EXHIBIT 1.1
_______________ SHARES
APPLIED SCIENCE FICTION, INC.
COMMON STOCK (PAR VALUE $0.001 PER SHARE)
UNDERWRITING AGREEMENT
_______________, 2000
_______________, 2000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
Credit Suisse First Boston Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc.
Prudential Securities Incorporated
c/o Morgan ▇▇▇▇▇▇▇ & Co.
Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
Applied Science Fiction, Inc., a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "UNDERWRITERS") _________ shares of its Common Stock (par value
$0.001 per share) (the "FIRM SHARES"). The Company also proposes to issue and
sell to the several Underwriters not more than an additional ______________
shares of its Common Stock (par value $0.001 per share) (the "ADDITIONAL
SHARES") if and to the extent that you, as Managers of the offering, shall have
determined to exercise, on behalf of the Underwriters, the right to purchase
such shares of common stock granted to the Underwriters in Section 2 hereof. The
Firm Shares and the Additional Shares are hereinafter collectively referred to
as the "SHARES." The shares of Common Stock (par value $0.001 per share) of the
Company to be outstanding after giving effect to the sales contemplated hereby
are hereinafter referred to as the "COMMON STOCK."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and its affiliates ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇")
has agreed to reserve a portion of the Shares to be purchased by it under this
Agreement for sale to the Company's directors, officers, employees and business
associates and other parties related to the Company (collectively,
"PARTICIPANTS"), as set forth in the Prospectus under the heading "Underwriters"
(the "DIRECTED SHARE PROGRAM"). The Shares to be sold by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ pursuant
to the Directed Share Program are referred to hereinafter as the "DIRECTED
SHARES." Any Directed Shares not orally confirmed for purchase by any
Participants by the end of the business day on which this Agreement is executed
will be offered to the public by the Underwriters as set forth in the
Prospectus.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or, to the
Company's knowledge, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement and the
Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder and (iii) the
Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph
do not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so
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qualified or be in good standing would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority
to own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital stock
of each subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable and are owned directly by
the Company, free and clear of all liens, encumbrances, equities or
claims. None of the subsidiaries of the Company is a "significant
subsidiary" as such term is defined in Rule 1-02 of Regulation S-X of the
Securities Act.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid
and non-assessable.
(h) The shares of Common Stock to be issued upon conversion of the
Company's Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock (collectively, the "CONVERTIBLE PREFERRED STOCK") have
been duly authorized and, when issued and delivered pursuant to the terms
of the Company's Fourth Amended and Restated Certificate of Incorporation,
will be validly issued, fully paid and non-assessable.
(i) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights.
(j) The shares of Common Stock being sold pursuant to Regulation D
under the Securities Act concurrently with the Shares as
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described in the Prospectus (the "PRIVATE PLACEMENT SHARES") will be
validly issued, fully paid and non-assessable, and the issuance of such
Private Placement Shares will not be subject to any preemptive or similar
rights.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale
of the Shares.
(l) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(m) There are no legal or governmental proceedings pending or, to
the Company's knowledge, after due inquiry, threatened, to which the
Company or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the Prospectus
and are not so described or any statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(n) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Securities Act, complied when so
filed in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder.
(o) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
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described in the Prospectus, will not be required to register as an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
(p) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(r) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company or to require the Company to include such securities with the
Shares registered pursuant to the Registration Statement.
(s) It is not necessary in connection with the offer, sale and
delivery of the Private Placement Shares to register the Private Placement
Shares under the Securities Act.
(t) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the Government
of Cuba or with any person or affiliate located in Cuba.
(u) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) the Company
and its subsidiaries have not incurred any material liability or
obligation,
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direct or contingent, nor entered into any material transaction, in each
case, not in the ordinary course of business; (ii) the Company has not
purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock other than ordinary and customary dividends and the __ for __ stock
dividend effected on ____, 2000; and (iii) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and its subsidiaries, except in each case as described in the
Prospectus (exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement).
(v) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries, in each
case except as described in the Prospectus.
(w) The Company and its subsidiaries own or hold valid licenses to
all material patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to any of the
foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(x) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in the Prospectus, or,
to the knowledge of the Company, is imminent; and the Company is not aware
of any existing, threatened or imminent labor disturbance by the employees
of any of its principal suppliers, manufacturers or contractors that could
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
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(y) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which they are engaged; neither the Company nor any such subsidiary has
been refused any insurance coverage sought or applied for; and neither the
Company nor any such subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole, except as described in the Prospectus.
