3,720,000 SHARES
QUANTUM EFFECT DEVICES, INC.
COMMON STOCK, $.001 PAR VALUE
UNDERWRITING AGREEMENT
___________, 2000
___________, 2000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
BancBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇ Brothers Inc.
c/o Morgan ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
Quantum Effect Devices, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to the several Underwriters named in
Schedule II hereto (the "UNDERWRITERS") and a stockholder of the Company (the
"SELLING STOCKHOLDER") named in Schedule I hereto severally propose to sell to
the Underwriters, an aggregate of 3,720,000 shares of its Common Stock, $.001
par value (the "FIRM SHARES"), of which 3,000,000 shares are to be issued and
sold by the Company and 720,000 shares are to be sold by the Selling
Stockholder.
The Company also proposes to issue and sell to the several
Underwriters, and the Selling Stockholder proposes to sell to the Underwriters,
not more than an additional 558,000 shares of its Common Stock, $.001 par value
(the "ADDITIONAL SHARES"), of which 450,000 shares are to be issued and sold by
the Company and 108,000 shares are to be sold by the Selling Stockholder, 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, $.001 par value, of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "COMMON STOCK." The Company and the Selling Stockholder are
hereinafter sometimes collectively referred to as the "SELLERS."
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.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and its affiliates ("▇▇▇▇▇▇
▇▇▇▇▇▇▇") have agreed to reserve a portion of the Shares to be purchased by them
under this Agreement for sale to the Company's directors, officers, employees
and business associates and other parties associated with 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 Participant by the end of the business day following the 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
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 (as of the date of such amendment or supplement, as
applicable) 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 (as of the date of such amendment or supplement, as
applicable) 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 (as of the date of such amendment or
supplement, as applicable) 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 qualified or be in good
standing would not have a material adverse effect on the Company.
(d) The Company has no subsidiaries and does not own any
equity interest in any other corporation, partnership, limited
liability company or other entity.
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(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 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.
(i) 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 that is material to the Company, or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company 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 and by the National Association of
Securities Dealers, Inc. with respect to the fairness of the
underwriting compensation in connection with the offer and sale of the
Shares.
(j) 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, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(k) There are no legal or governmental proceedings pending or,
to the Company's knowledge, threatened to which the Company is a party
or to which any of the properties of the Company 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.
(l) 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
except for the
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omission of price range and other information derived
therefrom to the extent such information was omitted from the initial
filing of the registration statement.
(m) 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.
(n) The Company (i) is 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) has received all permits, licenses or
other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) is 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.
(o) 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.
(p) 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, except such as have
been validly waived.
(q) 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.
(r) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (1) the
Company has not incurred any material liability or obligations, direct
or contingent, nor entered into any material transaction not in the
ordinary course of business; (2) 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 (3) there has not been any
material change in the capital stock, short-term debt or long-term debt
of the Company, except in each case as described in the Prospectus.
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(s) The Company has good and marketable title in fee simple to
all real property and good and marketable title to all personal
property owned by it which is material to the business of the Company,
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 materially
interfere with the use made and proposed to be made of such property by
the Company; and any real property and buildings held under lease by
the Company are held by it under valid, subsisting and enforceable
leases with such exceptions as are not material and do not materially
interfere with the use made and proposed to be made of such property
and buildings by the Company, in each case except as described in the
Prospectus.
(t) The Company owns or possesses, or can acquire on
reasonable terms, 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 it in connection with the business now operated
by it, and the Company has not 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, would have a material adverse
effect on the Company.
(u) No material labor dispute with the employees of the
Company 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 its principal suppliers, manufacturers or contractors that could
reasonably be expected to have a material adverse effect on the
Company.
(v) The Company is 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 it is engaged; the
Company has not been refused any insurance coverage sought or applied
for; and the Company has no 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, except as described in the
Prospectus.
(w) The Company possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business as described in the
Prospectus, and the Company has not 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, could reasonably
be expected to have a material adverse effect on the Company, except as
described in the Prospectus.
