EXHIBIT 1.1
3,400,000 SHARES
DIGITAL THEATER SYSTEMS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
, 2003
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▇▇ ▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LLC
As Representatives of the several Underwriters
c/o ▇▇ ▇▇▇▇▇ Securities Corporation
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. INTRODUCTORY. Digital Theater Systems, Inc., a Delaware corporation (the
"Company") proposes to sell, pursuant to the terms of this Agreement, to the
several underwriters named in Schedule A hereto (the "Underwriters," or, each,
an "Underwriter"), an aggregate of 3,400,000 shares of Common Stock, $0.0001 par
value (the "Common Stock") of the Company. The aggregate of 3,400,000 shares so
proposed to be sold is hereinafter referred to as the "Firm Stock". The selling
stockholders named in Schedule B hereto (the "Selling Stockholders") propose to
sell to the Underwriters, upon the terms and subject to the conditions set forth
in Section 3 hereof, up to an additional 510,000 shares of Common Stock (the
"Optional Stock"). The Firm Stock and the Optional Stock are hereinafter
collectively referred to as the "Stock". ▇▇ ▇▇▇▇▇ Securities Corporation ("▇▇
▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC are acting as
representatives of the several Underwriters and in such capacity are hereinafter
referred to as the "Representatives." As part of the offering contemplated by
this Agreement, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC (the "Designated Underwriter") has
agreed to reserve out of the Firm Stock purchased by it under this Agreement, up
to 170,000 shares, for sale to the Company's customers and business partners and
friends of the Company's officers, directors and employees (collectively,
"Participants"), as set forth in the Prospectus (as defined herein) under the
heading "Underwriting" (the "Directed Share Program"). The Firm Securities to be
sold by the Designated Underwriter pursuant to the Directed Share Program (the
"Directed Shares") will be sold by the Designated Underwriter pursuant to this
Agreement at the public offering price. Any Directed Shares not subscribed for
by the end of the business day on which this Agreement is executed will be
offered to the public by the Underwriters as set forth in the Prospectus.
2. (I) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to, and agrees with, the several Underwriters that:
(a) A registration statement on Form S-1 File No. 333-104761 (the
"Initial Registration Statement") in respect of the Stock has been
filed with the Securities and Exchange Commission
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(the "Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you for each of the other Underwriters, and, excluding exhibits
thereto, have been declared effective by the Commission in such form;
other than a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act") and the rules and regulations (the "Rules and
Regulations") of the Commission promulgated thereunder, which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission;
and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the
Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the Rules and Regulations is hereinafter called a
"Preliminary Prospectus"); the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if
any, including all exhibits thereto and including the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act and deemed by virtue
of Rule 430A under the Securities Act to be part of the Initial
Registration Statement at the time it was declared effective, each as
amended at the time such part of the Initial Registration Statement
became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statements"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under
the Securities Act, is hereinafter called the "Prospectus." No document
has been or will be prepared or distributed in reliance on Rule 434
under the Securities Act. No order preventing or suspending the use of
any Preliminary Prospectus has been issued by the Commission.
(b) The Initial Registration Statement conforms (and the Rule 462(b)
Registration Statement, if any, the Prospectus and any amendments or
supplements to either of the Registration Statements or the Prospectus,
when they become effective or are filed with the Commission, as the
case may be, will conform) in all material respects to the requirements
of the Securities Act and the Rules and Regulations and do not and will
not, as of the applicable effective date (as to the Registration
Statements and any amendment or supplement thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) 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, in light of the circumstances
in which they were made, not misleading; provided, however, that the
foregoing representations and warranties shall not apply to information
contained in or omitted from the Registration Statements or the
Prospectus or any such amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the
Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein.
(c) The Company and each of its subsidiaries (as defined in Section 14)
have been duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good
standing as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all
corporate power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged,
except where the failure to so qualify or have such power or authority
would not have, singularly or in the aggregate, a material adverse
effect on the condition (financial or otherwise), results of
operations, business or prospects of the Company and its subsidiaries
taken as a whole (a "Material Adverse Effect").
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(d) This Agreement has been duly authorized executed and delivered by
the Company.
(e) The Firm Stock to be issued and sold by the Company to the
Underwriters hereunder has been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued, fully paid and nonassessable and free of
any preemptive or similar rights and will conform to the description
thereof contained in the Prospectus.
(f) The Company has an authorized capital stock as set forth in the
Prospectus. All of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus. None of the outstanding shares of Common Stock were issued
in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company
other than such rights that have been waived. There are no authorized
or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock
of the Company other than as set forth in the Prospectus.
(g) All the outstanding shares of capital stock of each subsidiary of
the Company have been duly authorized and validly issued, are fully
paid and nonassessable and, except to the extent set forth in the
Prospectus, are owned by the Company directly or indirectly through one
or more wholly-owned subsidiaries, free and clear of any claim, lien,
encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party. The Company owns or controls,
directly or indirectly, only the following corporations, associations
or other entities: DTS Consumer Products, Inc., a Delaware corporation;
DTS Entertainment, LLC, a Delaware limited liability company; Digital
Theater Systems (UK) Limited, a United Kingdom private limited company;
DTS (BVI) Limited, a British Virgin Islands limited liability company;
DTS (Asia) Limited, a Hong Kong limited liability company; DTS China
Holding Limited, a British Virgin Islands limited liability company;
DTS China Licensing (Hong Kong) Limited, a Hong Kong limited liability
company; and Guangzhou DTS Digital Theater Systems Co. Ltd., a People's
Republic of China limited liability company.
(h) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby
will not (i) conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, (ii) result in any violation of the provisions
of the charter or by-laws of the Company or any of its subsidiaries or
(iii) result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties or assets, except any conflicts, breaches or
violations with respect to (i), (ii) and/or (iii) which, singularly or
in the aggregate, would not have a Material Adverse Effect.
(i) Except for the registration of the Stock under the Securities Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable
state securities laws, the National Association of Securities Dealers,
Inc. and the Nasdaq National Market in connection with the purchase and
distribution of the Stock by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution,
delivery and
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performance of this Agreement by the Company and the consummation of
the transactions contemplated hereby.
(j) The Company has taken all necessary actions to ensure that, upon
and at all times after the effectiveness of the Registration Statement,
it will be in compliance with all applicable provisions of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") that are then in
effect and is actively taking steps to ensure that it will be in
compliance with other applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
not currently in effect upon and at all times after the effectiveness
of such provisions.
(k) The Company has taken all necessary actions to ensure that, upon
the approval of the Stock for inclusion on the Nasdaq National Market
System ("Nasdaq"), it will be in compliance with all applicable
corporate governance requirements set forth in the Nasdaq Marketplace
Rules that are then in effect and is actively taking steps to ensure
that it will be in compliance with other applicable corporate
governance requirements set forth in the Nasdaq Marketplace Rules not
currently in effect upon and at all times after the effectiveness of
such requirements.
(l) PricewaterhouseCoopers LLP, who have expressed their opinions on
the audited financial statements and related schedules included in the
Registration Statements and the Prospectus, are independent public
accountants as required by the Securities Act and the Rules and
Regulations.
(m) The financial statements, together with the related notes and
schedules, included in the Prospectus and in each Registration
Statement fairly present the financial position and the results of
operations and changes in financial position of the Company and its
consolidated subsidiaries at the respective dates or for the respective
periods therein specified. Such statements and related notes and
schedules have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis except as may be
set forth in the Prospectus. The financial statements, together with
the related notes and schedules, included in the Prospectus comply in
all material respects with the Securities Act and the Rules and
Regulations thereunder. No other financial statements or supporting
schedules or exhibits are required by the Securities Act or the Rules
and Regulations thereunder to be included in the Prospectus.
(n) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included in
the Prospectus, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in
the Prospectus; and, since such date, there has not been any change in
the capital stock (other than issuances of options in the ordinary
course of business and pursuant to the Plans disclosed in the
Prospectus or the issuance of Common Stock upon the exercise of
outstanding options and warrants) or long-term debt of the Company or
any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the business, general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus.
(o) Except as set forth in the Prospectus, there is no legal or
governmental proceeding pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which, singularly or
in the aggregate, if determined adversely to the Company or any of its
subsidiaries, might have a Material Adverse Effect or would prevent or
adversely affect the ability of the Company to perform its obligations
under this Agreement; and to the best of the Company's knowledge, no
5
such proceedings are threatened or contemplated by any governmental
authorities or threatened by others.
(p) Neither the Company nor any of its subsidiaries (i) is in violation
of its charter or by-laws, (ii) is in default in any respect, and no
event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which it
is a party or by which it is bound or to which any of its property or
assets is subject or (iii) is in violation in any respect of any law,
ordinance, governmental rule, regulation or court decree to which it or
its property or assets may be subject except any violations or defaults
with respect to (i), (ii) and/or (iii) which, singularly or in the
aggregate, would not have a Material Adverse Effect.
(q) The Company and each of its subsidiaries possess all licenses,
certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate local, state, federal or
foreign regulatory agencies or bodies which are necessary or desirable
for the ownership of their respective properties or the conduct of
their respective businesses as described in the Prospectus except where
any failures to possess or make the same, singularly or in the
aggregate, would not have a Material Adverse Effect, and the Company
has not received notification of any revocation or modification of any
such license, authorization or permit and has no reason to believe that
any such license, certificate, authorization or permit will not be
renewed.