(z) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses and neither the Company nor any such subsidiary has received
any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the Company and its subsidiaries,
taken as a whole, except as described in the Prospectus.
(aa) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (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 the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(bb) Except as described in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), the Company has not sold, issued or distributed any shares of
Common Stock during the six-month period preceding the date hereof,
including any sales pursuant to Rule 144A under, or Regulation D or S of,
the Securities Act, other than shares issued pursuant to employee benefit
plans, qualified stock option plans or other employee compensation plans
or pursuant to outstanding options, rights or warrants.
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(cc) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations of
the Company or any of its subsidiaries have been or could be affected by
the Year 2000 Problem (that is, any significant risk that computer
hardware or software applications used by the Company and its subsidiaries
will not, in the case of dates or time periods occurring after December
31, 1999, function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000); as a result of such review,
the Company has no reason to believe, and does not believe, that the Year
2000 Problem will have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, or result in any material
loss or interference with the business or operations of the Company and
its subsidiaries, taken as a whole.
(dd) The Registration Statement, the Prospectus and any preliminary
prospectus comply, and any amendments or supplements thereto will comply,
with any applicable laws or regulations of foreign jurisdictions in which
the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share
Program.
(ee) No consent, approval, authorization or order of, or
qualification with, any governmental body or agency, other than those
obtained, is required in connection with the offering of the Directed
Shares in any jurisdiction where the Directed Shares are being offered.
(ff) The Company has not offered, or caused ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or its
affiliates to offer, Shares to any person pursuant to the Directed Share
Program with the intent to unlawfully influence (i) a customer or supplier
of the Company to alter the customer's or supplier'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.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
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one-time right to purchase, severally and not jointly, up to _______________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing, or (C) the issuance by the Company of
options to purchase Common Stock, or the direct issuance by the Company of
Common Stock, that are made pursuant to a stock option or other employee
compensation plan described in the Prospectus, provided that the person
acquiring such options or Common Stock agrees in writing to the restriction set
forth in the foregoing sentence.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "PUBLIC OFFERING PRICE") and to certain dealers
selected by you at a price that
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represents a concession not in excess of $______ a share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $_____ a share, to any Underwriter or to
certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made to the
Company in Federal or other funds immediately available in New York City against
delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on ____________, 2000, or at
such other time on the same or such other date, not later than _________, 2000,
as shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at
10:00 a.m., New York City time, on the date specified in the notice described in
Section 2 or at such other time on the same or on such other date, in any event
not later than _______, 2000, as shall be designated in writing by you. The
time and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than [_____] (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
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(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 5(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, outside counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business and is in good standing in the State of Texas, ____ and
____;
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(ii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(iii) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, and, to such counsel's knowledge, are fully paid and
non-assessable;
(iv) the shares of Common Stock to be issued upon conversion
of the Convertible Preferred Stock have been duly authorized and,
when issued and delivered pursuant to the terms of the Company's
Fourth Amended and Restated Certificate of Incorporation, will be
validly issued, fully paid and non-assessable;
(v) the Shares have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor in
accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive rights arising under the Company's
Fourth Amended and Restated Certificate of Incorporation or the
Delaware General Corporation Law or, to such counsel's knowledge,
any similar rights that entitle or will entitle any person to
acquire any shares of capital stock of the Company upon the issuance
and sale of the Shares;
(vi) the Private Placement Shares have been duly authorized
and, when issued and delivered in accordance with the terms of the
applicable subscription agreements, will be validly issued, fully
paid and non-assessable, and the issuance of such Private Placement
Shares will not be subject to any preemptive rights arising under
the Company's Fourth Amended and Restated Certificate of
Incorporation or the Delaware General Corporation Law or, to such
counsel's knowledge, any similar rights that entitle or will entitle
any person to acquire any shares of capital stock of the Company
upon the issuance and sale of the Shares;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) it is not necessary in connection with the offer, sale
and delivery of the Private Placement Shares to register such shares
under the Securities Act, it being understood that no opinion is
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expressed as to any subsequent resale of any such Shares (such
counsel being expressly permitted to rely upon the "no action"
letters issued by the Commission to [Black Box, Inc. (dated June 26,
1990) and Squadron, Ellenoff, Pleasant & ▇▇▇▇▇▇ (dated February 28,
1992)]);
(ix) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
(A) will not result in any violation of any existing law, (B) will