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(x) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or
specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(3) access to assets is permitted only in accordance with management's
general or specific authorization; and (4) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(y) The Company has reviewed its operations to evaluate the
extent to which the business or operations of the Company will 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, (i) the Company does not believe, that (A) there
are any issues related to the Company's preparedness to address the
Year 2000 Problem that are of a character required to be described or
referred to in the Registration Statement or Prospectus which have not
been accurately described in the Registration Statement or Prospectus
and (B) 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, or result in any material loss or
interference with the business or operations of the Company; and (ii)
the Company believes that the suppliers, vendors, customers or other
material third parties used or served by the Company are addressing or
will address the Year 2000 Problem in a timely manner, except to the
extent that a failure to address the Year 2000 Problem by any supplier,
vendor, customer or material third party would not have a material
adverse effect on the condition, financial or otherwise, or on the
earnings, business or operations of the Company.
(z) As of the date the Registration Statement became
effective, the Common Stock was authorized for listing on the Nasdaq
National Market upon official notice of issuance.
(aa) Substantially all of the outstanding shares of Common
Stock, and all securities convertible into or exercisable or
exchangeable for Common Stock, are subject to agreements (collectively,
the "LOCK-UP AGREEMENTS") in substantially the form attached as Exhibit
A.
(bb) Furthermore, the Company represents and warrants to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ that (i) the Registration Statement, the Prospectus and
any preliminary prospectus comply, and any further 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, and that
(ii) 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
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securities laws and regulations of foreign jurisdictions in which the
Directed Shares are offered outside the United States.
(cc) The Company has not offered, or caused ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
its affiliates to offer, Shares to any person pursuant to the Directed
Share Program with the specific 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. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDER.
The Selling Stockholder represents and warrants to and agrees with each of the
Underwriters that:
(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder.
(b) The execution and delivery by such Selling Stockholder of,
and the performance by such Selling Stockholder of its obligations
under, this Agreement, the Custody Agreement signed by such Selling
Stockholder and ____________, as Custodian, relating to the deposit of
the Shares to be sold by such Selling Stockholder (the "CUSTODY
AGREEMENT") and the Power of Attorney appointing certain individuals as
such Selling Stockholder's attorneys-in-fact to the extent set forth
therein, relating to the transactions contemplated hereby and by the
Registration Statement (the "POWER OF ATTORNEY") will not contravene
any provision of applicable law, or the certificate of incorporation or
by-laws of such Selling Stockholder, or any agreement or other
instrument binding upon such Selling Stockholder or any judgment, order
or decree of any governmental body, agency or court having jurisdiction
over such Selling Stockholder, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency is
required for the performance by such Selling Stockholder of its
obligations under this Agreement or the Custody Agreement or Power of
Attorney of such Selling Stockholder, 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.
(c) Such Selling Stockholder has, and on the Closing Date will
have, valid title to the Shares to be sold by such Selling Stockholder
and the legal right and power, and all authorization and approval
required by law, to enter into this Agreement, the Custody Agreement
and the Power of Attorney and to sell, transfer and deliver the Shares
to be sold by such Selling Stockholder.
(d) The Shares to be sold by such Selling Stockholder pursuant
to this Agreement have been fully paid.
(e) The Custody Agreement and the Power of Attorney have been
duly authorized, executed and delivered by such Selling Stockholder and
are valid and binding agreements of such Selling Stockholder.
7
(f) Delivery of the Shares to be sold by such Selling
Stockholder pursuant to this Agreement will pass title to such Shares
free and clear of any security interests, claims, liens, equities and
other encumbrances.
(g) All information furnished in writing by the Selling
Stockholder for use in the Registration Statement is, and on the
Closing Date will be, true, correct, and complete, and does not, and on
the Closing Date will not, contain any untrue statement of a material
fact or omit to state any material fact necessary to make such
information not misleading, and all information furnished in writing by
the Selling Stockholder for use in the Prospectus is, and on the
Closing Date will be, true, correct, and complete, and does not, and on
the Closing Date will not, contain any untrue statement or a material
fact or omit to state any material fact necessary to make such
information not misleading in the light of the circumstances under
which they were made.