(r) Neither the Company nor any of its subsidiaries is or, after giving
effect to the offering of the Stock and the application of the proceeds
thereof as described in the Prospectus will become an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended and the rules and regulations of the Commission thereunder.
(s) Neither the Company nor any of its officers, directors or, to the
Company's knowledge, affiliates, has taken or will take, directly or
indirectly, any action designed or intended to stabilize or manipulate
the price of any security of the Company, or which caused or resulted
in, or which might in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any security
of the Company.
(t) The Company and its subsidiaries own or possess the right to use
all patents, trademarks, trademark registrations, service marks,
service ▇▇▇▇ registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights described in the Prospectus as
being owned or possessed by them and own or possess the right to use
all intellectual property necessary for the conduct of their respective
businesses, and the Company is not aware of any claim to the contrary
or any challenge by any other person to the rights of the Company and
its subsidiaries with respect to the foregoing. The Company's business
as now conducted and as proposed to be conducted does not and will not
infringe or conflict with any patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses or other intellectual
property or franchise right of any person. Except as described in the
Prospectus, no claim has been made or is likely to be made against the
Company alleging the infringement by the Company of any patent,
trademark, service ▇▇▇▇, trade name, copyright, trade secret, license
in or other intellectual property right or franchise right of any
person.
(u) The Company and each of its subsidiaries have good and marketable
title in fee simple to, or have valid rights to lease or otherwise use,
all items of real or personal property which are material to the
business of the Company and its subsidiaries taken as a whole, in each
case free and clear of all liens, encumbrances, claims and defects that
may result in a Material Adverse
6
Effect, except such liens set forth in that certain Revolving Credit
Agreement, dated as of October 24, 1997, between the Company and
Imperial Bank (Comerica), as amended.
(v) No labor disturbance by the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's knowledge, is
imminent which might be expected to have a Material Adverse Effect. The
Company is not aware that any key employee or significant group of
employees of the Company or any subsidiary plans to terminate
employment with the Company or any such subsidiary.
(w) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time (the "Code")) or "accumulated funding deficiency" (as defined
in Section 302 of ERISA) or any of the events set forth in Section
4043(b) of ERISA (other than events with respect to which the 30-day
notice requirement under Section 4043 of ERISA has been waived) has
occurred with respect to any employee benefit plan which could have a
Material Adverse Effect; each employee benefit plan is in compliance in
all material respects with applicable law, including ERISA and the
Code; the Company has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of,
or withdrawal from, any "pension plan"; and each "pension plan" (as
defined in ERISA) for which the Company would have any liability that
is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which could cause the loss of such
qualification.
(x) Except as disclosed in the Prospectus or as otherwise would not,
singly or in the aggregate, have a Material Adverse Effect or otherwise
require disclosure in the Prospectus, (i) neither the Company nor any
of its subsidiaries has been or is in violation of any federal, state
or local laws or regulation relating to pollution or protection of
human health or the environment, including, without limitation, laws
and regulations relating to emissions, discharges, releases or
threatened releases of toxic or hazardous substances, materials or
wastes, or petroleum and petroleum products ("Materials of
Environmental Concern"), or otherwise relating to the protection of
human health and safety, or the use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern
(collectively, "Environmental Laws"), which violation includes, without
limitation, noncompliance with, or lack of, any permits or other
environmental authorizations; (ii) to the Company's knowledge, there
are no circumstances, either past, present or that are reasonably
foreseeable, that may lead to any such violation in the future; (iii)
neither the Company nor any of its subsidiaries has received any
communication (written or oral), whether from a governmental agency or
body or otherwise, alleging any such violation; (iv) there is no
pending or threatened claim, action, investigation, notice (written or
oral) or other proceeding by any person or entity alleging potential
liability of either the Company or any of its subsidiaries (or against
any person or entity for whose acts or omissions the Company or any of
its subsidiaries is or may reasonably be expected to be liable, either
contractually or by operation of law) for investigatory, cleanup, or
other response costs, or natural resources or property damages, or
personal injuries, attorney's fees or penalties relating to (A) the
presence, or release into the environment, of any Materials of
Environmental Concern at any location, or (B) circumstances forming the
basis of any violation or potential violation, of any Environmental Law
(collectively, "Environmental Claims"); and (v) to the Company's
knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents that could form the
basis of any Environmental Claim.
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(y) The Company and its subsidiaries each (i) have filed with all
necessary federal, state and foreign income and franchise tax returns,
(ii) have paid all federal state, local and foreign taxes due and
payable for which it is liable, and (iii) do not have any tax
deficiency or claims outstanding or assessed or, to the best of the
Company's knowledge, proposed against it which could reasonably be
expected to have a Material Adverse Effect.
(z) The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in
similar businesses in similar industries.
(aa) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific authorization,
and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(bb) The minute books of the Company and each of its subsidiaries have
been made available to the Underwriters and counsel for the
Underwriters, and such books (i) contain a complete summary of all
meetings and actions of the board of directors (including each
committee thereof) and stockholders of the Company and each of its
subsidiaries since the time of its respective incorporation through the
date of the latest meeting and action, and (ii) accurately in all
material respects reflect all transactions referred to in such minutes.
(cc) There is no franchise, lease, contract, agreement or document
required by the Securities Act or by the Rules and Regulations to be
described in the Prospectus or to be filed as an exhibit to the
Registration Statements which is not described or filed therein as
required; and all descriptions of any such franchises, leases,
contracts, agreements or documents contained in the Registration
Statements are accurate and complete descriptions of such documents in
all material respects. Other than as described in the Prospectus, no
such franchise, lease, contract or agreement has been suspended or
terminated for convenience or default by the Company or any of the
other parties thereto, and the Company has not received notice or any
other knowledge of any such pending or threatened suspension or
termination, except for such pending or threatened suspensions or
terminations that would not reasonably be expected to, singularly or in
the aggregate, have a Material Adverse Effect.
(dd) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company on the other hand, which is
required to be described in the Prospectus and which is not so
described.
(ee) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of
the filing or effectiveness of the Registration Statements or
otherwise, except for persons and entities who have expressly waived
such right or who have been given timely and proper notice and have
failed to exercise such right within the time or times required under
the terms and conditions of such right.
(ff) Neither the Company nor any of its subsidiaries own any "margin
securities" as that term is defined in Regulation U of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"),
and none of the proceeds of the sale of the Stock will be used,
directly
8
or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security
or for any other purpose which might cause any of the Securities to be
considered a "purpose credit" within the meanings of Regulation T, U or
X of the Federal Reserve Board.
(gg) Neither the Company nor any of its subsidiaries is a party to any
contract, agreement or understanding with any person that would give
rise to a valid claim against the Company or the Underwriters for a
brokerage commission, finder's fee or like payment in connection with
the offering and sale of the Stock.
(hh) No forward-looking statement (within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act) contained in
the Prospectus has been made or reaffirmed without a reasonable basis
or has been disclosed other than in good faith.
(ii) The Stock has been approved for listing subject to notice of
issuance on the Nasdaq Stock Market's National Market.
(jj) The Registration Statements, the Prospectus and the Preliminary
Prospectus comply, and any further amendments or supplements thereto
will comply, with any applicable laws or regulations of foreign
jurisdictions in which they are distributed in connection with the
Directed Share Program. No authorization, approval, consent, license,
order, registration or qualification of or with any government,
governmental instrumentality or court, other than such as have been
obtained, is necessary under the securities laws or regulations of any
foreign jurisdiction in which the Directed Shares are offered outside
the United States.
(kk) The Company has not offered, or caused the Underwriters to offer,
any Firm Stock to any person pursuant to the Directed Share Program
with the specific intent to unlawfully influence (i) a customer or
business partner of the Company to alter the customer's or business
partner's level or type of business with the Company or (ii) a trade
journalist or publication to write or publish favorable information
about the Company or its products.
(II) REPRESENTATIONS AND WARRANTIES AND AGREEMENTS OF THE SELLING
STOCKHOLDERS. Each Selling Stockholder severally represents and warrants to, and
agrees with, the several Underwriters that such Selling Stockholder:
(a) Has, and immediately prior to each Option Closing Date (as defined
in Section 3 hereof) the Selling Stockholder will have, good and valid
title to the shares of Stock to be sold by the Selling Stockholder
hereunder on such date, free and clear of all liens, encumbrances,
equities or claims; and upon delivery of such shares and payment
therefor pursuant hereto, good and valid title to such shares, free and
clear of all liens, encumbrances, equities or claims, will pass to the
several Underwriters.
(b) Has duly and irrevocably executed and delivered a power of
attorney, in substantially the form heretofore delivered by the
Representatives (the "Power of Attorney"), appointing each of ▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as attorney-in-fact (the
"Attorney-in-Fact") with authority to execute and deliver this
Agreement on behalf of such Selling Stockholder, to authorize the
delivery of the shares of Stock to be sold by such Selling Stockholder
hereunder and otherwise to act on behalf of such Selling Stockholder in
connection with the transactions contemplated by this Agreement.
