereof (if the
Registration Statement has not yet been declared effective by the
Commission), the issuance of the order of the Commission declaring the
Registration Statement effective and such consents, approvals, authorizations
or orders as may be necessary under state or other securities or Blue Sky
laws) have been obtained and are in full force and effect; the Selling
Stockholder, if other than a natural person, has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization as the type of entity that it purports to be; and the Selling
Stockholder has full legal right, power and authority to enter into and
perform its obligations under this Agreement and such Power of Attorney and
Custody Agreement, and to sell, assign, transfer and deliver the Option
Shares to be sold by the Selling Stockholder under this Agreement.
(d) The Selling Stockholder will not, during the Lock-up Period,
effect the Disposition of any Securities now owned or hereafter acquired
directly by the Selling Stockholder or with respect to which the Selling
Stockholder has or hereafter acquires the power of disposition, otherwise
than (i) as a bona fide gift or gifts, provided the donee or donees thereof
agree in writing to be bound by this restriction, (ii) as a distribution to
partners, limited liability company members or stockholders of the Selling
Stockholder, provided that the distributees thereof agree in writing to be
bound by the terms of this restriction, or (iii) with the prior written
consent of Xxxxxxxxx, Xxxxxxxx & Company LLC. The foregoing restriction is
expressly agreed to preclude the holder of the Securities from engaging in
any hedging or other transaction which is designed to or reasonably expected
to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than
the Selling Stockholder. Such prohibited hedging or other transactions would
include, without limitation, any short sale (whether or not against the box)
or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from Securities. The
Selling Stockholder also agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
securities held by the Selling Stockholder except in compliance with this
restriction.
(e) Certificates in negotiable form for all Option Shares to be
sold by the Selling Stockholder under this Agreement, together with a stock
power or powers duly endorsed in blank by the Selling Stockholder, have been
placed in custody with the Custodian for the purpose of effecting delivery
hereunder.
(f) This Agreement has been duly authorized by the Selling
Stockholder that is not a natural person; this Agreement has been duly
executed and delivered by or on behalf of the Selling Stockholder and is a
valid and binding agreement of the Selling Stockholder, enforceable in
accordance
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with its terms, except as rights to indemnification hereunder may be limited
by applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; and the performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or violation of
any of the terms and provisions of or constitute a default under any bond,
debenture, note or other evidence of indebtedness, or under any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture
or other agreement or instrument to which the Selling Stockholder is a party
or by which the Selling Stockholder, or any Option Shares to be sold by the
Selling Stockholder hereunder, may be bound or, to the best of the Selling
Stockholder's knowledge, result in any violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over
the Selling Stockholder or over the properties of such Selling Stockholder,
or, if the Selling Stockholder is other than a natural person, result in any
violation of any provisions of the charter, bylaws or other organizational
documents of the Selling Stockholder.
(g) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
(h) The Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) The Selling Stockholder will comply with all agreements on
its part to be complied with pursuant to this Agreement on or prior to the
Closing Date, or any later date on which Option Shares are to be purchased,
as the case may be, and will advise one of its Attorneys and Xxxxxxxxx,
Xxxxxxxx & Company LLC prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, if any statement to be
made on behalf of the Selling Stockholder in the certificate contemplated by
Section 6(j) would be inaccurate if made as of the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be.
(j) The Selling Stockholder does not have, or has waived prior to
the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Shares that are to be
sold by the Company to the Underwriters pursuant to this Agreement; the
Selling Stockholder does not have, or has waived prior to the date hereof,
any registration right or other similar right to participate in the offering
made by the Prospectus, other than such rights of participation as have been
satisfied by the participation of the Selling Stockholder in the transactions
to which this Agreement relates in accordance with the terms of this
Agreement; and the Selling Stockholder does not own any warrants, options or
similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, rights, warrants, options or other securities
from the Company, other than those described in the Registration Statement
and the Prospectus.
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(k) The sale of the Option Shares by such Selling Stockholder
pursuant hereto is not prompted by any material adverse information
concerning the Company which is not set forth in the Registration Statement
or the Prospectus.
(l) All written information furnished to the Company by or on
behalf of the Selling Stockholder specifically for use in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendments or
supplements thereto, is and will be true, correct and complete and does not
and will not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make such
information not misleading at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up
to and on the Closing Date, and on any later date on which Option Shares are
to be purchased. To the extent and only to the extent that any statements or
omissions made in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendments or supplements thereto are made in reliance upon
and in conformity with such written information, such Registration Statement
and Preliminary Prospectus did NOT, and any amendments or supplements to the
Registration Statement or the Prospectus will NOT, when they become effective
or are filed with the Commission and at all times subsequent on the Closing
Date and on any later date on which Option Shares are to be purchased, as the
case may be, 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.