(h) (i) the section of the Registration Statement entitled
"Certain Transactions--Agreements with IDT" and the sections of the
Registration Statement entitled "Certain Transactions--Financing
Transactions" and "Principal and Selling Stockholder" as they relate to
IDT, 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, and
(ii) the sections of the Prospectus entitled "Certain
Transactions--Agreements with IDT" and the sections of the Prospectus
entitled "Certain Transactions--Financing Transactions" and "Principal
and Selling Stockholder" as they relate to IDT, 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 necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
3. AGREEMENTS TO SELL AND PURCHASE. Each Seller, severally and
not jointly, 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 such Seller the respective numbers of Firm
Shares set forth in Schedule II 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
Sellers severally and not jointly agree to sell to the Underwriters the
Additional Shares, and the Underwriters shall have a one-time right to
purchase, severally and not jointly, up to 558,000 Additional Shares at the
Purchase Price. If you, on behalf of the Underwriters, elect to exercise such
option, you shall so notify the Company and the attorney-in-fact for the
Selling Stockholder 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
8
purchased as provided in Section 5 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 II hereto opposite the
name of such Underwriter bears to the total number of Firm Shares.
Each Seller 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 as
described in the Registration Statement or of which the Underwriters have been
advised in writing; (C) the grant of options to purchase Common Stock pursuant
to the 1999 Equity Incentive Plan or 1999 Non-Employee Directors Stock Option
Plan and the issuance of shares upon the exercise of such options; and (D) the
issuance by the Company of shares of Common Stock pursuant to the 1999 Employee
Stock Purchase Plan.
4. TERMS OF PUBLIC OFFERING. The Sellers are 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 Sellers
are 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 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.
5. PAYMENT AND DELIVERY. Payment for the Firm Shares to be
sold by each Seller shall be made to such Seller 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 __________, 1999, or at such other time on the same or such other date,
not later than _________, 1999, 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 such Seller
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
9
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 __________, 1999, 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.
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The
obligations of the Sellers 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 1:30 p.m. (New York City time) on the
date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(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, 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 6(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
10
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 a
certificate, dated the Closing Date and signed by the Selling
Stockholder (or by their attorney-in-fact on their behalf), to the
effect that the representations and warranties of the Selling
Stockholder contained in this Agreement are true and correct as of the
Closing Date and that each Selling Stockholder 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.
(d) The Underwriters shall have received on the Closing Date
an opinion of ▇▇▇▇▇▇ Godward 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 to
such counsel's knowledge, 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;
(ii) except as described in the Registration
Statement, to such counsel's knowledge, the Company has no
subsidiaries and does not own any equity interest in any other
corporation, partnership, limited liability company or other
entity;
(iii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus;
(iv) 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;
(v) 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 to such counsel's knowledge,
similar rights;
11
(vi) this Agreement has been duly authorized,
executed and delivered by the Company;
(vii) 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 (other than applicable state securities and blue sky laws,
as to which such counsel need not express an opinion) or the
certificate of incorporation or by-laws of the Company or, to
such counsel's knowledge, any agreement or other instrument
binding upon the Company that is material to the Company, or,
to the best of such counsel's knowledge, any judgment, order
or decree of any governmental body, agency or court having
jurisdiction over the Company, 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 have been obtained under the Securities Act or 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;
(viii) the statements (A) in the Prospectus under the
captions " Risk Factors--the Price of our Stock Could Decrease
as a Result of Shares Being Sold in the Market after this
Offering," "Business--MIPS License and Intellectual Property,"
"Description of Capital Stock," "Shares Eligible for Future
Sale" and "Underwriters" to the extent of the description of
this Agreement, 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 to the
extent required under the Securities Act and the applicable
rules and regulations of the Commission thereunder;
(ix) such counsel does not know of any legal or
governmental proceedings pending or threatened to which the
Company is a party or to which any of the properties of the
Company is subject that are required to be described in the
Registration Statement or the Prospectus and are not so
described or of any statutes or regulations that are required
to be described in the Registration Statement or the
Prospectus that are not so described or of any contracts or
other documents that are required, be filed as exhibits to the
Registration Statement that are not filed as required;
(x) the Company is not and, after giving effect to
the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus, will not be
an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(xi) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and
12
statistical data included therein as to which such counsel
need not express any opinion) comply as to form in all
material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder, (B) 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) 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 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.