(c) Has duly and irrevocably executed and delivered a custody
agreement, in substantially the form heretofore delivered by the
Representatives (the "Custody Agreement"), with Equiserve,
9
Inc. as custodian (the "Custodian"), pursuant to which certificates in
negotiable form for the shares of Stock to be sold by such Selling
Stockholder hereunder have been placed in custody for delivery under
this Agreement.
(d) Has full right, power and authority to enter into this Agreement,
the Power of Attorney and the Custody Agreement; the execution,
delivery and performance of this Agreement, the Power of Attorney and
the Custody Agreement by such Selling Stockholder and the consummation
by such Selling Stockholder of the transactions contemplated hereby and
thereby will not conflict with or result in a breach or violation of
the charter or bylaws of such Selling Stockholder (if such Selling
Stockholder is a corporation) or articles of partnership of such
Selling Stockholder (if such Selling Stockholder is a partnership) or
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which such Selling Stockholder is a party or by which
the Selling Stockholder is bound or to which any of the property or
assets of the Selling Stockholder is subject, nor will such actions
result in any violation of any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Selling Stockholder or the property or assets of the Selling
Stockholder; and, except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state securities laws, the National Association of
Securities Dealers, Inc. and the Nasdaq National Market in connection
with the purchase and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement, the Power of
Attorney or the Custody Agreement by such Selling Stockholder and the
consummation by the Selling Stockholder of the transactions
contemplated hereby and thereby.
(e) The Registration Statements do not, and the Prospectus and any
further amendments or supplements to the Registration Statements or the
Prospectus will not, as of the applicable effective date (as to the
Registration Statements and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) 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, in light of the circumstances
in which they were made, not misleading. The preceding sentence applies
only to the extent that any information contained in or omitted from
the Registration Statements or Prospectus was in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder specifically for inclusion therein.
(f) Such 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 the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the any shares of Stock.
3. PURCHASE SALE AND DELIVERY OF OFFERED SECURITIES. 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 each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company, that number of shares of Firm Stock set forth opposite the
name of such Underwriter in Schedule A hereto (subject to adjustment by ▇▇ ▇▇▇▇▇
to eliminate fractions). The purchase price per share to be paid by the
Underwriters to the Company for the Stock will be $[_____] per share (the
"Purchase Price").
10
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York time, on the second full business day preceding the
First Closing Date (as defined below) against payment of the aggregate Purchase
Price therefor by same-day wire transfer to an account at a bank reasonably
acceptable to ▇▇ ▇▇▇▇▇, payable to the order of the Company, all at the offices
of Heller, Ehrman, White & ▇▇▇▇▇▇▇▇▇, LLP ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Time shall be of the essence, and delivery
at the time and place specified pursuant to this Agreement is a further
condition of the obligations of each Underwriter hereunder. The time and date of
the delivery and closing shall be at 7:00 A.M., California time, on [ ], 2003,
in accordance with Rule 15c6-1 of the Exchange Act. The time and date of such
payment and delivery are herein referred to as the "First Closing Date". The
First Closing Date and the location of delivery of, and the form of payment for,
the Firm Stock may be varied by agreement between the Company and ▇▇ ▇▇▇▇▇. The
Company shall make the certificates for the Firm Stock available to the
Representatives for examination on behalf of the Underwriters in San Diego,
California at least twenty-four hours prior to the First Closing Date.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Underwriters may purchase from the Selling Stockholders and the Company up to
all of the Optional Stock. The price per share to be paid for the Optional Stock
shall be the Purchase Price. The Selling Stockholders agree, severally and not
jointly, to sell to the Underwriters up to all of the numbers of shares of
Optional Stock set forth opposite the names of such Selling Stockholders in
Schedule B hereto under the caption "Number of Optional Shares to be Sold", in
such aggregate amounts as determined by the Representatives in their discretion;
provided, however, that in the event the Representatives shall exercise the
right, on behalf of the Underwriters, to purchase less than all of the Optional
Stock, each Selling Stockholder shall sell that number of shares set forth
opposite his, her or its name on Schedule B in the same proportion, relative to
the other Selling Stockholders, as that number of total shares of Optional Stock
subject to the over-allotment option set forth in this Section 3, and provided
further that, in the event the aggregate number of shares of Optional Stock sold
by the Selling Stockholders is less than the aggregate number of shares of
Optional Stock exercised by the Representatives, the Company shall sell to the
Underwriters the number of shares of Optional Stock that, together with the
number of shares of Optional Stocks sold by the Selling Stockholders, equals the
number of shares of Optional Stock exercised by the Representatives. Such shares
of Optional Stock shall be purchased for the account of each Underwriter in the
same proportion as the number of shares of Firm Stock set forth opposite such
Underwriter's name bears to the total number of shares of Firm Stock (subject to
adjustment by ▇▇ ▇▇▇▇▇ to eliminate fractions). The option granted hereby may be
exercised as to all or any part of the Optional Stock at any time, and from time
to time, up to three times, not more than thirty (30) days subsequent to the
date of this Agreement. No Optional Stock shall be sold and delivered unless the
Firm Stock previously has been, or simultaneously is, sold and delivered. The
right to purchase the Optional Stock or any portion thereof may be surrendered
and terminated at any time upon notice by ▇▇ ▇▇▇▇▇ to the Company and the
Selling Stockholders.
The option granted hereby may be exercised by written notice being
given to the Company and the Selling Stockholders by ▇▇ ▇▇▇▇▇ setting forth the
number of shares of the Optional Stock to be purchased by the Underwriters and
the date and time for delivery of and payment for the Optional Stock. Each date
and time for delivery of and payment for the Optional Stock (which may be the
First Closing Date, but not earlier) is herein called an "Option Closing Date"
and shall in no event be earlier than two (2) business days nor later than five
(5) business days after written notice is given. (The Option Closing Dates and
the First Closing Date are herein called the "Closing Dates".)
The Selling Stockholders and the Company will deliver the Optional
Stock to the Underwriters (in the form of definitive certificates, issued in
such names and in such denominations as the
11
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York time, on the second full business day preceding an
Option Closing Date against payment of the aggregate Purchase Price therefor by
same-day funds by wire transfer to an account at a bank reasonably acceptable to
▇▇ ▇▇▇▇▇ payable to the order of Equiserve, Inc., as Custodian for the Selling
Stockholders all at the offices of Heller, Ehrman, White & ▇▇▇▇▇▇▇▇▇, LLP ▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Time shall be of
the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligations of each Underwriter
hereunder. The Company and the Selling Stockholders shall make the certificates
for the Optional Stock available to the Representatives for examination on
behalf of the Underwriters in San Diego, California not later than 7:00 A.M.,
California time, on the business day preceding an Option Closing Date. Any
Option Closing Date and the location of delivery of, and the form of payment
for, the Optional Stock may be varied by agreement among the Company, the
Selling Stockholders and ▇▇ ▇▇▇▇▇.
The several Underwriters propose to offer the Stock for sale upon the
terms and conditions set forth in the Prospectus.
(4) (I) FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters that:
(a) The Company will prepare the Rule 462(b) Registration Statement, if
necessary, in a form approved by the Representatives and file such Rule
462(b) Registration Statement with the Commission on the date hereof;
prepare the Prospectus in a form approved by the Representatives and
file such Prospectus pursuant to Rule 424(b) under the Securities Act
not later than the second business day following the execution and
delivery of this Agreement; make no further amendment or any supplement
to the Registration Statements or to the Prospectus to which the
Representatives shall reasonably object by notice to the Company after
a reasonable period to review, other than any such amendment or
supplement which, in the opinion of legal counsel to the Company, is
required by applicable laws or regulations to be filed; advise the
Representatives, promptly after it receives notice thereof, of the time
when any amendment to either Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with
copies thereof; advise the Representatives, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, of the suspension of the qualification of
the Stock for offering or sale in any jurisdiction, of the initiation
or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the
Registration Statements or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of
any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification, use
promptly its best efforts to obtain its withdrawal.
(b) If at any time prior to the expiration of nine months after the
effective date of the Initial Registration Statement when a prospectus
relating to the Stock is required to be delivered any event occurs as a
result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the
Securities Act, the Company will promptly notify the Representatives
thereof and upon their request will prepare an amended or supplemented
Prospectus which will correct such statement or omission or effect such
compliance. The Company will furnish without charge to each Underwriter
and to any dealer in securities as many copies as the Representatives
may from time to time reasonably request of such amended or
supplemented Prospectus; and in case any Underwriter is required to
deliver a prospectus relating to the Stock nine months or more after
the effective date of the
12
Initial Registration Statement, the Company upon the request of the
Representatives and at the expense of such Underwriter will prepare
promptly an amended or supplemented Prospectus as may be necessary to
permit compliance with the requirements of Section 10(a)(3) of the
Securities Act.
(c) To furnish promptly to each of the Representatives and to counsel
for the Underwriters a signed copy of each of the Registration
Statements as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith.
(d) To deliver promptly to ▇▇ ▇▇▇▇▇ Securities Corporation in New York
City such number of the following documents as the Representatives
shall reasonably request: (i) conformed copies of the Registration
Statements as originally filed with the Commission and each amendment
thereto (in each case excluding exhibits), (ii) each Preliminary
Prospectus, and (iii) the Prospectus (not later than 10:00 A.M., New
York time, of the business day following the execution and delivery of
this Agreement, or such later date agreed to by the Company and the
Representatives) and any amended or supplemented Prospectus (not later
than 10:00 A.M., New York City time, on the business day following the
date of such amendment or supplement or such later date agreed to by
the Company and ▇▇ ▇▇▇▇▇ Securities Corporation).