not violate the certificate of incorporation or by-laws of the
Company, (C) will not constitute a breach of, or a default under,
any agreement or other instrument binding upon the Company or any of
its subsidiaries that is set forth as an exhibit to the Registration
Statement, and (D) will not violate any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the
Company or any of its subsidiaries known to such counsel and
applicable to the Company or any of its subsidiaries, and no
consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, except such as
may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares;
(x) the statements (A) in the Prospectus under the captions
"Related Party Transactions," "Description of Capital Stock" and, to
the extent of the description of this Agreement, "Underwriters" and
(B) in the Registration Statement in Items 14 and 15, in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the matters
referred to therein;
(xi) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to
be described in the Registration Statement or the Prospectus and are
not so described or of any statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
and
14
(xii) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be required to
register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
In addition, such counsel shall also state in its opinion that
(A) it is of the opinion that the Registration Statement and Prospectus (except
for financial statements and schedules and other financial and statistical data
included therein as to which such counsel need not express any opinion), as of
the effective date of the Registration Statement complied, and of the Closing
Date will comply, as to form in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder, (B) it
has no reason to believe that (except for financial statements and schedules and
other financial and statistical data as to which such counsel need not express
any belief) the Registration Statement and the prospectus included therein at
the time the Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(C) it has no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such counsel need
not express any belief) the Prospectus as of its date and as of the date hereof
contained or contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of o, outside counsel for the Company, dated the Closing Date, to
the effect that:
15
(i) the statements in the Prospectus under the captions
["Risk Factors--We depend on a non-exclusive license from IBM which,
if terminated or renewed on less favorable terms, could cause us to
incur substantial expenses in developing new technologies," "Risk
Factors--We may be unable to protect our intellectual property,
which would adversely affect our ability to compete," "Risk
Factors--Claims may be brought against us that our technologies
infringe the intellectual property rights of others, which may
require us to incur costs in defending ourselves and our customers
against such allegations,"] "Business--Research and Development" and
"Business--Intellectual Property Rights," insofar as such statements
constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein; and
(ii) (A) the patent estate of the Company and its subsidiaries
that such counsel has worked on is made up of the issued patents
listed in Exhibit A to such opinion ("COMPANY PATENTS") and the
patent applications listed in Exhibit B to such opinion ("COMPANY
PATENT APPLICATIONS"), (B) such counsel does not know of any legal
or governmental proceedings pending (other than prosecution of the
Company Patent Applications) or threatened relating to the claimed
inventions of the Company Patents or the Company Patent
Applications, (C) such counsel does not know of any facts which
would preclude the Company or its subsidiaries from having valid
license rights or clear title to the Company Patents or the Company
Patent Applications, (D) to the best of such counsel's knowledge,
after due inquiry, the Company and its subsidiaries have valid
license rights or clear record title to all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and
trade names currently employed by the Company and its subsidiaries
in connection with the business now operated by them ("COMPANY
INTELLECTUAL PROPERTY") free and clear of any liens or encumbrances,
(E) the Company and its subsidiaries have complied with the Patent
and Trademark Office duty of candor and disclosure for each of the
Company Patents and Company Patent Applications and such counsel
does not have any knowledge, after due inquiry, that the Company or
its subsidiaries lack or will be unable to obtain any rights or
licenses to use all Company Intellectual Property, (F) such
16
counsel does not know of any reasonable basis for a finding of
invalidity of any of the Company Patents that could have a material
adverse effect on the Company and its subsidiaries, taken as a
whole, (G) such counsel has no reason to believe that any of the
Company Patent Applications will not issue as a patent, except to
the extent that such failure to issue as a patent would not have a
material adverse effect on the Company and its subsidiaries, taken
as a whole, (H) such counsel does not know of any notices received
by either the Company or any of its subsidiaries of infringement or
conflict with asserted intellectual property rights or claims of
others with respect to any products or proposed products of the
Company or its subsidiaries described in the Prospectus and (I) such
counsel does not know of any patent rights of others which are or
would be infringed by the manufacture, sale or use of the products
or processes referred to in the Prospectus.
(e) The Underwriters shall have received on the Closing Date an
opinion of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in Sections 5(c)(v),
5(c)(vii) and 5(c)(x) (but only as to the statements in the Prospectus
under "Description of Capital Stock" and "Underwriters") and in the final
paragraph of Section 5(c) above.
With respect to the final paragraph of Section 5(c) above,
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇, LLP and ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ may
state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent
check or verification, except as specified.
The opinion of ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇, LLP described in
Section 5(c) above shall be rendered to the Underwriters at the
request of the Company and shall so state therein.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the
Underwriters, from Ernst & Young LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration
17
Statement and the Prospectus; PROVIDED that the letter delivered on the
Closing Date shall use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Common Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the
Closing Date.