(e) The Underwriters shall have received on the Closing Date
an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel for the Selling Stockholder,
dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed
and delivered by or on behalf of the Selling Stockholder;
(ii) the execution and delivery by the Selling
Stockholder of, and the performance by such Selling
Stockholder of its obligations under, this Agreement and the
Custody Agreement and Powers of Attorney of such Selling
Stockholder will not contravene any provision of applicable
law, or the certificate of incorporation or by-laws of such
Selling Stockholder, or, to the best of such counsel's
knowledge, any agreement or other instrument binding upon such
Selling Stockholder or, to the best of such counsel's
knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over such Selling
Stockholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required for the performance by such Selling Stockholder of
its obligations under this Agreement or the Custody Agreement
or Power of Attorney of such Selling Stockholder, except such
as may be required by the securities or Blue Sky laws of the
various states in connection with offer and sale of the
Shares;
(iii) the Selling Stockholder has valid title to the
Shares to be sold by such Selling Stockholder and the legal
right and power, and all authorization and approval required
by law, to enter into this Agreement and the Custody Agreement
and Power of Attorney of such Selling Stockholder and to sell,
transfer and deliver the Shares to be sold by such Selling
Stockholder;
(iv) the Custody Agreement and the Power of Attorney
of the Selling Stockholder have been duly authorized, executed
and delivered by such Selling
13
Stockholder and are valid and binding agreements of such
Selling Stockholder; and
(v) delivery of the Shares to be sold by the Selling
Stockholder pursuant to this Agreement will pass title to such
Shares free and clear of any security interests, claims,
liens, equities and other encumbrances.
(f) The Underwriters shall have received on the Closing Date
an opinion of Fenwick & West LLP, counsel for the Underwriters, dated
the Closing Date, covering the matters referred to in Sections 6(d)(v),
6(d)(vi), 6(d)(viii) (but only as to the statements in the Prospectus
under "Description of Capital Stock" and "Underwriters") and 6(d)(xi)
above.
With respect to Section 6(d)(xi) above, ▇▇▇▇▇▇ Godward LLP and
Fenwick & West LLP 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 ▇▇▇▇▇▇ Godward LLP described in Section 6(d)
above shall be rendered to the Underwriters at the request of the Company and
shall so state therein.
(g) 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 PricewaterhouseCoopers LLP, Independent
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 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.
(h) The Lock-Up Agreements, each substantially in the form of
Exhibit A hereto, between you and the officers and directors of the
Company and substantially all of the stockholders 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.
(i) The Shares shall have received approval for listing, upon
official notice of issuance, on the Nasdaq National Market.
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 and
14
sale of the Additional Shares and an opinion of ▇▇▇▇▇▇ Godward LLP and ▇▇▇▇▇▇ &
▇▇▇▇▇ LLP in form and substance satisfactory to Fenwick & West LLP, counsel for
the Underwriters.
7. 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, four 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 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.
(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 ________, 2000 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
15
(f) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
(g) The Company will comply with all provisions of all
undertakings contained in the Registration Statement.
(h) Prior to the Closing Date, the Company will not, directly
or indirectly, issue any press release or other communication and will
not hold any press conference with respect to the Company, or its
financial condition, results of operations, business, properties,
assets, or prospects or this offering, without your prior written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned.
(i) 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 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 National Association
of Securities Dealers, 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) to pay all reasonable fees and
disbursements of counsel incurred by the Underwriters in connection
with the Directed Share Program and stamp duties, similar taxes or
duties or
16
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 9 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.
(j) that in connection with the Directed Share Program, the
Company will ensure that the Directed Shares will be restricted to the
extent required by the National Association of Securities Dealers, Inc.
(the "NASD") or the NASD rules from sale, transfer, assignment, pledge
or hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 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.