(e) To make generally available to its stockholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Securities Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Securities Act and the Rules and Regulations (including, at the
option of the Company, Rule 158).
(f) The Company will promptly take from time to time such actions as
the Representatives may reasonably request to qualify the Stock for
offering and sale under the securities or Blue Sky laws of such
jurisdictions as the Representatives may designate in writing to the
Company and to continue such qualifications in effect for so long as
required for the distribution of the Stock; provided that the Company
and its subsidiaries shall not be obligated to qualify as foreign
corporations in any jurisdiction in which they are not so qualified or
to file a general consent to service of process in any jurisdiction;
(g) During the period of five years from the date hereof, the Company
will deliver to the Representatives and, upon request, to each of the
other Underwriters, (i) as soon as they are available, copies of all
reports or other communications furnished to stockholders and (ii) as
soon as they are available, copies of any reports and financial
statements furnished or filed with the Commission pursuant to the
Exchange Act or any national securities exchange or automatic quotation
system on which the Stock is listed or quoted.
(h) The Company will not directly or indirectly offer, sell, assign,
transfer, pledge, contract to sell, or otherwise dispose of any shares
of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock for a period of 180 days from the date of
the Prospectus without the prior written consent of ▇▇ ▇▇▇▇▇ other than
(i) the Company's sale of the Stock hereunder, (ii) the issuance of
options to purchase shares of Common Stock in the ordinary course of
business and pursuant to the Company's 1997 Stock Option Plan, 2002
Stock Option Plan, 2003 Equity Incentive Plan, 2003 Employee Stock
Purchase Plan and 2003 Foreign Subsidiary Employee Stock Purchase Plan
(collectively, the "Plans") (not to exceed the shares available for
issuance of grant under such plans as set forth in the Prospectus),
(ii) the issuance of shares of Common Stock upon exercise of options to
purchase shares of Common Stock issued in the ordinary course of
business and pursuant to the Plans and (iii) the issuance of shares of
13
Common Stock upon exercise of outstanding warrants as described in the
Prospectus. The Company will cause all of its officers, directors and
security holders (other than those security holders listed on Schedule
B hereto) to furnish to the Representatives, prior to the First Closing
Date, a letter, substantially in the form of Exhibit I hereto, pursuant
to which each such person shall agree not to directly or indirectly
offer, sell, assign, transfer, pledge, contract to sell, or otherwise
dispose of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock for a period of 180 days
from the date of the Prospectus, without the prior written consent of
▇▇ ▇▇▇▇▇.
(i) The Company will supply the Representatives with copies of all
correspondence to and from, and all documents issued to and by, the
Commission in connection with the registration of the Stock under the
Securities Act.
(j) Prior to each of the Closing Dates the Company will furnish to the
Representatives, as soon as they have been prepared, copies of any
unaudited interim consolidated financial statements of the Company for
any periods subsequent to the periods covered by the financial
statements appearing in the Registration Statement and the Prospectus.
(k) Prior to each of the Closing Dates, the Company will not issue any
press release or other communication directly or indirectly or hold any
press conference with respect to the Company, its condition, financial
or otherwise, or earnings, business affairs or business prospects
(except for routine oral marketing communications in the ordinary
course of business and consistent with the past practices of the
Company and of which the Representatives are notified), without the
prior written consent of the Representatives, unless in the judgment of
the Company and its counsel, and after notification to the
Representatives, such press release or communication is required by
law.
(l) In connection with the offering of the Stock, until ▇▇ ▇▇▇▇▇ shall
have notified the Company of the completion of the resale of the Stock,
the Company will not, and will cause its affiliated purchasers (as
defined in Regulation M under the Exchange Act) not to, either alone or
with one or more other persons, bid for or purchase, for any account in
which it or any of its affiliated purchasers has a beneficial interest,
any Stock, or attempt to induce any person to purchase any Stock; and
not to, and to cause its affiliated purchasers not to, make bids or
purchase for the purpose of creating actual, or apparent, active
trading in or of raising the price of the Stock.
(m) The Company will not take any action prior to the Option Closing
Date which would require the Prospectus to be amended or supplemented
pursuant to Section 4(I)(b).
(n) The Company will apply the net proceeds from the sale of the Stock
as set forth in the Prospectus under the heading "Use of Proceeds".
(o) In connection with the Directed Share Program, the Company will
ensure that the Directed Shares will be restricted to the extent
required by the NASD or the NASD rules from sale, transfer, assignment,
pledge or hypothecation for a period of three (3) months following the
date of the effectiveness of the Registration Statement. The Designated
Underwriter will notify the Company as to which Participants will need
to be so restricted. The Company will direct the transfer agent to
place stop transfer restrictions upon such securities for such period
of time.
(p) The Company will, or will cause the Selling Stockholders to, pay
all fees and disbursements of counsel incurred by the Underwriters in
connection with the Directed Share
14
Program and stamp duties, similar taxes or duties or other taxes, if
any, incurred by the Underwriters in connection with the Directed Share
Program.
(q) The Company will comply with all applicable securities and other
applicable securities and other laws, rules and regulations in each
foreign jurisdiction in which the Directed Shares are offered in
connection with the Directed Share Program.
(II) FURTHER AGREEMENTS OF THE SELLING STOCKHOLDERS. Each Selling Stockholder,
severally and not jointly, agrees with the several Underwriters that:
(a) The shares of Stock represented by the certificates held in custody
under the Custody Agreement are for the benefit of and coupled with and
subject to the interests of the Underwriters and the other Selling
Stockholders, and that the arrangement for such custody and the
appointment of the Attorney-in-Fact are irrevocable; that the
obligations of such Selling Stockholder hereunder shall not be
terminated by operation of law, whether by the death or incapacity,
liquidation or distribution of such Selling Stockholder, or any other
event, that if such Selling Stockholder should die or become
incapacitated or is liquidated or dissolved or any other event occurs,
before the delivery of the Stock hereunder, certificates for the Stock
to be sold by such Selling Stockholder shall be delivered on behalf of
such Selling Stockholder in accordance with the terms and conditions of
this Agreement and the Custody Agreement, and action taken by the
Attorney-in-Fact or any of them under the Power of Attorney shall be as
valid as if such death, incapacity, liquidation or dissolution or other
event had not occurred, whether or not the Custodian, the
Attorney-in-Fact or any of them shall have notice of such death,
incapacity, liquidation or dissolution or other event.
(b) Such Selling Stockholder will deliver to ▇▇ ▇▇▇▇▇ on or prior to
the first Option Closing Date a properly completed and executed United
States Treasury Department Form W-8 (if the Selling Stockholder is a
non-United States person) or Form W-9 (if the Selling Stockholder is a
United States person) or such other applicable form or statement
specified by Treasury Department regulations in lieu thereof.
(c) Such Selling Stockholder will not take, directly or indirectly, any
action designed to or that might reasonably be expected to cause or
result in the stabilization or manipulation of the price of any
security of the Company or facilitate the sale or resale of the any
shares of Stock.
5. PAYMENT OF EXPENSES. The Company agrees with the Underwriter to pay: (a) the
costs incident to the authorization, issuance, sale, preparation and delivery of
the Stock and any taxes payable in that connection; (b) the costs incident to
the Registration of the Stock under the Securities Act; (c) the costs incident
to the preparation, printing and distribution of the Registration Statement,
Preliminary Prospectus, Prospectus any amendments and exhibits thereto the costs
of printing, reproducing and distributing the Power of Attorney, the Custody
Agreement, the "Agreement Among Underwriters" between the Representatives and
the Underwriters, the Master Selected Dealers' Agreement, the Underwriters'
Questionnaire and this Agreement by mail, telex or other means of
communications; (d) the fees and expenses (including related fees and expenses
of counsel for the Underwriters) incurred in connection with filings made with
the National Association of Securities Dealers; (e) any applicable listing or
other fees; (f) the fees and expenses of qualifying the Stock under the
securities laws of the several jurisdictions as provided in Section 4(I)(f) and
of preparing, printing and distributing Blue Sky Memoranda and Legal Investment
Surveys (including related fees and expenses of counsel to the Underwriters);
(g) all fees and expenses of the registrar and transfer agent of the Stock; and
(h) all other costs and expenses incident to the performance of the obligations
of the Company under this Agreement (including, without limitation, the fees and
expenses of the Company's counsel and the Company's independent accountants);
provided that, except as otherwise expressly provided in this Section 5 and in
15
Section 9, the Underwriters shall pay their own costs and expenses, including
the fees and expenses of their counsel, any transfer taxes on the Stock which
they may sell and the expenses of advertising any offering of the Stock made by
the Underwriters.