(h) The Nasdaq National Market shall have approved the Common Stock
for listing, subject only to official notice of issuance.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to you on
the Option Closing Date of such documents as you may reasonably
request with respect to the good standing of the Company, the due
authorization and issuance of the Additional Shares and other
matters related to the issuance of the Additional Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with
each Underwriter as follows:
(a) To furnish to you, without charge, five signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment
or supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by
18
an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request; PROVIDED, however, that the Company will not be required to
qualify in any jurisdiction where it would be required to (i) give a
general consent to the service of process or submit to general personal
jurisdiction or (ii) assume any ongoing reporting obligation to the
authorities in such jurisdiction.
(e) To make generally available to the Company's security holders
and to you as soon as practicable an earning statement covering the
twelve-month period ending June 30, 2001 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under
this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all
other fees or expenses in connection with the preparation and filing of
the Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies
thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing any
Blue Sky
20
or Legal Investment memorandum in connection with the offer and sale of
the Shares under state securities laws and all expenses in connection with
the qualification of the Shares for offer and sale under state securities
laws as provided in Section 6(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky or
Legal Investment memorandum, (iv) all filing fees and the reasonable fees
and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the
NASD Regulation, Inc., (v) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating
to the Common Stock and all costs and expenses incident to listing the
Shares on the Nasdaq National Market, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of
the Company relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of the Shares,
including, without limitation, expenses associated with the production of
road show slides and graphics, fees and expenses of any consultants
engaged in connection with the road show presentations with the prior
approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and
the cost of any aircraft chartered in connection with the road show, (ix)
all fees and disbursements of counsel incurred by the Underwriters in
connection with the Directed Share Program and stamp duties, similar taxes
or duties or other taxes, if any, incurred by the Underwriters in
connection with the Directed Share Program, and (x) all other costs and
expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 7
entitled "Indemnity and Contribution", and the last paragraph of Section
10 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, stock transfer taxes
payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.
(g) To place stop transfer orders on any Directed Shares that have
been sold to Participants subject to the three month restriction on sale,
transfer, assignment, pledge or hypothecation imposed by NASD Regulation,
Inc. under its Interpretative Material 2110-1 on free-riding and
withholding to the extent necessary to ensure compliance with the three
month restrictions.
20
(h) To comply with all applicable securities and other applicable
laws, rules and regulations in each jurisdiction in which the Directed
Shares are offered in connection with the Directed Share Program.
7. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein PROVIDED, however, that
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person asserting
any such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
21
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 7(a), 7(b) or 7(c), such person (the "INDEMNIFIED
PARTY") shall promptly notify the person against whom such indemnity may be
sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act or (ii) the fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of either such
Section. In the case of any such separate firm for the Underwriters and such
control persons of any Underwriters, such firm shall be designated in writing by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an
22
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in Section 7(a), 7(b)
or 7(c) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause 7(d)(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 7(d)(i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Company on the one hand
and the Underwriters on the other hand 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 or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
23
(e) The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 7(d). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, 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, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. 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 remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section 7
and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.
8. DIRECTED SHARE PROGRAM INDEMNIFICATION. The Company agrees to indemnify
and hold harmless ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and each person, if any, who controls ▇▇▇▇▇▇
▇▇▇▇▇▇▇ within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ENTITIES"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by 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, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) caused by the
failure of any Participant to pay for and accept delivery of Directed Shares
that the Participant has agreed to purchase; or (iii) related to, arising out
of, or in connection with the Directed Share Program, other than losses, claims,
damages or liabilities (or
24
expenses relating thereto) that are finally judicially determined to have
resulted from the bad faith or gross negligence of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities.
(b) In case any proceeding (including any governmental investigation)
shall be instituted involving any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity in respect of which
indemnity may be sought pursuant to Section 8(a), the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity
seeking indemnity shall promptly notify the Company in writing and the Company,
upon request of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity, shall retain counsel reasonably
satisfactory to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity to represent the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity
and any other indemnified party the Company may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity shall have the
right to retain its own counsel, but the reasonable fees and expenses of such
counsel shall be at the expense of such ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity unless (i) the
Company shall have agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the Company and the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity and representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not, in respect of the legal expenses
of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Entities. Any such separate firm for the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities shall
be designated in writing by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. The Company shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
Company agrees to indemnify the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities from and against any
loss or liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time a ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity shall have requested
the Company to reimburse it for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the Company agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by the Company of the aforesaid request and (ii) the Company shall not
have reimbursed the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity in accordance with such request prior
to the date of such settlement. The Company shall not, without the prior written
consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, effect any settlement of any pending or threatened
proceeding in respect of which any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity is or could have been a
party and indemnity could have been sought hereunder by such ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Entity, unless such settlement includes an unconditional release of the ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Entities from all liability on claims that are the subject matter of
such proceeding.