(k) the Company agrees: (i) to enforce the terms of each
Lock-Up Agreement and (ii) issue stop-transfer instructions to the
transfer agent for the Common Stock with respect to any transaction or
contemplated transaction that would constitute a breach of or default
under the applicable Lock-Up Agreement. In addition, without the prior
written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the Company agrees: (i) not to amend
or terminate, or waive any right under, any Lock-Up Agreement, or take
any other action that would directly or indirectly have the same effect
as an amendment or termination, or waiver of any right under, any
Lock-Up Agreement, that would permit any holder of shares of Common
Stock, or securities convertible into or exercisable or exchangeable
for Common Stock, to (1) offer, pledge, sell, contract to sell, sell
any option, right or warrant or contract to purchase, purchase any
option, right or warrant 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 other
than the exercise of options granted under the 1992 Stock Option Plan,
1997 Stock Option Plan, 1999 Equity Incentive Plan and 1999
Non-Employee Directors' Stock Option Plan, or the purchase of shares of
Common Stock under the 1999 Employee Stock Purchase Plan (collectively,
the "PLANS") or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic
consequences of ownership of Common Stock, 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, or (ii)
not to consent to any of the foregoing.
(l) The Company agrees that, without the prior written consent
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, it will not release any stockholder or option holder
from the market standoff provision imposed by the Company pursuant to
the Plans earlier than 180 days after the date of the initial public
offering of the Shares.
17
(m) furthermore, the Company covenants with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
that the Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction in
which the Directed Shares are offered in connection with the Directed
Share Program.
The provisions of this Section shall not supersede or otherwise affect
any agreement that the Sellers may otherwise have for the allocation of such
expenses among themselves.
8. 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 (as of the effective date and any Closing Date
as defined in Section 5 herein) 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, as of the date of such amendment or supplement, as
applicable), 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, or any person controlling such Underwriter, from whom the
person asserting any such losses, claims, damages or liabilities
purchased Shares, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) shall have been furnished by the Company to such
Underwriter and 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 loss,
claim, damage or liability.
(b) The Selling Stockholder agrees to indemnify and hold
harmless the Underwriters 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 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
18
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, but only with
reference to information relating to such Selling Stockholder
furnished in writing by or on behalf of such Selling Stockholder
expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
The aggregate liability of the Selling Stockholder under the indemnity
agreement contained in this paragraph and the contribution agreement
contained in paragraphs 8(e) and (f) below shall be limited to an
amount equal to the net proceeds received by such Selling Stockholder
from the offering of the Shares sold by such Selling Stockholder.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Selling Stockholder, the
directors of the Company and the officers of the Company who sign the
Registration Statement and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company and the
Selling Stockholder to such Underwriter, 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.
(d) 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 8(a), 8(b) or 8(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 the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. 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 ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. Incorporated. In the case of any such separate firm for
the Company, and such
19
directors, officers and control persons of the Company, such firm
shall be designated in writing by the Company. In the case of any
separate firm for the Selling Stockholder and such control persons of
the Selling Stockholder, such firm shall be designated in writing by
the Selling Stockholder. 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 orliability by reason
of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
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.
(e) To the extent the indemnification provided for in Section
8(a), 8(b) or 8(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 8(e)(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(e)(i)
above but also the relative fault of the Indemnifying party or parties
on the one hand and 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 Sellers
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 each Seller 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 Sellers 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 Sellers or by the
Underwriters and the parties' relative intent, knowledge, access to
20
information and opportunity to correct or prevent such statement or
omission. The Underwriters' respective obligations to contribute
pursuant to this Section 8 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(f) The Sellers and the Underwriters 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 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 8(e). 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 8, 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
8 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
or any person controlling the Selling Stockholder.
(g) The indemnity and contribution provisions contained in
this Section 8 and the representations, warranties and other statements
of the Company and the Selling Stockholder 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,
any Selling Stockholder or any person controlling the Selling
Stockholder, or the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of
the Shares.
9. DIRECTED SHARE PROGRAM INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and its affiliates and each person, if any, who controls ▇▇▇▇▇▇
▇▇▇▇▇▇▇ or its affiliates 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
21
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading; (ii) related to, arising out of, or in connection with the
Directed Share Program, other than losses, claims, damages or
liabilities (or expenses relating thereto) that are finally judicially
determined to have resulted from the bad faith or gross negligence of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities; or (iii) caused by the failure of any
Participant to pay for and accept delivery of Directed Shares which,
immediately following the effectiveness of the Registration Statement,
were subject to a properly confirmed agreement to purchase.