Each Selling Stockholder will pay all fees and expenses incident to the
performance of such Selling Stockholder's obligations under this Agreement which
are not otherwise specifically provided for herein, including but not limited to
any fees and expenses of counsel for such Selling Stockholder, such Selling
Stockholder's pro rata share of fees and expenses of the Attorney-in-Fact and
the Custodian and all expenses and taxes incident to the sale and delivery of
the Stock to be sold by such Selling Stockholder to the Underwriters hereunder.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of the
several Underwriters hereunder are subject to the accuracy, when made and on
each of the Closing Dates, of the respective representations and warranties of
the Company and the Selling Stockholders contained herein, to the accuracy of
the respective statements of the Company and the Selling Stockholders made in
any certificates pursuant to the provisions hereof, to the performance by the
Company and the Selling Stockholders of their respective obligations hereunder,
and to each of the following additional terms and conditions:
(a) No stop order suspending the effectiveness of either of the
Registration Statements shall have been issued and no proceedings for
that purpose shall have been initiated or threatened by the Commission,
and any request for additional information on the part of the
Commission (to be included in the Registration Statements or the
Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Representatives. The Rule 462(b)
Registration Statement, if any, and the Prospectus shall have been
timely filed with the Commission in accordance with Section 4(I)(a).
(b) None of the Underwriters shall have discovered on or prior to the
Closing Date that the Registration Statements or the Prospectus or any
amendment or supplement thereto contains an untrue statement of a fact
which, in the reasonable opinion of counsel for the Underwriters, is
material or omits to state any fact which, in the reasonable opinion of
such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of this Agreement, the Custody
Agreements, the Powers of Attorney, the Stock, the Registration
Statements and the Prospectus and all other legal matters relating to
this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to counsel for the
Underwriters, and the Company and the Selling Stockholders shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(d) ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇ LLP shall have furnished to the
Representatives such counsel's written opinion, as counsel to the
Company, addressed to the Underwriters and dated the Closing Date, in
form and substance reasonably satisfactory to the Representatives, to
the effect that:
(i) The Company and each of DTS Consumer Products, Inc.,
a Delaware corporation, DTS Entertainment, LLC, a
Delaware limited liability company, and Digital
Theater Systems (UK), a United Kingdom corporation
(collectively, the "Major Subsidiaries") have been
duly organized and are validly existing in good
standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to
do business and are in good standing as foreign
entities in each
16
jurisdiction in which their respective ownership or
lease of property or the conduct of their respective
businesses requires such qualification, and have all
power and authority necessary to own or hold their
respective properties and to conduct their businesses
as described in the Prospectus, except where the
failure to so qualify or have such power or authority
would not have, singularly or in the aggregate, a
Material Adverse Effect.
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares
of capital stock of the Company have been duly
authorized and validly issued, are non-assessable
and, to our knowledge, fully paid. Such shares
conform to the description thereof contained under
the heading "Description of Securities" in the
Prospectus. The Firm Stock being delivered on the
Closing Date has been duly authorized and, when
issued and delivered to and paid for by the
Underwriters in accordance with this Agreement, will
be validly issued, fully paid and non-assessable and
will conform to the description thereof contained
under the heading "Description of Securities" in the
Prospectus.
(iii) All the outstanding shares of capital stock of each
Major Subsidiary have been duly authorized and
validly issued, nonassessable and, to our knowledge,
fully paid and, except to the extent set forth in the
Prospectus, are owned by the Company directly or
indirectly through one or more wholly-owned
subsidiaries, free and clear of any claim, lien,
encumbrance, security interest, restriction upon
voting or transfer or any other claim of any third
party.
(iv) There are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the
voting or transfer of, any shares of (A) the Firm
Stock or (B) any and all Optional Stock sold by the
Company, pursuant to the Company's charter or by-laws
or any agreement or other instrument known to such
counsel, except for such rights and/or restrictions
that have been waived.
(v) This Agreement has been duly authorized, executed and
delivered by the Company.
(vi) The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby will not (i) conflict with or
result in a breach or violation of any of the terms
or provisions of, or constitute a default under any
indenture, mortgage, deed of trust, loan agreement or
other agreement which has been filed as an exhibit to
the Registration Statements, (ii) result in any
violation of the Charter or by-laws of the Company or
of any Major Subsidiary or (iii) violate any statute
or any order, rule or regulation, known by such
counsel, of any court or governmental agency or body
or court having jurisdiction over the Company or any
Major Subsidiary or any of their properties or
assets.
(vii) Except for the registration of the Stock under the
Securities Act and such consents, approvals,
authorizations, registrations or qualifications as
may be required under the Exchange Act and applicable
state securities or blue sky laws in connection with
the purchase and distribution of the Stock by the
Underwriters (except that we express no opinion as to
any necessary qualification under state securities or
blue sky laws of the various jurisdictions in which
the Stock is being offered by the Underwriters), no
consent, approval, authorization or order of, or
filing or registration with, any such court or
governmental or regulatory agency
17
or body is required for the execution, delivery and
performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby.
(viii) The statements in (A) the Prospectus under the
headings "Certain Relationships and Related
Transactions", "Description of Securities", "Shares
Eligible for Future Sale", "Material United States
Federal Income Tax Considerations for Non-U.S.
Holders of Our Common Stock" and "Risk Factors -
Anti-Takeover Provisions Under Our Charter Documents
and Delaware Law Could Delay or Prevent a Change of
Control and Could Also Limit the Market Price of Our
Stock" and in (B) the Registration Statement, Part
II, Items 14 and 15, to the extent that such
statements constitute summaries of matters of law or
regulation or legal conclusions, have been reviewed
by such counsel and fairly summarize the matters
described therein in all material respects.
(ix) To such counsel's knowledge, neither the Company nor
any Major Subsidiary is (i) in violation of its
charter or by-laws, (ii) in default, and no event has
occurred, which, with notice or lapse of time or
both, would constitute a default, in the due
performance or observance of any term, covenant or
condition contained in any agreement or instrument to
which it is a party or by which it is bound or to
which any of its properties or assets is subject or
(iii) in violation of any law, ordinance,
governmental rule, regulation or court decree to
which it or its property or assets may be subject or
has failed to obtain any license, permit,
certificate, franchise or other governmental
authorization or permit necessary to the ownership of
its property or to the conduct of its business
except, in the case of clauses (ii) and /or (iii),
for those defaults, violations or failures which,
individually or in the aggregate, would not have a
Material Adverse Effect.
(x) To counsel's knowledge, there are no contracts or
other documents of a character required to be
described in the Registration Statement or Prospectus
or to be filed as exhibits to the Registration
Statement which are not described or filed as
required.
(xi) To such counsel's knowledge, there are no statutes or
legal or governmental proceedings pending to which
the Company or any Major Subsidiary is a party or of
which any property or asset of the Company or any
Major Subsidiary is the subject which are of a
character required to be described not described in
the Prospectus which are not described as required.
(xii) The Registration Statement was declared effective
under the Securities Act as of the date and time
specified in such opinion, the Rule 462(b)
Registration Statement, if any, was filed with the
Commission on the date specified therein, the
Prospectus was filed with the Commission pursuant to
the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date
specified therein and no stop order suspending the
effectiveness of the Registration Statement has been
issued and, to the knowledge of such counsel, no
proceeding for that purpose is pending or threatened
by the Commission.
(xiii) The Registration Statements, as of their respective
effective dates, and the Prospectus, as of its date,
and any further amendments or supplements thereto, as
of their respective dates, made by the Company prior
to the Closing Date (other than the financial
statements and schedules and other financial and
statistical data
18
contained or incorporated by reference therein, as to
which such counsel need express no opinion) complied
as to form in all material respects with the
requirements of the Securities Act and the Rules and
Regulations.
(xiv) To such counsel's knowledge, except as described in
the Prospectus, no person or entity has the right to
require the Company to register any shares of Common
Stock or other securities of the Company because of
the filing or effectiveness of the Registration
Statements or otherwise, except for persons and
entities who have expressly waived such right or who
have been given proper notice and have failed to
exercise such right within the time or times required
under the terms and conditions of such right.
(xv) Neither the Company nor any of its subsidiaries is an
"investment company" within the meaning of the
Investment Company Act and the rules and regulations
of the Commission thereunder (provided that such
opinion may rely upon an appropriate officer's
certificate certifying the facts necessary for
counsel to render such opinion).
Such counsel shall also have furnished to the Representatives
a written statement, addressed to the Underwriters and dated the
Closing Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted as
counsel to the Company in connection with the preparation of the
Registration Statements (y) based on such counsel's examination of the
Registration Statements and such counsel's investigations made in
connection with the preparation of the Registration Statements and
"conferences with certain officers and employees of and with auditors
for and counsel to the Company", such counsel has no reason to believe
that the Registration Statements, as of the respective effective dates,
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order
to make the statements therein not misleading, or that the Prospectus
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading; it being understood that such counsel
need express no opinion as to the financial statements or other
financial data contained in the Registration Statement or the
Prospectus.
The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel has not independently
verified the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus and takes no
responsibility therefor except to the extent set forth in the opinion
described in clauses (viii) and (ix) above.