(m) The Selling Stockholder has reviewed the Registration
Statement and the Prospectus and, although the Selling Stockholder has not
conducted any investigation, nothing has come to the Selling Stockholder's
attention that would lead it to believe: (i) that the Registration Statement
or any amendments thereto includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (ii) that the Prospectus
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
3. PURCHASE, SALE AND DELIVERY OF COMPANY SHARES. On the basis of
the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Company agrees to sell to
the Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $[_____] per share, the
respective number of Company Shares as hereinafter set forth opposite the
name of the Company in SCHEDULE B hereto. The obligation of each Underwriter
to the Company shall be to purchase from the Company that number of Company
Shares which is set forth opposite the name of such Underwriter in SCHEDULE A
hereto (subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Company Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made
against payment of the purchase price therefor by the several Underwriters by
certified or official bank check or checks drawn in same-day funds, payable
to the order of the Company (and the Company agrees not to deposit any such
check in the bank on which it is drawn, and not to take any other action with
the purpose or effect of receiving immediately available
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funds, until the business day following the date of its delivery to the
Company and, in the event of any breach of the foregoing, the Company shall
reimburse the Underwriters for the interest lost and any other expenses borne
by them by reason of such breach), at the offices of Xxxxxx Xxxxxxx Xxxxxxxx
& Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 (or at such
other place as may be agreed upon among the Representatives and the Company)
at 7:00 A.M., San Francisco time (a) on the third (3rd) full business day
following the first day that Shares are traded, (b) if this Agreement is
executed and delivered after 1:30 P.M., San Francisco time, the fourth (4th)
full business day following the day that this Agreement is executed and
delivered or (c) at such other time and date not later than seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"CLOSING DATE;" PROVIDED, HOWEVER, that if the Company has not made available
to the Representatives copies of the Prospectus within the time provided in
Section 4(d) hereof, the Representatives may, in their sole discretion,
postpone the Closing Date until no later than two (2) full business days
following delivery of copies of the Prospectus to the Representatives. The
certificates for the Company Shares to be so delivered will be made available
to you at such office or such other location including, without limitation,
in New York City, as you may reasonably request for checking at least one (1)
full business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2)
full business days prior to the Closing Date. If the Representatives so
elect, delivery of the Company Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment
of the purchase price on behalf of any Underwriter or Underwriters whose
check or checks shall not have been received by you prior to the Closing Date
for the Company Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Company Shares at an initial public
offering price of $[_____] per share. After the initial public offering, the
several Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), on the inside
front cover concerning stabilization and over-allotment by the Underwriters,
and under the [_____] and [_____] paragraphs under the caption "UNDERWRITING"
in any Preliminary Prospectus and in the Prospectus constitutes the only
information furnished by the Underwriters to the Company for inclusion in any
Preliminary Prospectus, the Prospectus or the Registration Statement, and
you, on behalf of the respective Underwriters, represent and warrant to the
Company and the Selling Stockholder that the statements made therein do not
include any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
-14-
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto, to become effective as promptly as possible; the Company will use its
best efforts to cause any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations as may be required subsequent to the date
the Registration Statement is declared effective to become effective as
promptly as possible; the Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus and term sheet meeting the requirements of Rule 434(b) or
(c), as applicable, of the Rules and Regulations, have been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (7) of
Rule 424(b) of the Rules and Regulations; if for any reason the filing of the
final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the
time period prescribed; it will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information; promptly upon your request, it
will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in the opinion of counsel for
the several Underwriters ("UNDERWRITERS' COUNSEL"), may be necessary or
advisable in connection with the distribution of the Shares by the
Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have
occurred as a result of which the Prospectus or any other prospectus relating
to the Shares as then in effect would include any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements
of Section 10(a)(3) of the Act; and it will file no amendment or supplement
to the Registration Statement or Prospectus which shall not previously have
been submitted to you a reasonable time prior to the proposed filing thereof
or to which you shall reasonably object in writing, subject, however, to
compliance with the Act and the Rules and Regulations, and the provisions of
this Agreement.
-15-
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of
the initiation or threat of any proceeding for that purpose; and it will
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order
should be issued.
(c) The Company will use its best efforts to qualify the Shares
for offering and sale under the securities laws of such jurisdictions as you
may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except that
the Company shall not be required in connection therewith or as a condition
thereof to qualify as a foreign corporation or to execute a general consent
to service of process in any jurisdiction in which it is not otherwise
required to be so qualified or to so execute a general consent to service of
process. In each jurisdiction in which the Shares shall have been qualified
as above provided, the Company will make and file such statements and reports
in each year as are or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet under
Rule 434, in no event later than the first (1st) full business day following
the first day that Shares are traded, copies of the Registration Statement
(three of which will be signed and which will include all exhibits), each
Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Act, all in such quantities as you may from time to
time reasonably request. Notwithstanding the foregoing, if Xxxxxxxxx,
Xxxxxxxx & Company LLC, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the Company shall
provide to you copies of a Preliminary Prospectus updated in all respects
through the date specified by you in such quantities as you may from time to
time reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement, an earnings statement (which will be in reasonable
detail but need not be audited) complying with the provisions of Section
11(a) of the Act and covering a twelve (12) month period beginning after the
effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end
of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal
year, and will furnish to you and the other several Underwriters hereunder,
upon request (i) concurrently with furnishing such reports to its
stockholders, statements of operations of the Company for each of the first
three (3) quarters in the form furnished to the Company's stockholders, (ii)
concurrently with furnishing to its stockholders, a balance sheet of the
Company as of the end of such fiscal year, together with statements of
operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon
of independent certified public accountants, (iii) as soon as they are
available,
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copies of all reports (financial or other) mailed to stockholders, (iv) as
soon as they are available, copies of all reports and financial statements
furnished to or filed with the Commission, any securities exchange or the
National Association of Securities Dealers, Inc. ("NASD"), (v) every material
press release and every material news item or article in respect of the
Company or its affairs which was generally released to stockholders or
prepared by the Company or any of its subsidiaries, and (vi) any additional
information of a public nature concerning the Company or its subsidiaries, or
its business which you may reasonably request. During such five (5) year
period, if the Company shall have active subsidiaries, the foregoing
financial statements shall be on a consolidated basis to the extent that the
accounts of the Company and its subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "USE OF
PROCEEDS" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which
may be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR as applicable in conformity with
the requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company or the
Selling Stockholder to perform any agreement on their respective parts to be
performed hereunder or to fulfill any condition of the Underwriters'
obligations hereunder, or if the Company shall terminate this Agreement
pursuant to Section 11(a) hereof, or if the Underwriters shall terminate this
Agreement pursuant to Section 11(b)(i), the Company will reimburse the
several Underwriters for all out-of-pocket expenses (including fees and
disbursements of Underwriters' Counsel) incurred by the Underwriters in
investigating or preparing to market or marketing the Shares.