(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 9(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 others
the Company may designate in such proceeding and shall pay the 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 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.
22
(c) To the extent the indemnification provided for in Section
9(a) is unavailable to a ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entity or insufficient in
respect of any losses, 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 9(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 9(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 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
9 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 9(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 9, 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 as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding
paragraph. The remedies provided for in this Section 9 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.
23
(e) The indemnity and contribution provisions contained in
this Section 9 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.
10. 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 10(a)(i) through 10(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.
11. 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 II 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 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, the
Company and the Selling Stockholder 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 the Company or the
Selling Stockholder. 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
24
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 any Seller to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason any Seller shall be unable to perform its obligations under
this Agreement, the Sellers 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.
12. 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.
13. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
25
14. 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,
QUANTUM EFFECT DEVICES, INC.
By:
--------------------------------
Name:
Title:
INTEGRATED DEVICE TECHNOLOGY, INC.
By:
-----------------------------
Name:
Title: Attorney-in-Fact
Accepted as of the date hereof
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
BancBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇ Brothers Inc.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
By:
--------------------------
Name:
Title:
[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]
26
SCHEDULE I
NUMBER OF FIRM NUMBER OF
SELLING STOCKHOLDER SHARES TO BE SOLD ADDITIONAL SHARES
------------------- ----------------- -----------------
Integrated Device Technology, Inc.
Total................................
-------------------------- ------------------------
========================== ========================
SCHEDULE II
NUMBER OF FIRM
UNDERWRITER SHARES TO BE PURCHASED
----------- ----------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
BancBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇ Brothers Inc.
Total................................
--------------------------------
================================
EXHIBIT A
[FORM OF LOCK-UP LETTER]
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇ Brothers Inc.
BancBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
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 Quantum Effect Devices, Inc., a California
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, no par value, of
the Company, or its successor company upon the consummation of any
reincorporation of the Company into the State of Delaware (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
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) the sale of any
Shares to the Underwriters pursuant to the Underwriting Agreement; (b)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after the completion of the Public Offering; or (c)
transactions relating to shares of Common Stock or other securities convertible
or exchangeable for Common Stock disposed of (i) as a bona fide gift or gifts,
(ii) by will or intestacy to the undersigned's immediate family or to a trust
the beneficiaries of which are exclusively the undersigned and/or a member or
members of his or her immediately family and/or a charity, or (iii) as a
distribution to limited partners, members of limited liability companies or
shareholders of the undersigned, in each case provided that any gift, transfer
or distribution pursuant to clause (i), (ii) or (iii) above shall be conditioned
upon such donee, transferee or distributee executing and delivering a copy of a
Lock-Up Agreement to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. 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.
It is understood that, if the Company notifies you that it does not
intend to proceed with the Public Offering, if the Underwriting Agreement does
not become effective, or if the Underwriting Agreement (other than the
provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Shares, we will be released from our
obligations under this Lock-Up Agreement.
Notwithstanding anything herein to the contrary, the foregoing
provision shall not restrict ▇▇▇▇▇▇▇, Sachs & Co. and its affiliates from
engaging in any brokerage, investment advisory, financial advisory, anti-raid
advisory, merger advisory, financing, asset management, trading, market making,
arbitrage and other similar activities conducted in the ordinary course of its
or its affiliates' business, so long as such activities are not conducted in
respect of the shares of Common Stock (or by virtue of a short position
undertaken to benefit from the cover of such shares of Common Stock, or the
issuance of a derivative security designed to benefit from the value of such
shares of Common Stock) of the Company directly owned by The ▇▇▇▇▇▇▇ ▇▇▇▇▇
Group, Inc., Stone Street Fund 1999, L.P. or Bridge Street Fund 1999, L.P.
As a condition to the undersigned's obligations hereunder, each officer
and director of the Company shall have executed and be bound by a similar
lock-up agreement in favor of the Underwriters.
This Agreement will terminate if the closing date of the Offering has
not occurred prior to March 31, 2000.
Date: ________________, 1999 Very truly yours,
--------------------------------
Signature
--------------------------------
Print Name
--------------------------------
Title