(e) O'Melveny & ▇▇▇▇▇ LLP shall have furnished to the
Representatives such counsel's written opinion, as counsel to the
Selling Stockholders, addressed to the Underwriters and dated the
Closing Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) Each Selling Stockholder has full right,
power and authority to enter into this
Agreement, the Power of Attorney and the
Custody Agreement; the execution, delivery
and performance of this Agreement, the Power
of Attorney and the Custody Agreement by
each Selling Stockholder and the
consummation by each Selling Stockholder of
the transactions contemplated hereby and
thereby will not conflict with or result in
a breach or violation of any of the terms or
provisions of, or constitute a default
under, any statute, any indenture, mortgage,
deed of trust, loan
19
agreement or other agreement or instrument
known to such counsel to which any Selling
Stockholder is a party or by which any
Selling Stockholder is bound or to which any
of the property or assets of any Selling
Stockholder is subject, nor will such
actions result in any violation of any
statute or any order, rule or regulation
known to such counsel of any court or
governmental agency or body having
jurisdiction over any Selling Stockholder or
the property or assets of any Selling
Stockholder; and, except for the
registration of the Optional Stock under the
Securities Act and such consents, approvals,
authorizations, registrations or
qualifications as may be required under the
Exchange Act and applicable state securities
laws in connection with the purchase and
distribution of the Optional Stock by the
Underwriters, no consent, approval,
authorization or order of, or filing or
registration with, any such court or
governmental agency or body is required for
the execution, delivery and performance of
this Agreement, the Power of Attorney or the
Custody Agreement by any Selling Stockholder
and the consummation by any Selling
Stockholder of the transactions contemplated
hereby and thereby.
(ii) This Agreement has been duly executed and
delivered by or on behalf of each Selling
Stockholder.
(iii) A Power-of-Attorney and a Custody Agreement
have been duly executed and delivered by or
on behalf of each Selling Stockholder and
constitute valid and binding agreements of
each Selling Stockholder.
(iv) Upon payment for, and delivery of, the
shares of Optional Stock to be sold by each
Selling Stockholder under this Agreement in
accordance with the terms hereof, the
Underwriters will acquire good and valid
title to such shares, free and clear of all
liens, encumbrances, equities or claims.
(f) The Representatives shall have received from Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel for the Underwriters, such
opinion or opinions, dated the Closing Date, with respect to such
matters as the Underwriters may reasonably require, and the Company
shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(g) At the time of the execution of this Agreement, the
Representatives shall have received from PricewaterhouseCoopers LLP a
letter, addressed to the Underwriters and dated such date, in form and
substance satisfactory to the Representatives (i) confirming that they
are independent certified public accountants with respect to the
Company and its subsidiaries within the meaning of the Securities Act
and the Rules and Regulations and (ii) stating the conclusions and
findings of such firm with respect to the financial statements and
certain financial information contained in the Prospectus.
(h) On the Closing Date, the Representatives shall have
received a letter (the "bring-down letter") from PricewaterhouseCoopers
LLP addressed to the Underwriters and dated the Closing Date
confirming, as of the date of the bring-down letter (or, with respect
to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Prospectus
as of a date not more than three business days prior to the date of the
bring-down letter), the conclusions and findings of such firm with
respect to the
20
financial information and other matters covered by its letter delivered
to the Representatives concurrently with the execution of this
Agreement pursuant to Section 6(g).
(i) The Company shall have furnished to the Representatives a
certificate, dated the Closing Date, of its Chief Executive Officer and
President and its Chief Financial Officer stating that (i) such
officers have carefully examined the Registration Statements and the
Prospectus and, in their opinion, the Registration Statements as of
their respective effective dates and the Prospectus, as of each such
effective date, did not include any untrue statement of a material fact
and did not omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, (ii) since the
effective date of the Initial Registration Statement no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statements or the Prospectus, (iii) to the best of
their knowledge after reasonable investigation, as of the Closing Date,
the representations and warranties of the Company in this Agreement are
true and correct and the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date, and (iv) subsequent to the
date of the most recent financial statements in the Prospectus, there
has been no change in the financial position or results of operation of
the Company and its subsidiaries, or any change, or any development
including a prospective change, in each of the instances in this clause
(iv), that might have a Material Adverse Effect on the condition
(financial or otherwise), results of operations, business or prospects
of the Company and its subsidiaries taken as a whole, except as set
forth in the Prospectus.
(j) Each Selling Stockholder shall have furnished to the
Representatives on each applicable Option Closing Date a certificate,
dated the such date, signed by, or on behalf of, the Selling
Stockholder stating that the representations, warranties and agreements
of the Selling Stockholder contained herein are true and correct as of
such Option Closing Date and that the Selling Stockholder has complied
with all agreements contained herein to be performed by the Selling
Stockholder at or prior to the Closing Date.
(k) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the business, general
affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of
which, in any such case described in clause (i) or (ii), is, in the
judgment of the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of
the Stock on the terms and in the manner contemplated in the
Prospectus.
(l) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date,
prevent the issuance or sale of the Stock; and no injunction,
restraining order or order of any other nature by any federal or state
court of competent jurisdiction shall have been issued as of the
Closing Date which would prevent the issuance or sale of the Stock.
(m) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the Company's corporate
credit rating or the rating accorded the
21
Company's debt securities by any "nationally recognized statistical
rating organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) of the Rules and Regulations and (ii) no
such organization shall have publicly announced that it has under
surveillance or review (other than an announcement with positive
implications of a possible upgrading), its rating of any of the
Company's debt securities.
(n) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or the Toronto Stock Exchange or in the over-the-counter
market, or trading in any securities of the Company on any exchange or
in the over-the-counter market, shall have been suspended or minimum or
maximum prices or maximum range for prices shall have been established
on any such exchange or such market by the Commission, by such exchange
or by any other regulatory body or governmental authority having
jurisdiction; (ii) a banking moratorium shall have been declared by
United States Federal or state authorities, or Canadian federal or
provincial authorities, or a material disruption has occurred in
commercial banking or securities settlement or clearance services in
the United States or Canada; (iii) (A) a declaration of a material
national emergency or a declaration of war by the United States, or a
material outbreak or escalation of hostilities between the United
States and any foreign power, (B) an outbreak or material escalation of
any other insurrection or armed conflict, or act of terrorism involving
the United States, or any other national or international crisis,
calamity or emergency, (C) a "Red" terrorist threat condition,
announced by the Homeland Security Advisory System or similar agency in
the United States, (D) any material discharge, detonation, explosion or
use against any person or entity or nation anywhere in the world of any
weapon of mass destruction has occurred or (iv) there shall have
occurred such a material adverse change in general economic, political
or financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such) as to make
it, in the sole judgment of the Representatives, impracticable or
inadvisable to proceed with the sale or delivery of the Stock on the
terms and in the manner contemplated in the Prospectus.
(o) The Nasdaq National Market System shall have approved the
Stock for inclusion, subject only to official notice of issuance and
evidence of satisfactory distribution.
(p) ▇▇ ▇▇▇▇▇ shall have received the written agreements,
substantially in the form of Exhibit I hereto, of all of the officers,
directors and security holders of the Company (other than those
security holders listed on Schedule C hereto).
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each Underwriter, its
officers, employees, representatives and agents and each person, if
any, who controls any Underwriter within the meaning of the Securities
Act (collectively the "Underwriter Indemnified Parties" and , each an
"Underwriter Indemnified Party") against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which
that Underwriter Indemnified Party may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in
the Preliminary Prospectus, either of the Registration Statements or
the Prospectus or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state in any Preliminary Prospectus,
either of the Registration Statements or
22
the Prospectus or in any amendment or supplement thereto a material
fact required to be stated therein or necessary to make the statements
therein not misleading and shall reimburse each Underwriter Indemnified
Party reasonably promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter Indemnified Party in connection
with investigating or preparing to defend or defending against or
appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred;
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 (i) an untrue statement or
alleged untrue statement in or an omission or alleged omission from the
Preliminary Prospectus, either of the Registration Statements or the
Prospectus or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company through
the Representatives by or on behalf of any Underwriter specifically for
use therein, which information the parties hereto agree is limited to
the Underwriters' Information (as defined in Section 16); provided,
further, however, that the foregoing indemnification agreement with
respect to the Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any such loss, claim,
damage or liability purchases Securities, or any officers, employees,
representatives, agents or controlling persons of such Underwriter, if
(i) a copy of the Prospectus (as then amended or supplemented) was
required by law to be delivered to such person at or prior to the
written confirmation of the sale of Securities to such person, (ii) a
copy of the Prospectus (as then amended or supplemented) was not sent
or given to such person by or on behalf of such Underwriter and such
failure was not due to non-compliance by the Company with Section
4(I)(d), and (iii) the Prospectus (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage or
liability.
The Company shall indemnify and hold harmless the Designated
Underwriter and its officers, employees, representatives and agents and
each person, if any, who controls any Underwriter within the meaning of
the Securities Act (collectively the "Designated Underwriter
Indemnified Parties," and each a "Designated Underwriter Indemnified
Party") against any loss, claim, damage or liability, joint or several,
or any action in respect thereof, to which that Designated Underwriter
Indemnified Party may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any material prepared
by or with the consent of the Company for distribution to Participants
in connection with the Directed Share Program, (ii) the omission or
alleged omission to state in any material prepared by or with the
consent of the Company for distribution to Participants in connection
with the Directed Share Program of 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,
(iii) the failure of any Participant to pay for and accept delivery of
Directed Shares that the Participant agreed to purchase; or (iv) any
other loss, claim, damage or liability, or any action in respect of,
related to, arising out of, or in connection with the Directed Share
Program, other than such losses, claims, damages or liabilities (or
expenses relating thereto) that are finally judicially determined to
have resulted from the willful misconduct or gross negligence of the
Designated Underwriter.