(k) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, forthwith prepare, consult with you concerning the substance of
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication
or event.
(l) During the Lock-up Period, the Company will not, without the
prior written consent of Xxxxxxxxx Xxxxxxxx & Company LLC, effect the
Disposition of, directly or indirectly, any Securities other than the sale of
the Company Shares and the Option Shares; provided, however, that the
Company may grant options and issue shares thereunder pursuant to the
Company's 1997 Non-Employee Directors
-17-
Stock Option Plan, 1995 Stock Option Plan, 1997 Performance Stock Option Plan
and Employee Stock Purchase Plan.
5. EXPENSES.
(a) The Company and the Selling Stockholder agree with each
Underwriter that:
(i) The Company and the Selling Stockholder will pay and
bear all costs and expenses in connection with the preparation, printing and
filing of the Registration Statement (including financial statements,
schedules and exhibits), Preliminary Prospectuses and the Prospectus and any
amendments or supplements thereto; the printing of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement, the Preliminary
Blue Sky Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of
the foregoing; the issuance and delivery of the Shares hereunder to the
several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company; all fees and
other charges of the Company's independent certified public accountants; the
cost of furnishing to the several Underwriters copies of the Registration
Statement (including appropriate exhibits), Preliminary Prospectus and the
Prospectus, and any amendments or supplements to any of the foregoing; NASD
filing fees and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and fees and
disbursements of Underwriters' Counsel in connection with such NASD filings
and Blue Sky qualifications); and all other expenses directly incurred by the
Company and the Selling Stockholder in connection with the performance of
their obligations hereunder. Any additional expenses incurred as a result of
the sale of the Shares by the Selling Stockholder will be borne collectively
by the Company and the Selling Stockholder. The provisions of this Section
5(a)(i) are intended to relieve the Underwriters from the payment of the
expenses and costs which the Selling Stockholder and the Company hereby agree
to pay, but shall not affect any agreement between the Selling Stockholder
and the Company requiring the Company to pay for all such expenses and costs.
Such agreements shall not impair the obligations of the Company and the
Selling Stockholder hereunder to the several Underwriters.
(ii) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's obligation to reimburse
the Underwriters for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is
so held to have been improper, the Underwriters shall promptly return such
payment to the Company together with interest, compounded daily, determined
on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) listed from time to time in The
Wall Street Journal which represents the base rate on corporate loans posted
by a substantial majority of the nation's thirty (30) largest banks (the
"PRIME RATE"). Any such interim reimbursement payments which are not made to
the
-18-
Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(iii) In addition to their other obligations under Section
8(b) hereof, each Selling Stockholder agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(b) hereof relating to the Selling
Stockholder, it will reimburse the Underwriters on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Selling Stockholder's obligation to
reimburse the Underwriters for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is
so held to have been improper, the Underwriters shall promptly return such
payment to the Selling Stockholder, together with interest, compounded
daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Underwriters within thirty
(30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(b) In addition to their other obligations under Section 8(c)
hereof, the Underwriters, severally and not jointly, agree that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding described in Section 8(c) hereof, they will
reimburse the Company and the Selling Stockholder on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Underwriters' obligation to reimburse the
Company and the Selling Stockholder for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, the Company and the Selling
Stockholder shall promptly return such payment to the Underwriters together
with interest, compounded daily, determined on the basis of the Prime Rate.
Any such interim reimbursement payments which are not made to the Company and
the Selling Stockholder within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
(c) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in Sections 5(a)(ii),
5(a)(iii) and 5(b) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the basis
on which such amounts shall be apportioned among the reimbursing parties,
shall be settled by arbitration conducted under the provisions of the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the event the
party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand
or notice is authorized to do so. Any such arbitration will be limited to
the operation of the interim reimbursement provisions contained in Sections
5(a)(ii), 5(a)(iii) and 5(b) hereof and will not resolve the ultimate
propriety or enforceability of the obligation to indemnify for expenses which
is created by the
-19-
provisions of Sections 8(a), 8(b) and 8(c) hereof or the obligation to
contribute to expenses which is created by the provisions of Section 8(e)
hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date
and any later date on which Option Shares are to be purchased, as the case
may be, of the representations and warranties of the Company and the Selling
Stockholder herein, to the performance by the Company and the Selling
Stockholder of their respective obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 P.M., San Francisco time, on the date following the date of
this Agreement, or such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to
the knowledge of the Company, the Selling Stockholder or any Underwriter,
threatened by the Commission, and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and such counsel shall have been furnished with such papers and information
as they may reasonably have requested to enable them to pass upon the matters
referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in
your sole judgment, impracticable or inadvisable to proceed with the public
offering of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, the
following opinion of counsel for the Company dated the Closing Date or such
later date on which Option Shares are to be purchased addressed to the
Underwriters and with reproduced copies or signed counterparts thereof for
each of the Underwriters, to the effect that:
(i) The Company and each "SIGNIFICANT SUBSIDIARY" (as that
term is defined in Regulation S-X of the Act) has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
-20-
(ii) The Company and each Significant Subsidiary has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction, if any, in which the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations
or business of the Company and its subsidiaries considered as one enterprise.