(c) To the extent the indemnification provided for in Section 8(a) is
unavailable to a ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity or insufficient in respect of any losses,
25
claims, damages or liabilities referred to therein, then the Company, in lieu of
indemnifying the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity thereunder, shall contribute to the
amount paid or payable by the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities on the other hand from the offering of the Directed
Shares or (ii) if the allocation provided by clause 8(c)(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 8(c)(i) above but also the
relative fault of the Company on the one hand and of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities
on the other hand in connection with any statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities on the other hand in connection with
the offering of the Directed Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Directed Shares (before
deducting expenses) and the total underwriting discounts and commissions
received by the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities for the Directed Shares, bear to the
aggregate Public Offering Price of the Directed Shares. If the loss, claim,
damage or liability is caused by an untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact, the
relative fault of the Company on the one hand and the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement or the omission or alleged omission
relates to information supplied by the Company or by the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(d) The Company and the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities agree that it would not be
just or equitable if contribution pursuant to this Section 8 were determined by
PRO RATA allocation (even if the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 8(c). The amount
paid or payable by the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Entities in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, no ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity shall
be required to contribute any amount in excess of the amount by which the total
price at which the Directed Shares distributed to the public were offered to the
public exceeds the amount of any damages that such ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The remedies provided for in this
Section 8 are not exclusive
26
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(e) The indemnity and contribution provisions contained in this Section 8
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity or the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Directed Shares.
9. TERMINATION. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; PROVIDED that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such number of Shares without
27
the written consent of such Underwriter. If, on the Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on the
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
11. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
13. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
28
APPLIED SCIENCE FICTION, INC.
By: __________________________________
Name:
Title:
Accepted as of the date hereof
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
Credit Suisse First Boston Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc.
Prudential Securities Incorporated
Acting severally on behalf of themselves and
the several Underwriters named in
Schedule I hereto.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
By: _____________________________________________________________
Name:
Title:
29
SCHEDULE I
UNDERWRITER NUMBER OF FIRM SHARES
TO BE PURCHASED
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated.........
Credit Suisse First Boston Corporation ...
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc..................
Prudential Securities Incorporated........
Total:..............................
EXHIBIT A
[FORM OF LOCK-UP LETTER]
_________, 2000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
Credit Suisse First Boston Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc.
Prudential Securities Incorporated
c/o Morgan ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
The undersigned understands that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Applied Science Fiction, Inc., a Delaware
corporation (the "COMPANY"), providing for the public offering (the "PUBLIC
OFFERING") by the several underwriters, including ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the
"UNDERWRITERS"), of shares (the "SHARES") of the Common Stock (par value $0.001
per share) of the Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the final prospectus relating
to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (a) transactions relating
to shares of Common Stock or other securities acquired in open market
transactions after the completion of the
Public Offering and (b) if the undersigned is an individual, transfers of shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (i) by will or intestacy, or as a bona fide gift
or gifts, to members of the undersigned's immediate family or (ii) to members of
the undersigned's immediate family; provided that in the case of any transfer or
distribution pursuant to clause (b), (A) each donee or distribute shall execute
and deliver to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ a duplicate form of this Lock-up Letter and (B) no
filing by any party (donor, donee, transferor or transferee) under Section 16(a)
of the Securities Exchange Act of 1934, as amended, shall be required or shall
be made voluntarily in connection with such transfer or distribution (other than
a filing on a Form 5 made after the expiration of the 180-day period referred to
above). "IMMEDIATE FAMILY" shall mean the undersigned's children, stepchildren,
grandchildren, parents, stepparents, grandparents, spouse, former spouses,
siblings, nieces, nephews, mother-in-law, father-in-law, sons-in-law,
daughters-in- laws, brothers-in-law, or sisters-in-law, including adoptive
relationships, any person sharing the undersigned's household (other than a
tenant or employee), a trust in which these persons have more than fifty percent
of the beneficial interest, a foundation in which these persons (or the
undersigned) control the management of assets, and any other entity in which
these persons (or the undersigned) own more than fifty percent of the voting
interests. In addition, the undersigned agrees that, without the prior written
consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ on behalf of the Underwriters, it will not, during the
period commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
____________________________________
(Name)
____________________________________
(Address)
2