This indemnity agreement is not exclusive and will be in addition to
any liability which the Company might otherwise have and shall not
limit any rights or remedies which may otherwise be available at law or
in equity to each Underwriter Indemnified Party.
(b) Each Selling Stockholder, severally and not jointly, shall
indemnify and hold harmless each Underwriter Indemnified Party, against
any loss, claim, damage or liability or any action in respect thereof,
to which that Underwriter Indemnified may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of or is based
23
upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Prospectus, either of the
Registration Statements or the Prospectus or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state in
any Preliminary Prospectus, either of the Registration Statements or
the Prospectus or in any amendment or supplement thereto a material
fact required to be stated therein or necessary to make the statements
therein not misleading -- but in case of each (i) and (ii), only to the
extent that the 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 or on
behalf of such Selling Stockholder specifically for inclusion therein,
and shall reimburse each Underwriter Indemnified Party reasonably
promptly upon demand for any legal or other expenses reasonably
incurred by that Underwriter Indemnified Party in connection with
investigating or preparing to defend or defending against or appearing
as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided,
however, that the foregoing indemnification agreement with respect to
the Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such loss, claim, damage
or liability purchased Securities, or any officers, employees,
representatives, agents or controlling persons of such Underwriter, (A)
if (i) a copy of the Prospectus (as then amended or supplemented) was
required by law to be delivered to such person at or prior to the
written confirmation of the sale of Securities to such person, (ii) a
copy of the Prospectus (as then amended or supplemented) was not sent
or given to such person by or on behalf of such Underwriter and such
failure was not due to non-compliance by the Company with Section
4(I)(d), and (iii) the Prospectus (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage or
liability or (B) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the
Preliminary Prospectus, either of the Registration Statements or the
Prospectus or any amendment or supplement in reliance upon and in
conformity with the Underwriters' Information (as defined in Section
16); and provided further, however, that the liability of any Selling
Stockholder under this subsection (b) shall not exceed the net proceeds
received by such Selling Stockholder in connection with the sale of
such Selling Stockholder's Optional Shares. This indemnity agreement is
not exclusive and will be in addition to any liability which the
Selling Stockholders might otherwise have and shall not limit any
rights or remedies which may otherwise be available at law or in equity
to each Underwriter Indemnified Party.
(c) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company its officers, employees, representatives and
agents, each of its directors (including any person who with his
consent is named in the Registration Statements as expected to become a
director of the Company shortly after the First Closing) and each
person, if any, who controls the Company within the meaning of the
Securities Act (collectively the "Company Indemnified Parties" and each
a "Company Indemnified Party") and the Selling Stockholders, their
respective officers, employees, representatives and agents and each
person, if any, who controls the Selling Stockholders within the
meaning of the Securities Act (collectively, the "Selling Stockholder
Indemnified Parties" and each a "Selling Stockholder Indemnified
Party," against any loss, claim, damage or liability, joint or several,
or any action in respect thereof, to which the Company Indemnified
Parties or the Selling Stockholder Parties may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in
the Preliminary Prospectus, either of the Registration Statements or
the Prospectus or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with
24
written information furnished to the Company through the
Representatives by or on behalf of that Underwriter specifically for
use therein, and shall reimburse the Company Indemnified Parties and
the Selling Stockholder Indemnified Parties for any legal or other
expenses reasonably incurred by such parties in connection with
investigating or preparing to defend or defending against or appearing
as third party witness in connection with any such loss, claim, damage,
liability or action as such expenses are incurred; provided that the
parties hereto hereby agree that such written information provided by
the Underwriters consists solely of the Underwriters' Information (as
defined in Section 16). This indemnity agreement is not exclusive and
will be in addition to any liability which the Underwriters might
otherwise have and shall not limit any rights or remedies which may
otherwise be available at law or in equity to the Company Indemnified
Parties and the Selling Stockholder Indemnified Parties.
(d) Promptly after receipt by an indemnified party under this Section 7
of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 7 except to the extent it has been materially prejudiced
by such failure; and, provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 7. If
any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that
it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that any indemnified party shall have
the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i)
the employment thereof has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have
been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to
those available to the indemnifying party and in the reasonable
judgment of such counsel it is advisable for such indemnified party to
employ separate counsel or (iii) the indemnifying party has failed to
assume the defense of such action and employ counsel reasonably
satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any
time for all such indemnified parties, which firm shall be designated
in writing by ▇▇ ▇▇▇▇▇, if the indemnified parties under this Section 7
consist of any Underwriter Indemnified Party, or by the Company if the
indemnified parties under this Section 7 consist of any Company
Indemnified Parties or Selling Stockholder Indemnified Parties. Each
indemnified party, as a condition of the indemnity agreements contained
in Sections 7(a), 7(b) and 7(c), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action
or claim. Subject to the provisions of Section 7(f) below, no
indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if
there be a final
25
judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding anything contained herein to the contrary, if indemnity
may be sought pursuant to the penultimate paragraph in Section 7(a)
hereof in respect of such action or proceeding, then in addition to
such separate firm for the indemnified parties, the indemnifying party
shall be liable for the reasonable fees and expenses of not more than
one separate firm (in addition to any local counsel) for the Designated
Underwriter for the defense of any losses, claims, damages and
liabilities arising out of the Directed Share Program, and all persons,
if any, who control the Designated Underwriter within the meaning of
either Section 15 of the Act of Section 20 of the Exchange Act.
(e) If at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for fees and
expenses of counsel, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by this Section 7
effected without its written consent if (i) such settlement is entered
into more than 45 days after receipt by such indemnifying party of the
request for reimbursement, (ii) such indemnifying party shall have
received notice of the terms of such settlement at least 30 days prior
to such settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance with
such request prior to the date of such settlement.
(f) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
Section 7(a), 7(b) or 7(c), then each indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid
or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company, the Selling Stockholders and the Underwriters
from the offering of the Stock or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Company, the
Selling Stockholders and the Underwriters with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company
and the Selling Stockholders on the one hand and the Underwriters on
the other with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the
Stock purchased under this Agreement (before deducting expenses)
received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters
with respect to the Stock purchased under this Agreement, in each case
as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Stockholders on the
one hand or the Underwriters on the other, the intent of the parties
and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission; provided that the
parties hereto agree that the written information furnished to the
Company through the Representatives by or on behalf of the Underwriters
for use in any Preliminary Prospectus, either of the Registration
Statements or the Prospectus consists solely of the Underwriters'
Information (as defined in Section 16). The Company, the Selling
Stockholders and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were to be
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable
considerations referred to herein. The amount paid
26
or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in
this Section 7(f) shall be deemed to include, for purposes of this
Section 7(f), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section
7(f), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Stock
underwritten by it and distributed to the public were offered to the
public less the amount of any damages which such Underwriter has
otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7(f), no Selling
Stockholder shall be required to contribute any amount in excess of the
net proceeds received by such Selling Stockholder in connection with
the sale of such Selling Stockholder's Optional Shares. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this Section
7(f) are several in proportion to their respective underwriting
obligations and not joint. Each Selling Stockholder's obligation to
contribute as provided in this Section 7(f) is several in proportion to
the respective number of shares of Optional Stock to be sold by such
Selling Stockholder.
8. TERMINATION. The obligations of the Underwriters hereunder may be terminated
by ▇▇ ▇▇▇▇▇, in its absolute discretion by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 6(j), 6(l) or 6(m) have occurred
or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
9. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) this Agreement shall have
been terminated pursuant to Section 8 or 10, (b) the Company or any Selling
Stockholder shall fail to tender the Stock for delivery to the Underwriters for
any reason permitted under this Agreement, or (c) the Underwriters shall decline
to purchase the Stock for any reason permitted under this Agreement, the Company
and the Selling Stockholders shall reimburse the Underwriters for the fees and
expenses of their counsel and for such other out-of-pocket expenses as shall
have been reasonably incurred by them in connection with this Agreement and the
proposed purchase of the Stock, consistent with Section 5, and upon demand the
Company and the Selling Stockholders shall pay the full amount thereof to the ▇▇
▇▇▇▇▇; provided, however, that if this Agreement is terminated pursuant to
subsection (b) above, no Selling Stockholder shall be required to reimburse the
Underwriters for fees and expenses unless such Selling Stockholder failed to
tender the Optional Stock for delivery to the Underwriters for any reason
permitted under this Agreement. If this Agreement is terminated pursuant to
Section 8 or 10 by reason of the default of one or more Underwriters, neither
the Company nor any Selling Stockholder shall be obligated to reimburse any
defaulting Underwriter on account of those expenses, provided further, however,
that the foregoing shall not limit any reimbursement obligation of the Company
under this Section 9.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters shall
default in its or their obligations to purchase shares of Stock hereunder and
the aggregate number of shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed ten percent (10%) of the total
number of shares of Stock underwritten, the other Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the shares of Stock which such defaulting Underwriter or Underwriters
agreed but failed to purchase. If any Underwriter or Underwriters shall so
default and the aggregate number of shares with respect to which such default or
defaults occur is more than ten percent (10%) of the total number of shares of
Stock and arrangements satisfactory to the Representatives and the Company for
the purchase of such shares by other persons are not made within forty-eight
(48) hours after such default, this Agreement shall terminate.