To such counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity other than those
subsidiaries listed on EXHIBIT 21.1 to the Registration Statement.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption "CAPITALIZATION" as
of the dates stated therein, the issued and outstanding shares of capital stock
of the Company (including the Option Shares) have been duly and validly issued
and are fully paid and nonassessable, and, to such counsel's knowledge, will not
have been issued in violation of or subject to any preemptive right, co-sale
right, registration right, right of first refusal or other similar right;
(v) All issued and outstanding shares of capital stock of each
Significant Subsidiary of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and, to such counsel's knowledge,
have not been issued in violation of or subject to any preemptive right, co-sale
right, registration right, right of first refusal or other similar right and are
owned by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest;
(vi) The Shares to be issued by the Company pursuant to the terms
of this Agreement have been duly authorized and, upon issuance and delivery
against payment therefor in accordance with the terms hereof, will be duly and
validly issued and fully paid and nonassessable, and will not have been issued
in violation of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right.
(vii) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by you, is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except insofar as indemnification provisions may be
limited by applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles;
-21-
(ix) The Registration Statement has become effective under the
Act and, to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the Act;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom, as to which such
counsel need express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the requirements of
the Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the caption
"DESCRIPTION OF CAPITAL STOCK," to the extent that it constitutes matters of law
or legal conclusions, has been reviewed by such counsel and is a fair summary of
such matters and conclusions; and the forms of certificates evidencing the
Common Stock and filed as exhibits to the Registration Statement comply with
Delaware law;
(xii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the Act and the
applicable Rules and Regulations;
(xiii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which are
not described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation of
the transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations;
(xv) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except such as have been
obtained under the Act or such as may be required under state or other
securities or Blue Sky laws in connection with the purchase and the distribution
of the Shares by the Underwriters;
-22-
(xvi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Act or the Rules and Regulations other than
those described therein;
(xvii) To such counsel's knowledge, neither the Company nor any of
its subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any order, writ or decree of any
court or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries, or over any of their properties or operations; and
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to securities of
the Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights known to such
counsel to registration of such shares of Common Stock or other securities in
the offering contemplated by this Agreement, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by reason
of lapse of time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration Statement
pursuant to the exercise of and in full satisfaction of such rights; and
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later date on which
Option Shares are to be purchased, the Registration Statement and any amendment
or supplement thereto (other than the financial statements including supporting
schedules and other financial and statistical information derived therefrom, as
to which such counsel need express no comment) contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or at the
Closing Date or any later date on which the Option Shares are to be purchased,
as the case may be, the Registration Statement, the Prospectus and any amendment
or supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of California and
the State of Delaware upon opinions of local counsel, and as to questions of
fact upon representations or certificates of officers of the Company, the
Selling Stockholder or officers of the Selling Stockholder, and of government
officials, in which case their opinion is to state that they are so relying and
that they have no knowledge of any material misstatement
-23-
or inaccuracy in any such opinion, representation or certificate. Copies of
any opinion, representation or certificate so relied upon shall be delivered
to you, as Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of counsel for the Selling Stockholder, dated the Closing Date or such
later date on which Option Shares are to be purchased addressed to the
Underwriters and with reproduced copies or signed counterparts thereof for each
of the Underwriters, to the effect that:
(i) The Selling Stockholder has full power and authority to
enter into and to perform its obligations under the Power of Attorney and
Custody Agreement; the Power of Attorney and Custody Agreement of the Selling
Stockholder has been duly authorized by the Selling Stockholder; the Power of
Attorney and Custody Agreement of the Selling Stockholder has been duly executed
and delivered by or on behalf of the Selling Stockholder;
(ii) The Selling Stockholder has full power and authority to
enter into and to perform its obligations under this Agreement and to sell,
transfer, assign and deliver the Option Shares to be sold by the Selling
Stockholder hereunder;
(iii) This Agreement has been duly authorized by the Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of the Selling Stockholder; and
(iv) Upon the delivery of and payment for the Option Shares as
contemplated in this Agreement, each of the Underwriters will receive the Option
Shares purchased by it from the Selling Stockholder, free and clear of any
adverse claim (within the meaning of Section 8-302) of the New York Uniform
Commercial Code. In rendering such opinion, such counsel may assume that the
Underwriters are without notice of any adverse claim with respect to the Option
Shares being purchased from the Selling Stockholder.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of California and
the State of Delaware upon opinions of local counsel, and as to questions of
fact upon representations or certificates of officers of the Company, the
Selling Stockholder or officers of the Selling Stockholder, and of government
officials, in which case their opinion is to state that they are so relying and
that they have no knowledge of any material misstatement or inaccuracy in any
such opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of the Company's intellectual property counsel (satisfactory to you and
the Underwriters), dated the Closing Date or such later date on
-24-
which Option Shares are to be purchased, addressed to the Underwriters and
with reproduced copies or signed counterparts thereof for each of the
Underwriters, to the effect that:
(i) The Company owns or has exclusive rights to all (1) patents,
(2) trademarks, trade names and service marks (and registrations therefor),
(3) copyrights, including rights in maskworks, (4) licenses, (5) ideas,
inventions, trade secrets, and know-how (whether or not patented or
patentable), (6) confidential information (7) all other personal and
proprietary rights and all other rights similar to or in the nature of any
of the foregoing rights (and applications for any of the above) described
in the Registration Statement or the Prospectus as being owned by or
exclusively licensed to the Company or necessary for or material to the
conduct of the Company's business, and (A) except as set forth in the
Registration Statement and the Prospectus, such counsel is not aware of any
claim to the contrary or any challenge by any other person to the ownership
or license rights of the Company with respect to the foregoing and (B) such
counsel is unaware of any contingency or circumstance that would cause any
such right to expire or to be modified, altered or terminated;
(ii) That certain license agreement between Yves Faroudja and the
Company dated January 20, 1997, including without limitation the grants of
exclusive licenses to the Company set forth therein, is enforceable by the
Company in accordance with its terms, and the rights granted to the Company
pursuant to such agreement are sufficient to permit the Company in
perpetuity to exclude all others from exploiting in any manner the
technology described therein;
(iii) No fact has come to such counsel's attention that would lead
such counsel to believe that the patents (or any other intellectual
property rights necessary for or material to the conduct of the Company's
business) presently issued to or held by (or exclusively licensed to) the
Company are not valid and enforceable by the Company;
(iv) Such counsel is not aware of any material fact with respect
to the patent applications of (or licensed to) the Company presently on
file that (a) would preclude the issuance of patents with respect to such
applications or (b) would lead such counsel to believe that such patents,
when issued, would not be valid or enforceable by the Company;
(v) Such counsel is not aware of any legal actions, claims or
proceedings pending or threatened against the Company alleging that the
Company has infringed or currently is infringing or otherwise violating any
patent rights, trademark rights, service xxxx rights, trade name rights,
maskwork rights, copyrights, license rights, rights to inventions, trade
secret rights or any other personal or proprietary right or any right
similar to any of the foregoing (all such rights, "Intellectual Property
Rights") owned by any other person or entity, and no fact has come to such
counsel's attention indicating or tending to indicate that any of the
Company's present or proposed products or processes described in the
Registration Statement or the Prospectus have infringed or currently
infringe any Intellectual Property Rights of any other person or entity;
-25-
(vi) Such counsel has reviewed the descriptions of the Company's
intellectual property rights under the captions "Risk Factors--Limited
Protection of Proprietary Rights; Risk of Third Party Infringement,"
"Business--Technology,""Business--Research and Development; New Products,"
"Business--Proprietary Rights and Licenses", and "Certain Transactions--
Yves Faroudja License Agreement" in the Registration Statement and
Prospectus, and, to the extent that they constitute matters of fact,
matters of law or legal conclusions, these descriptions are true and
correct in all material respects and fairly present the intellectual
property situation of the Company; and
(vii) Nothing has come to such counsel's attention that causes
such counsel to believe that, as of the date on which the Registration
Statement became effective and as of the date of such opinion, the
statements set forth under the captions "Risk Factors -- Limited Protection
of Proprietary Rights; Risk of Third Party Infringement," "Business --
Technology,""Business-- Research and Development; New Products,""Business--
Proprietary Rights and Licenses", and "Certain Transactions--Yves Faroudja
License Agreement" in the Registration Statement and Prospectus contain any
untrue or misleading statement of a material fact or omit to state a
material fact necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
(g) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, an opinion of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., in form and substance satisfactory to
you, with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(h) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter from
Ernst & Young LLP addressed to the Underwriters, dated the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be,
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations and based upon the procedures described in such letter delivered
to you concurrently with the execution of this Agreement (herein called the
"ORIGINAL LETTER"), but carried out to a date not more than five (5) business
days prior to the Closing Date or such later date on which Option Shares are to
be purchased, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
the Closing Date or such later date on which Option Shares are to be purchased,
as the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
-26-
of the Shares as contemplated by the Prospectus. The Original Letter from Ernst
& Young LLP shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheet of the Company as of December 31, 1995,
December 31, 1996 and June 30, 1997 and related consolidated statements of
operations, stockholders' equity, and cash flows for the three (3) years in the
period ended December 31, 1996 and the six months ended June 30, 1997,
(iii) state that Ernst & Young LLP has performed the procedures set out in
Statement on Auditing Standards No. 71 ("SAS 71") for a review of interim
financial information and providing the report of Ernst & Young LLP as described
in SAS 71 on the financial statements for each of the quarters in the six-
quarter period ended June 30, 1997 (the "QUARTERLY FINANCIAL STATEMENTS"),
(iv) state that in the course of such review, nothing came to their attention
that leads them to believe that any material modifications need to be made to
any of the Quarterly Financial Statements in order for them to be in compliance
with generally accepted accounting principles consistently applied across the
periods presented, and (v) address other matters agreed upon by Ernst & Young
LLP and you. In addition, you shall have received from Ernst & Young LLP a
letter addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of June 30, 1997 did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(i) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a certificate of
the Company, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, signed by the Chief Executive Officer
and Chief Financial Officer of the Company, to the effect that, and you shall be
satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or any
later date on which Option Shares are to be purchased, as the case may be, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all
times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto contained all material information required to be included therein by
the Act and the Rules and Regulations and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, the Prospectus, and any
-27-
amendment or supplement thereto, did not and does not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, and, since the effective date of the
Registration Statement, there has occurred no event required to be set forth
in an amended or supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been
(a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (b) any transaction that is material
to the Company and its subsidiaries considered as one enterprise, except
transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(d) any change in the capital stock or outstanding indebtedness of the Company
or any of its subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries, or (f) any loss or damage (whether or not insured) to the property
of the Company or any of its subsidiaries which has been sustained or will have
been sustained which has a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(j) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for the Selling
Stockholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have NOT been
informed that:
(i) The representations and warranties made by the Selling
Stockholder herein are not true or correct in any material respect on the
Closing Date or on any later date on which Option Shares are to be purchased, as
the case may be; or
(ii) The Selling Stockholder has not complied with any obligation
or satisfied any condition which is required to be performed or satisfied on the
part of the Selling Stockholder at or prior to the Closing Date or any later
date on which Option Shares are to be purchased, as the case may be.
(k) The Company shall have obtained and delivered to you an agreement
from each officer and director of the Company, the Selling Stockholder and each
beneficial owner of shares of Common Stock in writing prior to the date hereof
that such person will not, during the Lock-up Period, effect the Disposition of
any Securities now owned or hereafter acquired directly by such person or with
respect to which such person has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a distribution
to partners, limited liability company members or stockholders of such person,
provided that the distributees thereof agree in writing to be bound by the terms
of this restriction, or (iii) with the prior written consent of Xxxxxxxxx,
Xxxxxxxx & Company LLC. The foregoing restriction shall have been
-28-
expressly agreed to preclude the holder of the Securities from engaging in
any hedging or other transaction which is designed to or reasonably expected
to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than
the such holder. Such prohibited hedging or other transactions would
including, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person will have also agreed and consented to
the entry of stop transfer instructions with the Company's transfer agent
against the transfer of the Securities held by such person except in
compliance with this restriction.
(l) The Company and the Selling Stockholder shall have furnished to
you such further certificates and documents as you shall reasonably request
(including certificates of officers of the Company, the Selling Stockholder or
officers of the Selling Stockholder as to the accuracy of the representations
and warranties of the Company and the Selling Stockholder herein, as to the
performance by the Company and the Selling Stockholder of their respective
obligations hereunder and as to the other conditions concurrent and precedent to
the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company and the Selling Stockholder will furnish
you with such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Selling Stockholder hereby grant to the several Underwriters, for the purpose of
covering over-allotments in connection with the distribution and sale of the
Company Shares only, a nontransferable option to purchase up to an aggregate of
[________] Option Shares at the purchase price per share for the Company Shares
set forth in Section 3 hereof. Such option may be exercised by the
Representatives on behalf of the several Underwriters on one (1) or more
occasions in whole or in part during the period of thirty (30) days after the
date on which the Company Shares are initially offered to the public, by giving
written notice to the Company and the Attorneys. The number of Option Shares to
be purchased by each Underwriter upon the exercise of such option shall be the
same proportion of the total number of Option Shares to be purchased by the
several Underwriters pursuant to the exercise of such option as the number of
Company Shares purchased by such Underwriter (set forth in SCHEDULE A hereto)
bears to the total number of Company Shares purchased by the several
Underwriters (set forth in SCHEDULE A hereto), adjusted by the Representatives
in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks
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drawn in same-day funds, payable to the order of the Custodian for the
respective accounts of the Selling Stockholder (and the Selling Stockholder
agrees not to deposit and to cause the Custodian not to deposit any such check
in the bank on which it is drawn, and not to take any other action with the
purpose or effect of receiving immediately available funds, until the business
day following the date of its delivery to the Custodian). In the event of any
breach of the foregoing, the Selling Stockholder shall reimburse the
Underwriters for the interest lost and any other expenses borne by them by
reason of such breach. Such delivery and payment shall take place at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, Xxxx
Xxxx, Xxxxxxxxxx 00000 or at such other place as may be agreed upon among the
Representatives and the Attorneys (i) on the Closing Date, if written notice of
the exercise of such option is received by the Company and the Attorneys at
least two (2) full business days prior to the Closing Date, or (ii) on a date
which shall not be later than the third (3rd) full business day following the
date the Company and the Attorneys receive written notice of the exercise of
such option, if such notice is received by the Company and the Attorneys less
than two (2) full business days prior to the Closing Date.
The certificates in negotiable form for the Option Shares have been
placed in custody (for delivery under this Agreement) under the Custody
Agreement. The Selling Stockholder agrees that the certificates for the Option
Shares of the Selling Stockholder so held in custody are subject to the
interests of the Underwriters hereunder, that the arrangements made by the
Selling Stockholder for such custody, including the Power of Attorney, is to
that extent irrevocable and that the obligations of the Selling Stockholder
hereunder shall not be terminated by the act of the Selling Stockholder or by
operation of law, whether by the death or incapacity of the Selling Stockholder
or the occurrence of any other event, except as specifically provided herein or
in the Custody Agreement. If the Selling Stockholder should die or be
incapacitated, or if any other such event should occur, before the delivery of
the certificates for the Option Shares hereunder, the Option Shares to be sold
by the Selling Stockholder shall, except as specifically provided herein or in
the Custody Agreement, be delivered by the Custodian in accordance with the
terms and conditions of this Agreement as if such death, incapacity or other
event had not occurred, regardless of whether the Custodian shall have received
notice of such death or other event.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
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(b) Upon exercise of any option provided for in Section 7(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company and the Selling Stockholder herein, to
the accuracy of the statements of the Company, the Selling Stockholder and
officers of the Company made pursuant to the provisions hereof, to the
performance by the Company and the Selling Stockholder of their respective
obligations hereunder, to the conditions set forth in Section 6 hereof, and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may request in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants or agreements of the Company and the Selling Stockholder or the
satisfaction of any of the conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "QUALIFIED INDEPENDENT
UNDERWRITER" within the meaning of SCHEDULE E of the Bylaws of the NASD), under
the Act, the Exchange Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities (or actions in respect thereof)
arising out of or based upon (i) any breach of any representation, warranty,
agreement or covenant of the Company herein contained, (ii) any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, PROVIDED FURTHER, that the indemnity agreement provided in this
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or
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given to such person within the time required by the Act and the Rules and
Regulations, unless such failure is the result of noncompliance by the
Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) The Selling Stockholder agrees to indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "QUALIFIED INDEPENDENT
UNDERWRITER" within the meaning of SCHEDULE E or the Bylaws of the NASD) under
the Act, the Exchange Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities (or actions in respect thereof) (i)
arising out of or based upon any breach of any representation, warranty,
agreement or covenant of the Selling Stockholder herein contained; (ii) any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but only to the extent
that the untrue statement in or alleged untrue statement or omission or alleged
omission from, the Registration Statement, Preliminary Prospectus, Prospectus or
amendment or supplement thereto, relates to the Selling Stockholder or was
included or omitted in reliance upon and in conformity with written information
furnished by or on behalf of the Selling Stockholder specifically for use in the
preparation of the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendments or supplements thereto. The Selling Stockholder
further agrees to reimburse each Underwriter for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any such
loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the indemnity
agreement provided in this Section 8(b) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any losses, claims, damages, liabilities or actions based upon
any untrue statement or alleged untrue statement of a material fact or omission
or alleged omission to state therein a material fact purchased Shares, if a copy
of the Prospectus in which such untrue statement or alleged untrue statement in
or omission or alleged omission was corrected had not been sent or given to such
person within the time required by the Act and the Rules and Regulations, unless
such failure is the result of noncompliance by the Company with Section 4(d)
hereof.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Selling Stockholder may otherwise have.
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(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company and the Selling Stockholder against any losses,
claims, damages or liabilities, joint or several, to which the Company or the
Selling Stockholder may become subject under the Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Underwriter herein
contained, (ii) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this Section 8(c) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof, and agrees to reimburse
the Company and the Selling Stockholder for any legal or other expenses
reasonably incurred by the Company and the Selling Stockholder in connection
with investigating or defending any such loss, claim, damage, liability or
action.
The indemnity agreement in this Section 8(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, the Selling Stockholder and each person, if any, who controls the
Company or the Selling Stockholder within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which
each Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought against
any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such
-33-
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section
8(a), 8(b) or 8(c) hereof who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. In no event shall any indemnifying party
be liable in respect of any amounts paid in settlement of any action unless
the indemnifying party shall have approved the terms of such settlement;
PROVIDED that such consent shall not be unreasonably withheld. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnification could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on all claims that are the
subject matter of such proceeding.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 8
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that, except as set forth
in Section 8(f) hereof, the Underwriters severally and not jointly are
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company and the Selling Stockholder are responsible for the remaining portion,
PROVIDED, HOWEVER, that (i) no Underwriter shall be required to contribute any
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter exceeds the amount of damages which
such Underwriter has otherwise required to pay and (ii) no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this Section 8(e)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter, the Company or
the Selling Stockholder within the meaning of the Act or the Exchange Act and
each officer of the Company who signed the Registration Statement and each
director of the Company.
(f) The liability of the Selling Stockholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 8 shall be
limited to an amount equal to the initial public offering price of the Option
Shares sold by the Selling Stockholder to the Underwriters minus the amount of
the underwriting discount paid thereon to the Underwriters by the Selling
Stockholder. The Company and the Selling Stockholder may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
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(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company, the Selling Stockholder and the Underwriters herein or in certificates
delivered pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or the Selling Stockholder, or
any of its officers, directors or controlling persons within the meaning of the
Act or the Exchange Act, and shall survive the delivery of the Shares to the
several Underwriters hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Shares
in accordance with the terms hereof, and if the aggregate number of Shares which
such defaulting Underwriter or Underwriters so agreed but failed to purchase
does not exceed ten percent (10%) of the Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Shares of such defaulting Underwriter or
Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed to take up and pay for exceeds ten percent (10%) of the Shares, the
remaining Underwriters shall have the right, but shall not be obligated, to take
up and pay for (in such proportions as may be agreed upon among them) the Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the privilege of substituting
within twenty-four (24) hours (including non-business hours) another underwriter
or underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further twenty-four (24) hours,
if necessary, to allow the Company the privilege of finding another underwriter
or underwriters, satisfactory to you, to purchase the Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Shares of the defaulting Underwriter or Underwriters
as provided in this Section 10, (i) the Company shall have the right to postpone
the time of delivery for a period of not more than seven (7) full business days,
in order to effect whatever changes may thereby be made necessary
-35-
in the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement, supplements to the Prospectus or other such documents
which may thereby be made necessary and (ii) the respective number of Shares
to be purchased by the remaining Underwriters and substituted underwriter or
underwriters shall be taken as the basis of their underwriting obligation.
If the remaining Underwriters shall not take up and pay for all such Shares
so agreed to be purchased by the defaulting Underwriter or Underwriters or
substitute another underwriter or underwriters as aforesaid and the Company
shall not find or shall not elect to seek another underwriter or underwriters
for such Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company nor the Selling
Stockholder shall be liable to any Underwriter (except as provided in Sections 5
and 8 hereof) nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, the Selling
Stockholder and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company or the Selling Stockholder (except to the
extent provided in Sections 5 and 8 hereof).
The term "UNDERWRITER" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., San Francisco time, on the first full business day following the effective
date of the Registration Statement, or (ii) the time of the initial public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set
forth in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(j), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
or the Selling Stockholder shall have failed, refused or been unable to perform
any agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your
-36-
sole judgment, is material and adverse, or (ii) if additional material
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices shall have been generally established on the New York Stock Exchange
or on the American Stock Exchange or in the over the counter market by the
NASD, or trading in securities generally shall have been suspended on either
such exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or
(iv) if there shall have been a material adverse change in the general
political or economic conditions or financial markets as in your reasonable
judgment makes it inadvisable or impracticable to proceed with the offering,
sale and delivery of the Shares, or (v) if there shall have been an outbreak
or escalation of hostilities or of any other insurrection or armed conflict
or the declaration by the United States of a national emergency which, in the
reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus. In the event of termination pursuant to subparagraph (i)
above, the Company shall remain obligated to pay costs and expenses pursuant
to Sections 4(j), 5 and 8 hereof. Any termination pursuant to any of
subparagraphs (ii) through (v) above shall be without liability of any party
to any other party except as provided in Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/x Xxxxxxxxx, Xxxxxxxx & Company LLC, 000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, telecopier
number (000) 000-0000, Attention: General Counsel; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Faroudja, Inc., 000 Xxxxxxx, Xxxxxxxxx,
XX 00000, telephone number (000) 000-0000 and fax number (000) 000-0000,
Attention: Xxxxxxx X. Xxxxx, President; if sent to the Selling Stockholder, such
notice shall be sent mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Attention: Xxxxxxx X. Xxxxx or Xxxxxxx
X. Xxxxxx, as Attorneys-in-Fact for the Selling Stockholder, at 000 Xxxxxxx,
Xxxxxxxxx, XX 00000, telephone number (000) 000-0000 and fax number (408) 735-
8571.
13. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and the Selling Stockholder and
their respective executors, administrators, successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons
within the meaning of the Act or the Exchange Act, officers and directors
referred to in Section 8 hereof, any legal or equitable right, remedy
-37-
or claim in respect of this Agreement or any provisions herein contained,
this Agreement and all conditions and provisions hereof being intended to be
and being for the sole and exclusive benefit of the parties hereto and their
respective executors, administrators, successors and assigns and said
controlling persons and said officers and directors, and for the benefit of
no other person or entity. No purchaser of any of the Shares from any
Underwriter shall be construed a successor or assign by reason merely of such
purchase.
In all dealings with the Company and the Selling Stockholder under
this Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and the Selling Stockholder shall be entitled to act and rely upon
any statement, request, notice or agreement made or given by you jointly or by
Xxxxxxxxx, Xxxxxxxx & Company LLC on behalf of you.
14. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
15. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
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If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholder and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Selling Stockholder
and the several Underwriters.
Very truly yours,
FAROUDJA, INC.
By_____________________________________________
SELLING STOCKHOLDER
FAROUDJA IMAGES INVESTORS, LLC
By_____________________________________________
Attorney-in-Fact for the Selling Stockholder
named in SCHEDULE B hereto
Accepted as of the date first above written:
XXXXXXXXX, XXXXXXXX & COMPANY LLC
XXXXX XXXXX XXXXXX & COMPANY
On their behalf and on behalf of each of the
several Underwriters named in SCHEDULE A hereto.
By XXXXXXXXX, XXXXXXXX & COMPANY LLC
By XXXXXXXXX, XXXXXXXX & COMPANY GROUP, L.L.C.
By_____________________________________________
Authorized Signatory
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SCHEDULE A
Number of
Company
Shares To Be
Underwriters Purchased
Xxxxxxxxx, Xxxxxxxx & Company LLC. . . . . . . . . . . . . . .
Xxxxx Xxxxx Xxxxxx & Company . . . . . . . . . . . . . . . . .
SCHEDULE B
Number of
Company Shares
Faroudja, Inc. To Be Sold
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Option Shares
Name of Selling Stockholder To Be Sold
Faroudja Images Investors, LLC
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