27
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 10, (i) the Company
shall have the right to postpone the applicable Closing Date for a period of not
more than five (5) full business days in order that the Company and the Selling
Stockholders may effect whatever changes may thereby be made necessary in the
Registration Statements or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statements or supplements to the Prospectus which may thereby be
made necessary, and (ii) the respective numbers of shares to be purchased by the
remaining Underwriters or substituted Underwriters shall be taken as the basis
of their underwriting obligation for all purposes of this Agreement. Nothing
herein contained shall relieve any defaulting Underwriter of its liability to
the Company, the Selling Stockholders or the other Underwriters for damages
occasioned by its default hereunder. Any termination of this Agreement pursuant
to this Section 10 shall be without liability on the part of any non-defaulting
Underwriter, the Selling Stockholders or the Company, except expenses to be paid
or reimbursed pursuant to Sections 5 and 9 and except the provisions of Section
7 shall not terminate and shall remain in effect.
11. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the several Underwriters, the
Company and the Selling Stockholders and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person other than the persons mentioned in the preceding sentence any
legal or equitable right, remedy or claim under or in respect of this Agreement,
or any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person; except that the
representations, warranties, covenants, agreements and indemnities of the
Company and the Selling Stockholders contained in this Agreement shall also be
for the benefit of the Underwriter Indemnified Parties, and the indemnities of
the several Underwriters shall also be for the benefit of the Company
Indemnified Parties and the Selling Stockholder Indemnified Parties. It is
understood that the Underwriter's responsibility to the Company is solely
contractual in nature and the Underwriters do not owe the Company, or any other
party, any fiduciary duty as a result of this Agreement. The term "successor" as
used in this Section 11 shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.
12. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective
indemnities, covenants, agreements, representations, warranties and other
statements of the Company and the several Underwriters, as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter, the Selling Stockholders, the Company or any person
controlling any of them and shall survive delivery of and payment for the Stock.
13. NOTICES. All statements, requests, notices and agreements hereunder shall be
in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to ▇▇ ▇▇▇▇▇ Securities Corporation Attention:
Equity Capital Markets (Fax: ▇▇▇-▇▇▇-▇▇▇▇), with a copy to the same
address, Attention: Legal Department - ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Fax:
▇▇▇-▇▇▇-▇▇▇▇);
(b) if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to Digital Theater Systems, Inc., Attention: ▇▇▇
▇▇▇▇▇▇▇▇ (Fax: (▇▇▇) ▇▇▇-▇▇▇▇);
(c) if to any of the Selling Stockholders, shall be delivered or sent
by mail, telex or facsimile transmission to such Selling Stockholder at
the address set forth on Schedule C hereto; provided, however, that any
notice to an Underwriter pursuant to Section 7 shall be delivered or
sent by
28
mail, telex or facsimile transmission to such Selling Stockholder at
the address set forth on Schedule C hereto; Underwriter at its address
set forth in its acceptance telex to the Representatives, which address
will be supplied to any other party hereto by the Representatives upon
request. Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. Any party to this Agreement
may change its address for notice by sending to the other parties to
this Agreement written notice of a new address for such purposes.
14. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement, (a) "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. UNDERWRITERS' INFORMATION. The parties hereto acknowledge and agree that,
for all purposes of this Agreement, the "Underwriters' Information" consists
solely of the following information in the Prospectus: (i) the last paragraph on
the front cover page concerning the terms of the offering by the Underwriters;
and (ii) the table of underwriters participating in the offering in the first
paragraph under the heading "Underwriting" and (ii) the statements concerning
the Underwriters contained in the third paragraph under the heading
"Underwriting" (which paragraph begins "The underwriters propose to offer the
shares . . . .").
17. AUTHORITY OF THE REPRESENTATIVES. In connection with this Agreement, you
will act for and on behalf of the several Underwriters, and any action taken
under this Agreement by the Representatives, will be binding on all the
Underwriters; and any action taken under this Agreement by any of the
Attorneys-in-Fact will be binding on all the Selling Stockholders.
18. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section,
paragraph or provision of this Agreement shall not affect the validity or
enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
19. GENERAL. This Agreement constitutes the entire agreement of the parties to
this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof. In this Agreement, the masculine, feminine and neuter genders and
the singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company, the Selling Stockholders and the
Representatives.
20. COUNTERPARTS. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
Any person executing and delivering this Agreement as Attorney-in-Fact for the
Selling Stockholders represents by so doing that he or she has been duly
appointed as Attorney-in-Fact by such Selling Stockholders pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-Fact to
take such action.
29
If the foregoing is in accordance with your understanding of the
agreement between the Company, the Selling Stockholders and the several
Underwriters, kindly indicate your acceptance in the space provided for that
purpose below.
[Signature Page Follows]
30
If the foregoing is in accordance with your understanding of the
agreement between the Company and the several Underwriters, kindly indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
DIGITAL THEATER SYSTEMS, INC.
By:
------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
SELLING STOCKHOLDERS LISTED IN
SCHEDULE B
By: Attorney in fact
By:
------------------------------
Attorney-in-Fact acting on own
behalf and on behalf of the
Selling Stockholders listed in
Schedule B.
Accepted as of the date first
above written:
▇▇ ▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LLC
Acting on their own behalf
and as Representatives of
several Underwriters referred
to in the foregoing Agreement.
By: ▇▇ ▇▇▇▇▇ SECURITIES CORPORATION
By:
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Title: Head of Equity Capital Markets
31
SCHEDULE A
Number Number of
of Firm Optional
Shares Shares
to be to be
Name Purchased Purchased
---- --------- ---------
▇▇ ▇▇▇▇▇ Securities Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC
Total
========= ==========
32
SCHEDULE B
Selling Shareholder[s] Number of Number of
---------------------- Firm Optional
Shares to Shares to
be Sold be Sold
--------- ----------
[Name and address]
---------- ----------
[Name and address]
---------- ----------
[Name and address]
---------- ----------
[Name and address]
---------- ----------
[Name and address]
---------- ----------
Total
========== ==========
33
SCHEDULE C
34
EXHIBIT I
[Form of Lock-Up Agreement]
[Date]
▇▇ ▇▇▇▇▇ Securities Corporation
As representative of the several Underwriters
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Digital Theater Systems, Inc
Ladies and Gentlemen:
In order to induce ▇▇ ▇▇▇▇▇ Securities Corporation ("▇▇ ▇▇▇▇▇") and the
several underwriters to enter in to a certain
underwriting agreement with
Digital Theater Systems, Inc., a Delaware corporation (the "Company"), with
respect to the public offering (the "Offering") of shares of the Company's
Common Stock, par value $0.001 per share ("Common Stock"), the undersigned
hereby agrees that for a period of 180 days following the date of the final
prospectus filed by the Company with the Securities and Exchange Commission in
connection with the Offering (the "Lock-Up Period"), the undersigned will not,
without the prior written consent of ▇▇ ▇▇▇▇▇, directly or indirectly, (i)
offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose
of, any shares of Common Stock (including, without limitation, Common Stock
which may be deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations promulgated under the Securities Act of 1933, as
the same may be amended or supplemented from time to time (such shares, the
"Beneficially Owned Shares")) or securities convertible into or exercisable or
exchangeable in Common Stock, (ii) enter into any swap, hedge or similar
agreement or arrangement that transfers, in whole or in part, the economic risk
of ownership of the Beneficially Owned Shares or securities convertible into or
exercisable or exchangeable in Common Stock or (iii) engage in any short selling
of the Common Stock.
The foregoing paragraph shall not apply to any transfer of shares of
Common Stock or any security convertible into Common Stock (a) as a bona fide
gift or gifts, (b) to any trust for the benefit of the undersigned or the
undersigned's immediate family, (c) by will or intestacy to the undersigned's
legal representative, heir or legatee, (d) if the undersigned is a partnership
or corporation or similar entity, as a distribution to partners or stockholders
of the undersigned or (e) acquired in the public market on or after the date of
the final prospectus filed by the Company with the Securities and Exchange
Commission in connection with the Offering, other than shares acquired through
any directed share program of the Company, which shall be subject to the
restrictions of said program; provided that each donee, transferee or
distributee shall execute and deliver to ▇▇ ▇▇▇▇▇ a duplicate form of this
letter.
Anything contained herein to the contrary notwithstanding, any person
to whom shares of Common Stock or Beneficially Owned Shares are transferred from
the undersigned shall be bound by the terms of this Agreement.
In addition, the undersigned hereby waives, from the date hereof until
the expiration of the Lock-Up Period, any and all rights, if any, to request or
demand registration pursuant to the Securities Act of any shares of Common Stock
that are registered in the name of the undersigned or that are Beneficially
Owned Shares. In order to enable the aforesaid covenants to be enforced, the
undersigned hereby
35
consents to the placing of legends and/or stop-transfer orders with the transfer
agent of the Common Stock with respect to any shares of Common Stock or
Beneficially Owned Shares.
If the Offering does not close by October 31, 2003, this Agreement
shall terminate immediately upon such date and be of no further force and
effect.
By:
--------------------------
Name:
Title: