EXHIBIT 1.1
QUALSTAR CORPORATION
UNDERWRITING AGREEMENT
__________________, 2000
FIRST SECURITY VAN ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & COMPANY, INC.
WEDBUSH ▇▇▇▇▇▇ SECURITIES
As Representatives of the
Several Underwriters
c/o First Security ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Qualstar Corporation, a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
several Underwriters named in Schedule I hereto (each, an "Underwriter" and
collectively, the "Underwriters") an aggregate of [__________________] shares
(the "Company Firm Shares") of its authorized but unissued Common Stock, no par
value per share (the "Common Stock"). Certain shareholders of the Company
listed on Schedule II hereto (the "Selling Shareholders") propose, subject to
the terms and conditions stated herein, to sell to the Underwriters an aggregate
of ____________ shares of the Common Stock (the "Selling Shareholder Firm
Shares" and, together with the Company Firm Shares, the "Firm Shares"). The
Company also proposes to grant to the Underwriters an option to purchase up to
[________] additional shares of Common Stock (the "Option Shares") for the sole
purpose of covering over-allotments, if any, in connection with the sale of the
Firm Shares. The Firm Shares and any Option Shares purchased pursuant to this
Agreement are collectively referred to below as the "Shares." First Security ▇▇▇
▇▇▇▇▇▇ ("FSVK"), ▇▇▇▇▇▇▇ & Company, Inc. and Wedbush ▇▇▇▇▇▇ Securities are
acting as Representatives of the several Underwriters and in that capacity are
referred to in this Agreement as the "Representatives."
The Company hereby confirms its agreement with the several Underwriters as
follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to and agrees with each Underwriter as follows:
(a) A registration statement (Registration No. 333-________) on Form
S-1 under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the Shares, including such amendments to such registration statement
as may have been required as of the date of this Agreement, has been prepared by
the Company under and in conformity
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with the provisions of the Securities Act and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission. After the
execution of this Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Securities Act, either (A)
if the Company relies on Rule 434 under the Securities Act, a Term Sheet
(defined below) relating to the Shares, that identifies the Preliminary
Prospectus (defined below) that it supplements and contains such information as
is required or permitted by Rules 434, 430A and 424(b) of the Rules and
Regulations or (B) if the Company does not rely on Rule 434 under the Securities
Act, a prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment has been filed, in such
registration statement), with such changes or insertions as are required by Rule
430A of the Rules and Regulations or permitted by Rule 424(b) of the Rules and
Regulations, and in the case of either (i)(A) or (i)(B) of this sentence, as has
been provided to and approved by the Representatives prior to the execution of
this Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the
Securities Act, an amendment to such registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and approved by the
Representatives prior to the execution of this Agreement. As used in this
Agreement, the term "Registration Statement" means such registration statement,
as amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto, any information omitted therefrom
pursuant to Rule 430A of the Rules and Regulations and included in the
Prospectus (defined below) and further including all filings or other documents
incorporated therein, as well as any additional registration statement filed in
connection with the offering of the Shares pursuant to Rule 462(b) under the
Securities Act; the term "Preliminary Prospectus" means each prospectus subject
to completion filed with such registration statement or any amendment thereto
(including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective and further including all filings or documents incorporated
therein); and the term "Prospectus" means the following, including any filings
or documents incorporated therein:
(A) if the Company relies on Rule 434 under the Securities Act, the Term
Sheet relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Securities Act, together with the Preliminary
Prospectus identified therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the Securities Act,
the prospectus first filed with the Commission pursuant to Rule
424(b) under the Securities Act; or
(C) if the Company does not rely on Rule 434 under the Securities Act and
if no prospectus is required to be filed pursuant to Rule 424(b)
under the Securities Act, the prospectus included in the Registration
Statement; provided that if any revised prospectus that is provided
to the Underwriters by the Company for use in connection with the
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offering of the Shares differs from the prospectus on file with the
Commission at the time the Registration Statement became or becomes,
as the case may be, effective, whether or not the revised prospectus
is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations, the term "Prospectus" shall
mean such revised prospectus (including all filings and documents
incorporated therein) from and after the time it is first provided to
the Underwriters for such use. The term "Term Sheet" as used in this
Agreement means any term sheet that satisfies the requirements of
Rule 434 under the Securities Act. Any reference in this Agreement to
the "date" of a Prospectus that includes a Term Sheet means the date
of such Term Sheet.
(b) No order suspending the effectiveness of the Registration Statement
or preventing or suspending the use of any Preliminary Prospectus or the
Prospectus has been issued and no proceedings for that purpose are pending or,
to the best knowledge of the Company, threatened or contemplated by the
Commission; no stop order suspending the sale of the Shares in any jurisdiction
has been issued and no proceedings for that purpose are pending or, to the best
knowledge of the Company, threatened or contemplated, and any request of the
Commission for additional information (to be included in the Registration
Statement, any Preliminary Prospectus or the Prospectus or otherwise) has been
complied with.
(c) As used in this Agreement, the word "subsidiary" means any
corporation, partnership, limited liability company or other entity of which the
Company directly or indirectly owns 50% or more of the equity or that the
Company directly or indirectly controls. The subsidiaries of the Company (the
"Subsidiaries") and the jurisdiction of incorporation of each Subsidiary are
listed on Exhibit A hereto. The Company has no subsidiaries other than the
Subsidiaries listed on Exhibit A hereto; except as set forth on Exhibit A, the
Company owns 100 percent of the issued and outstanding stock of each of the
Subsidiaries free and clear of any material pledge, lien, security interest,
encumbrance, claim or equitable interest of any type, kind or nature. Exhibit B
hereto lists each entity in which the Company or any Subsidiary holds an equity
interest, whether as shareholder, partner, member, joint venturer or otherwise.
Except as set forth on Exhibit B, neither the Company nor any Subsidiary has any
equity interest in any person. The Company and each of its Subsidiaries has been
duly organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its organization, has full corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement and the Prospectus and as is currently being
conducted by it and is duly qualified as a foreign corporation and in good
standing in all jurisdictions in which the character of the property owned or
leased or the nature of the business transacted by it makes qualification
necessary (except where the failure to be so qualified would not have a material
adverse effect on the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company and its Subsidiaries, taken as
a whole (a "Consolidated Material Adverse Effect")). The Company and each of its
Subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates,
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consents, orders and permits from federal, state, local and other governmental
or regulatory authorities that are necessary to the conduct of its or their
business, all of which are valid and in full force and effect, except for
authorizations, licenses, certificates, consents, orders and permits which would
not have a Consolidated Material Adverse Effect. Each contractual joint venture
in which the Company or any Subsidiary is involved and, to the Company's best
knowledge, each participant therein is operating in compliance with the terms of
its joint venture agreement except for any non-compliance that would not have a
Consolidated Material Adverse Effect.
(d) When any Preliminary Prospectus was filed with the commission it (i)
contained all statements required to be contained therein and complied in all
respects with the requirements of the Securities Act, the Rules and Regulations,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations of the Commission thereunder (the "Exchange Act Rules and
Regulations") and (ii) did not include any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. When the Registration Statement or any amendment thereto was or is
declared effective (the "Effective Date") and at all times subsequent thereto up
to and including the Closing Date and any date on which the Option Shares are to
be purchased, it (i) contained or will contain all statements required to be
contained therein and complied or will comply in all respects with the
requirements of the Securities Act, the Rules and Regulations, the Exchange Act
and the Exchange Act Rules and Regulations and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. When the Prospectus or
any Term Sheet that is a part thereof or any amendment or supplement to the
Prospectus is filed with the Commission pursuant to Rule 424(b) (or, if the
Prospectus or part thereof or such amendment or supplement is not required to be
so filed, when the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was or is declared effective) and
on the Closing Date (defined below) and any date on which Option Shares are to
be purchased, the Prospectus, as amended or supplemented at any such time, (i)
contained or will contain all statements required to be contained therein and
complied or will comply in all respects with the requirements of the Securities
Act, the Rules and Regulations and the Exchange Act Rules and Regulations and
(ii) did not or will not include any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing provisions of this paragraph (d) do not apply to statements or
omissions made in any Preliminary Prospectus, the Registration Statement or any
amendment thereto or the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the Representatives
specifically and expressly for use therein.
(e) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there has not been (i) any
material loss or interference with the business of the Company or any of its
Subsidiaries (A) from fire, explosion, flood or other calamity, whether or not
covered by insurance, or (B) from any court or governmental
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action, order or decree, or (ii) any material changes in the capital stock or,
except in the ordinary course of its business, long-term debt of the Company or
any of its Subsidiaries, or (iii) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, or (iv) any
development known to the Company that might cause or result in a Consolidated
Material Adverse Effect, whether or not arising from transactions in the
ordinary course of business, in each case of (i)-(iv) above other than as may be
set forth in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). Since
such dates, except in the ordinary course of business, neither the Company or
any of its Subsidiaries has entered into any material transaction not described
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) that might cause or result
in a Consolidated Material Adverse Effect.
(f) There is no agreement, contract, license, lease or other document
required to be described in the Registration Statement or the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) or
to be filed as an exhibit to the Registration Statement which is not described
or filed as required. All contracts described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), if any,
are in full force and effect on the date hereof, and neither the Company nor any
of its direct or indirect subsidiaries nor, to the best knowledge of the
Company, any other party, is in breach of or default under any such contract,
which breach or default would have a Consolidated Material Adverse Effect.
(g) The authorized, issued and outstanding capital stock of the Company
is set forth in the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), and the description of the capital stock
therein conforms with and accurately describes the rights set forth in the
instruments defining the same. The Company Firm Shares are duly authorized and
will, when issued in accordance with the terms of this Agreement and against
payment therefor, be validly issued, fully paid and non-assessable, and the
issuance of the Shares is not subject to any preemptive or similar rights.
(h) All of the outstanding shares of capital stock of the Company
(including the Selling Shareholder Firm Shares to be purchased by the
Underwriters from the Selling Shareholders) have been duly authorized and
validly issued and are fully paid and nonassessable, have been issued in
compliance with all applicable federal and state securities laws and were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities that were not satisfied or waived. All of
the issued shares of capital stock or other equity interests of each Subsidiary
have been duly authorized and validly issued, are fully paid and non-assessable,
have been issued in compliance with all applicable laws, including securities
laws, were not issued in violation of or subject to any preemptive or other
rights to subscribe for or purchase such securities that were not satisfied or
waived and are directly or indirectly owned by the Company, except as otherwise
set forth on Exhibit A hereto. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted or exercised thereunder, set forth in the Prospectus (or, if the
Prospectus is not in existence, in the most recent Preliminary Prospectus),
accurately and fairly present the information required to be
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shown with respect to such plans, arrangements, options and rights in all
material respects. Other than this Agreement and the options and warrants to
purchase Common Stock described in the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), there are no options,
warrants or other rights outstanding to subscribe for or purchase any shares of
the Company's capital stock from the Company. There are no preemptive rights
applicable to any shares of capital stock of the Company. There are no options,
warrants or other rights outstanding to subscribe for or purchase any shares of
the capital stock or registered capital of any Subsidiary from such Subsidiary
and no Subsidiary is subject to any obligation, commitment, plan, arrangement or
court or administrative orders with respect to the same. There are no preemptive
rights applicable to any shares of capital stock or registered capital of the
Subsidiaries. There are no restrictions upon the voting or transfer of any of
the Firm Shares or Option Shares pursuant to the Company's certificate of
incorporation, as amended to date ("Certificate of Incorporation"), bylaws or
other governing documents or any agreement to which the Company is a party or by
which it may be bound other than as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). Neither
the filing of the Registration Statement nor the offering or sale of the Shares
as contemplated by this Agreement gives rise to any rights, other than those
which have been waived, for or relating to the registration of any securities of
the Company.
(i) The Company has full corporate power and authority to enter into and
perform its obligations under this Agreement and to issue, sell and deliver the
Shares. This Agreement has been duly authorized, executed and delivered by the
Company and constitutes the valid and binding agreement of the Company, and is
enforceable against the Company in accordance with its terms except insofar as
enforceability may be affected by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and except
insofar as the indemnification and contribution provisions of Section 9 of this
Agreement may be affected by public policy concerns.
(j) Neither the Company nor any of its Subsidiaries is, nor with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution or delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement result in a
violation of or constitute a breach of or a default (including without
limitation with the giving of notice, the passage of time or otherwise) of any
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness or in any contract, indenture,
mortgage, deed of trust, loan agreement, lease, license, joint venture or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which any of its or their properties may be bound or affected or
that would result in a Consolidated Material Adverse Effect under the Articles
of Incorporation, bylaws or other charter documents of the Company or any of its
Subsidiaries. The Company has not incurred any liability, direct or indirect,
for any finders' or similar fees payable on behalf of the Company or the
Underwriters in connection with the transactions contemplated by this Agreement.
The performance by the Company of its obligations under this Agreement will not
violate any law, ordinance, Rule or regulation or any order, writ, injunction,
judgment or decree of any governmental agency or body or of any court having
jurisdiction over the Company or any of its Subsidiaries or any of its or
6
their properties that would result in a Consolidated Material Adverse Effect, or
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company or any of its Subsidiaries that would
result in a Consolidated Material Adverse Effect. Except for permits and similar
authorizations required under the Securities Act, the Exchange Act or under
state securities or Blue Sky laws of certain jurisdictions and for such permits
and authorizations that have been obtained, no consent, approval, authorization
or order of any court, governmental agency or body, financial institution or any
other person is required in connection with the consummation of the transactions
contemplated by this Agreement (except such additional steps as may be required
by the National Association of Securities Dealers, Inc. (the "NASD")).
(k) Each of the Company and its Subsidiaries has good and marketable
title, or has valid rights to use, all items of real and personal property which
are material to the business of the Company and its Subsidiaries, taken as a
whole, free and clear, except as described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), of all liens, encumbrances and claims that when taken
as a whole would result in a Consolidated Material Adverse Effect and subject to
such exceptions that do not adversely affect the present or prospective business
of the Company or its Subsidiaries.
(l) Each of the Company and its Subsidiaries holds adequate rights to use
all patents, patent rights, inventions, licenses, trade secrets, know-how
(including all unpatented and /or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks, tradenames and
copyrights ("Intellectual Property") described or referred to in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) currently employed by them in
connection with its or their business as described in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) except where the failure to own or possess such
Intellectual Property would not, singly or in the aggregate, have a Consolidated
Material Adverse Effect; and the Company has not received any notice of and is
not aware of any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Consolidated
Material Adverse Effect.
(m) There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding brought by any court or governmental
agency or body, domestic or foreign, to which the Company or any of its
Subsidiaries is a party or to which any property of the Company or any of its
Subsidiaries is subject which is pending or, to the best knowledge of the
Company, is threatened or contemplated against the Company or any of its
Subsidiaries that might have a Consolidated Material Adverse Effect, that might
prevent consummation of the transactions contemplated by this Agreement or that
is required to be disclosed in the Registration Statement or Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus); the
aggregate of all pending legal or governmental proceedings to which the Company
or any Subsidiary is a party or of which any of their respective property or
assets is subject which are not described in the
7
Registration Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material Adverse
Effect.
(n) Except as disclosed in the Prospectus (or, if the Prospectus is not
in existence, in the most recent Preliminary Prospectus), neither the Company
nor any of its Subsidiaries is in violation of any law, order, ordinance, Rule
or Regulation of which it is aware, or any order, writ, injunction, judgment or
decree of any governmental agency or body or of any court, to which it or its
properties (whether owned or leased) may be subject, which violation would have
a Consolidated Material Adverse Effect.
(o) Neither the Company nor, to the Company's knowledge, any of the
Selling Shareholders have taken, directly or indirectly, any action designed to
cause or result in, or which has constituted or will cause or result in, under
the Exchange Act, the Exchange Act Rules and Regulations or otherwise, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares other than any actions which may
have been taken or may be taken by the Underwriters. No bid or purchase by the
Company and, to the best knowledge of the Company, no bid or purchase of any
Selling Shareholder or, to the best knowledge of the Company, any bid or
purchase that could be attributed to the Company (as a result of bids or
purchases by an "affiliated purchaser" within the meaning of Regulation M under
the Exchange Act) for or of the Common Stock, any securities of the same class
or series as the Common Stock or any securities convertible into or exchangeable
for or that represent any right to acquire the Common Stock is now pending or in
progress or will have commenced at any time prior to the completion of the
distribution of the Shares.
(p) Ernst & Young LLP, whose reports appear in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) are, and during the periods covered by their reports in
the Registration Statement were, independent accountants as required by the
Securities Act and the Rules and Regulations. The historical and pro forma
financial statements, together with related notes and schedules, and other
financial information included in the Registration Statement, each Preliminary
Prospectus and the Prospectus present fairly (or, if the Prospectus has not been
filed with the Commission, as to the Prospectus, will present fairly) the
financial position, results of operations, cash flows and changes in
shareholders' equity of the Company and its Subsidiaries, taken as a whole, at
the dates and for the periods indicated, and the historical and pro forma
financial statements, together with relates notes, schedules and other financial
information included in the Registration Statement present fairly the
information required to be stated therein in all material respects. Such
financial statements, notes, schedules and other financial information have been
prepared in accordance with U.S. generally accepted accounting principles
applied on a consistent basis throughout the periods presented and all
adjustments necessary for a fair presentation of results for such periods have
been made, except as may be stated therein. The selected and summary financial
and statistical data included in the Registration Statement and the Prospectus
present fairly (or, if the Prospectus has not been filed with the Commission, as
to the Prospectus, will present fairly) the information shown therein and have
been compiled
8
on a basis consistent with the audited financial statements presented therein.
No other financial statements or schedules are required to be included in the
Registration Statement.
(q) The books, records and accounts of the Company and its Subsidiaries
accurately and fairly reflect, in reasonable detail in all material respects,
the transactions in and dispositions of the assets of the Company and its
Subsidiaries. The systems of internal accounting controls maintained by the
Company and its Subsidiaries are sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary (x) to
permit preparation of financial statements in conformity with U.S. generally
accepted accounting principles and (y) to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(r) The Company has delivered to FSVK the written agreement of each of
the Company's officers and directors and each holder of shares of the Company's
outstanding capital stock (collectively, the "Holders") to the effect that each
of the Holders will not, without the prior written consent of FSVK, for a period
of 180 days following the date of this Agreement, directly or indirectly offer,
sell, grant any option to purchase, contract to sell, or otherwise dispose of
any shares of Common Stock, any options or warrants to purchase any shares of
Common Stock or any securities convertible into or exchangeable for shares of
Common Stock owned by the Holder or with respect to which the Holder has the
power of disposition, or announce any offer to do so.
(s) No labor disturbance by the employees of the Company or any of its
Subsidiaries exists, or, to the knowledge of the Company, is imminent,
contemplated or threatened; and the Company is not aware of an existing,
imminent or threatened labor disturbance by the employees of any principal
suppliers, manufacturers, contractors or others which such disturbance might be
expected to result in any Consolidated Material Adverse Effect. No collective
bargaining agreement exists with any of the Company's employees or those of its
Subsidiaries and, to the best knowledge of the Company, no such agreement is
imminent.
(t) Each of the Company and its Subsidiaries has filed all federal,
state, local and foreign tax returns which are required to be filed or has
requested extensions thereof and has paid all taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges to the extent
that the same have become due and payable. To the best of the Company's
knowledge, no tax assessment or deficiency has been made or proposed against the
Company or any of its Subsidiaries nor has the Company or any of its
Subsidiaries received any notice of any proposed tax assessment or deficiency.
(u) Except as set forth in the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), there are no outstanding
contracts, loans, advances or guaranties of indebtedness by the Company or any
of its Subsidiaries to or for the benefit of any of (i) its "affiliates," as
such term is defined in the Rules and Regulations,
9
(ii) except for immaterial advances in the ordinary course of business, any of
the officers or directors of any of its Subsidiaries, or (iii) any of the
members of the families of any of them, in each case, required to be set forth
in the Prospectus (or, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus), under the Securities Act or Rules and Regulations.
(v) Neither the Company nor any of its Subsidiaries has at any time
within the last five years: (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of applicable law; (ii) made any payment to any local, state, federal
or foreign governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or allowed
by all applicable laws; or (iii) violated any applicable provision of the
Foreign Corrupt Practices Act of 1977, as amended.
(w) Neither the Company nor any of its Subsidiaries has any liability,
absolute or contingent, relating to: (i) public health or safety; (ii) worker
health or safety; or (iii) product defect or warranty (all except as would not
reasonably be expected to have a Consolidated Material Adverse Effect or as are
disclosed in the Registration Statement and Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus)).
(x) The Company has not distributed and will not distribute prior to the
Closing Date or on or prior to any date on which the Option Shares are to be
purchased, as the case may be, any prospectus or other offering material in
connection with the offering and sale of the Shares other than the Preliminary
Prospectus(es), the Prospectus, the Registration Statement and any other
material which may be permitted by the Securities Act and the Rules and
Regulations.
(y) Subject to official notice of issuance, the Shares have been approved
for inclusion for listing on the Nasdaq National Market.
(z) The Company is not now, and intends to conduct its affairs in the
future in such a manner so that it will not become, an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(aa) The Company and each of its Subsidiaries is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) for which the Company or any of its Subsidiaries would have
any liability has occurred; neither the Company nor any of its Subsidiaries has
incurred or expects to incur liability under (1) Title IV of ERISA with respect
to termination of, or withdrawal from, any "pension plan" or (2) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company or any of its Subsidiaries would have any liability that
is intended to
10
be qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification (all of the above except as would not
reasonably be expected to have a Consolidated Material Adverse Effect).
(bb) Except as set forth in the Prospectus (or if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there has, to the best
knowledge of the Company, been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, hazardous
wastes or hazardous substances by the Company or any of its Subsidiaries (or any
of their predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or its Subsidiaries in violation of
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit or which would require remedial action under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit; there has to the
best knowledge of the Company been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by the Company
or any of its Subsidiaries or with respect to which the Company or any of its
Subsidiaries have knowledge; and the terms "hazardous wastes," "toxic wastes"
and "hazardous substances" shall have the meanings specified in any applicable
local, state, federal and foreign laws or regulations with respect to
environmental protection (all of the above except as would not reasonably be
expected to have a Consolidated Material Adverse Effect).
(cc) The Company and each of its Subsidiaries are insured against such
losses and risks and in such amounts as are 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 cause a Consolidated Material Adverse Effect.
(dd) Each certificate signed by any officer of the Company, as amended in
writing from time to time, and delivered to the Representatives or Underwriters'
counsel pursuant to Section 7 of this Agreement shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
(ee) None of the Company or any of its subsidiaries does business with the
government of Cuba within the meaning of Florida statutes Section 517.075.
11
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING SHAREHOLDERS.
Each Selling Shareholder, severally and not jointly, represents and warrants to
and agrees with each Underwriter and the Company that:
(a) Such Selling Shareholder now has and on the Closing Date will
have good and marketable title to the Shares to be sold by such Selling
Shareholder, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest other than pursuant to this Agreement; and upon
delivery of such Shares hereunder and payment of the purchase price as herein
contemplated, each of the Underwriters who acquire such Shares without knowledge
of any adverse claim, will obtain good and marketable title to the Shares
purchased by it from such Selling Shareholder, free and clear of any pledge,
lien, security interest pertaining to such Selling Shareholder or such Selling
Shareholder's property, encumbrance, claim or equitable interest, or any
liability to or claims of any creditor, devisee, legatee or beneficiary of such
Selling Shareholder.
(b) Such Selling Shareholder has duly authorized (if applicable),
executed and delivered, in the form heretofore furnished to the Representatives,
an irrevocable Power of Attorney (the "Power of Attorney") appointing
{____________________] as attorneys-in-fact (collectively, the "Attorneys" and
individually, an "Attorney") and a Letter of Transmittal and Custody Agreement
(the "Custody Agreement") with [_________________________], as custodian (the
"Custodian"); each of the Power of Attorney and the Custody Agreement
constitutes a valid and binding agreement on the part of such Selling
Shareholder, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles and except insofar as the
indemnification and contribution provisions of Section 9 of this Agreement may
be affected by public policy concerns; and each of such Selling Shareholder's
Attorneys, acting alone, is authorized to execute and deliver this Agreement and
the certificate referred to in Section 7(f) hereof on behalf of such Selling
Shareholder, to determine the purchase price to be paid by the several
Underwriters to such Selling Shareholder as provided in Section 3 hereof, to
authorize the delivery of the Firm Shares to be sold by such Selling Shareholder
under this Agreement and to duly endorse (in blank or otherwise) the certificate
or certificates representing such Shares or a stock power or powers with respect
thereto, to accept payment therefor, and otherwise to act on behalf of such
Selling Shareholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders required for
the execution and delivery by such Selling Shareholder of the Power of Attorney
and the Custody Agreement, the execution and delivery by or on behalf of such
Selling Shareholder of this Agreement and the sale and delivery of the Firm
Shares to be sold by such Selling Shareholder under this Agreement (other than,
at the time of the execution hereof (if the Registration Statement has not yet
been declared effective by the Commission), the issuance of the order of the
Commission declaring the Registration Statement effective and such consents,
approvals, authorizations or orders as may be necessary under state or other
securities or Blue Sky laws) have been obtained and are in full force and
effect; such Selling Shareholder, if other than a natural person, has been duly
organized and is validly existing in
12
good standing under the laws of the jurisdiction of its organization as the type
of entity that it purports to be; and such Selling Shareholder has full legal
right, power and authority to enter into and perform its obligations under this
Agreement and such Power of Attorney and Custody Agreement, and to sell, assign,
transfer and deliver the Shares to be sold by such Selling Shareholder under
this Agreement.
(d) Certificates in negotiable form for all Firm Shares to be sold by
such Selling Shareholder under this Agreement, together with a stock power or
powers duly endorsed in blank by such Selling Shareholder, have been placed in
custody with the Custodian for the purpose of effecting delivery hereunder.
(e) This Agreement has been duly authorized by each Selling
Shareholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Shareholder and is a valid and binding
agreement of such Selling Shareholder, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and except
insofar as the indemnification and contribution provisions of Section 9 of this
Agreement may be affected by public policy concerns; and the performance of this
Agreement and the consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms and provisions of or
constitute a material default under any bond, debenture, note or other evidence
of indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
such Selling Shareholder is a party or to the best of such Selling Shareholder's
knowledge by which such Selling Shareholder, or any Firm Shares to be sold by
such Selling Shareholder hereunder, may be bound or, to the best of such Selling
Shareholders' knowledge, result in any violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over such
Selling Shareholder or over the properties of such Selling Shareholder, or, if
such Selling Shareholder is other than a natural person, result in any violation
of any provisions of the charter, bylaws or other organizational documents of
such Selling Shareholder.
(f) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock.
(g) Such Selling Shareholder has not distributed to the public and
will not distribute to the public any prospectus or other offering material in
connection with the offering and sale of the Shares.
(h) All information furnished by or on behalf of such Selling
Shareholder relating to such Selling Shareholder and the Firm Shares that is
contained in the representations and warranties of such Selling Shareholder in
such Selling Shareholder's Power of Attorney or set forth in the Registration
Statement or the Prospectus is, and at the
13
time the Registration Statement became or becomes, as the case may be, effective
and at all times subsequent thereto up to and on the Closing Date was or will
be, true, correct and complete in all material respects, and such information
furnished by or on behalf such Selling Shareholder does not, and at the time the
Registration Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date 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, in light of the
circumstances in which they are made, not misleading.
(i) Such Selling Shareholder will review the Prospectus and will
comply with all agreements and satisfy all conditions on its part to be complied
with or satisfied pursuant to this Agreement on or prior to the Closing Date and
will advise one of its Attorneys and FSVK prior to the Closing Date if any
statement to be made on behalf of such Selling Shareholder in the certificate
contemplated by Section 7(f) would be inaccurate if made as of such date.
(j) Such Selling Shareholder does not have, or has waived prior to
the date hereof, any preemptive right, co-sale right or right of first refusal
or other similar right to purchase any of the Shares that are to be sold by the
Company or any of the other Selling Shareholders to the Underwriters pursuant to
this Agreement; such Selling Shareholder does not have, or has waived prior to
the date hereof, any registration right or other similar right to participate in
the offering made by the Prospectus, other than such rights of participation as
have been satisfied by the participation of such Selling Shareholder in the
transactions to which this Agreement relates in accordance with the terms of
this Agreement; and such Selling Shareholder does not own any warrants, options
or similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, rights, warrants, options or other securities from
the Company, other than those described in the Registration Statement and the
Prospectus or those which are not required to be described in the Registration
Statement and the Prospectus.
(k) Such Selling Shareholder is not aware that any of the
representations and warranties of the Company set forth in Section 1 above is
untrue or inaccurate.
(l) To the best of such Selling Shareholder's knowledge, when any
Preliminary Prospectus was filed with the Commission it (i) contained all
statements required to be contained therein and complied in all respects with
the requirements of the Securities Act, the Rules and Regulations, the Exchange
Act and the Exchange Act Rules and Regulations and (ii) did not include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. To the best of such Selling Shareholder's
knowledge, on the Effective Date, the Registration Statement (i) contained or
will contain all statements required to be contained therein and complied or
will comply in all respects with the requirements of the Securities Act, the
Rules and Regulations, the Exchange Act and the Exchange Act Rules and
Regulations and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not
14
misleading. To the best of such Selling Shareholder's knowledge, when the
Prospectus or any Term Sheet that is a part thereof or any amendment or
supplement to the Prospectus is filed with the Commission pursuant to Rule
424(b) (or, if the Prospectus or part thereof or such amendment or supplement is
not required to be so filed, when the Registration Statement or the amendment
thereto containing such amendment or supplement to the Prospectus was or is
declared effective) and on any date on which Option Shares are to be purchased
by the Underwriters pursuant to this Agreement, the Prospectus, as amended or
supplemented at any such time, (i) contained or will contain all statements
required to be contained therein and complied or will comply in all respects
with the requirements of the Securities Act, the Rules and Regulations and the
Exchange Act Rules and Regulations and (ii) did not or will not include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The foregoing provisions of this paragraph
(l) do not apply to statements or omissions made in any Preliminary Prospectus,
the Registration Statement or any amendment thereto or the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives specifically and expressly for use therein.
(m) At the time of delivery to the Custodian of Firm Shares to be
sold by the Selling Shareholders, all stock transfer or other taxes (other than
income taxes) which are required to be paid in connection with the sale and
transfer of such Firm Shares to be sold by the Selling Shareholders to the
several Underwriters hereunder will have been fully paid or provided for by the
Selling Shareholder and all laws imposing such taxes will have been fully
complied with.
3. PURCHASE, SALE AND DELIVERY OF SHARES
(a) On the basis of the representations, warranties, covenants and
agreements of the Company, the Selling Shareholders and the Underwriters
contained in this Agreement and subject to the terms and conditions set forth in
this Agreement, the Company and the Selling Shareholders agree to sell to the
several Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company and the Selling Shareholders, at a
purchase price of $______ per share, the respective number of Firm Shares set
forth opposite the name of such Underwriter on Schedule I to this Agreement
(subject to adjustment as provided in Section 10 of this Agreement).
(b) On the basis of the several (and not joint) covenants and
agreements of the Underwriters contained in this Agreement and subject to the
terms and conditions set forth in this Agreement, the Company grants an option
to the several Underwriters to purchase from the Company all or any portion of
the Option Shares at the same price per share as the Underwriters are to pay for
the Firm Shares. This option may be exercised only to cover over-allotments in
the sale of the Firm Shares by the Underwriters and may be exercised in whole or
in part at any time (but not more than once) on or before the 45th day after the
date of the Prospectus first filed pursuant to Rule 424(b) under the Securities
Act upon written or telecopied notice by the Representatives to the Company
setting forth the
15
aggregate number of Option Shares as to which the several Underwriters are
exercising the option and the settlement date; notwithstanding the foregoing, if
the 45th day after the date of the Prospectus first filed pursuant to Rule
424(b) under the Securities Act is not a business day, then the time period for
delivery of the notice of the exercise of the over-allotment option shall
automatically be extended until the first business day following the 45th day
after the date of the Prospectus. The Option Shares shall be purchased
severally, and not jointly, by each Underwriter, if purchased at all, in the
same proportion that the number of Firm Shares set forth opposite the name of
the Underwriter in Schedule I to this Agreement bears to the total number of
Firm Shares to be purchased by the Underwriters under Section 3(a) above,
subject to such adjustments as the representatives in their absolute discretion
shall make to eliminate any fractional shares. Delivery of certificates for the
Option Shares, and payment therefor, shall be made as provided in Section 3(c)
and Section 3(d) below. Nothing contained in this Section 3 shall relieve any
defaulting Underwriter of its liability, if any, to the Company or to the
remaining Underwriters for damages occasioned by its default hereunder.
(c) Delivery of the Firm Shares and payment therefor, shall be made
at the office of Troop ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (or at such other location
as is agreed by the parties), at 6:30 a.m., Los Angeles time, on the fourth
business day after the date of this Agreement, or at such time on such other
day as shall be agreed upon in writing by the Company and the Representatives,
or as provided in Section 10 of this Agreement. The date and hour of delivery
and payment for the Firm Shares are referred to in this Agreement as the
"Closing Date." As used in this Agreement, "business day" means a day on which
the Nasdaq National Market is open for trading and on which banks in New York
and California are open for business and not permitted by law or executive order
to be closed.
(d) Delivery of the Option Shares and payment therefor, shall be made
at the office of Troop, Steuber, Pasich, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (or at such other
location as is agreed by the parties), at 6:30 a.m., Los Angeles time, on the
date specified by the Representatives (which shall be three business days after
the exercise of the option, but not in excess of the period of time specified in
the Rules and Regulations).
(e) Payment of the purchase price for the Firm Shares by the several
Underwriters shall be made at the election of the Representatives by (i)
certified or official bank check or checks drawn in next-day funds, payable to
the order of the Company and to the Custodian on behalf of the Selling
Shareholders, or (ii) wire transfer of immediately available funds to such
account of the Company and of the Custodian as the Company and the Custodian
shall advise the Representatives in writing at least three business days prior
to the Closing Date. Such payment shall be made upon delivery of certificates
for the Firm Shares to the Representatives for the respective accounts of the
several Underwriters. Certificates for the Firm Shares to be delivered to the
Representatives shall be registered in such name or names and shall be in such
denominations as the Representatives may request at least two business days
before the Closing Date. Such certificates will be made available
16
to the Underwriters for inspection, checking and packaging at the offices of
Troop, Steuber, Pasich, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, not less than one full business day
prior to the Closing Date. It is understood that the Representatives,
individually and not on behalf of the Underwriters, may (but shall not be
obligated to) make payment to the Company and the Custodian on behalf of the
Selling Shareholders for Firm Shares to be purchased by any Underwriter whose
check shall not have been received by the Representatives on the Closing Date
for the account of such Underwriter. Any such payment shall not relieve such
Underwriter from any of its obligations hereunder.
(f) Payment of the purchase price for the Option Shares by the
several Underwriters shall be made at the election of the Representatives by (i)
certified or official bank check or checks drawn in next-day funds, payable to
the order of the Company, or (ii) wire transfer of immediately available funds
to an account specified by the Company in writing at least three business days
prior to the date on which any such Option Shares are purchased. Such payment
shall be made upon delivery of certificates for the Option Shares to the
Representatives for the respective accounts of the several Underwriters.
Certificates for the Option Shares to be delivered to the Representatives shall
be registered in such name or names and shall be in such denominations as the
Representatives may request at least two business days before the date on which
any Option Shares are purchased by the Underwriters pursuant to this Agreement.
Such certificates will be made available to the Underwriters for inspection,
checking and packaging at the offices not less than one full business day prior
to the Closing Date. It is understood that the Representatives, individually and
not on behalf of the Underwriters, may (but shall not be obligated to) make
payment to the Company for Option Shares to be purchased by any Underwriter
whose check shall not have been received by the Representatives on any date on
which Option Shares are purchased for the account of such Underwriter. Any such
payment shall not relieve such Underwriter from any of its obligations
hereunder.
(g) It is understood that the several Underwriters propose to offer
the Shares for sale to the public as soon as the Representatives deems it
advisable to do so. The Firm Shares are to be initially offered to the public
at the public offering price set forth (or to be set forth) in the Prospectus.
The Representatives may from time to time thereafter change the public offering
price and other selling terms.
(h) The information set forth in the last paragraph on the front
cover page (insofar as such information relates to the Underwriters), the
legends respecting passive market making and stabilization set forth on the
inside front cover page and the statements set forth under the caption
"Underwriting" in any Preliminary Prospectus, the Registration Statement and the
Prospectus filed pursuant to Rule 424(b) constitute the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees
with the several Underwriters as follows:
17
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the time of execution
of this Agreement, to become effective as promptly as possible. If the
Registration Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Prospectus is otherwise required under Rule 424(b), the Company
will file the Prospectus, properly completed (and in form and substance
reasonably satisfactory to the Underwriters) pursuant to Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will not file the
Prospectus, any amended Prospectus, any amendment (including post-effective
amendments) to the Registration Statement or any supplement to the Prospectus
without (i) advising the Representatives of and, a reasonable time prior to the
proposed filing of such amendment or supplement, furnishing the Representatives
with copies thereof and (ii) obtaining the prior consent of the Representatives
to such filing. The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendment to the Registration
Statement or supplement to the Prospectus that may be necessary or advisable in
connection with the distribution of the Shares by the Underwriters and use its
best efforts to cause the same to become effective as promptly as possible.
(b) The Company will promptly advise the Representatives (i) when the
Registration Statement becomes effective, (ii) when any post-effective amendment
thereof becomes effective, (iii) of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for any additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (v) of the
receipt by the Company of any notification with respect to the suspension of the
registration, qualification or exemption from registration or qualification of
the Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best efforts to prevent
the issuance of any such stop order or suspension and, if issued, to obtain as
soon as possible the withdrawal thereof.
(c) The Company will (i) on or before the Closing Date, deliver to
the Representatives and to Underwriters' counsel a signed copy of the
Registration Statement as originally filed and of each amendment thereto filed
prior to the time the Registration Statement becomes effective and, promptly
upon the filing thereof, a signed copy of each post-effective amendment, if any,
to the Registration Statement (together with, in each case, all exhibits thereto
unless and to the extent previously furnished to the Representatives) and all
documents filed by the Company with the Commission under the Exchange Act and
deemed to be incorporated by reference into any Preliminary Prospectus or the
Prospectus and will also deliver to the Representatives, for distribution to the
several Underwriters, a sufficient number of additional conformed copies of each
of the foregoing (excluding exhibits) so that one copy of each may be
distributed to each Underwriter, (ii) as promptly as possible deliver to each of
the Representatives and send to the several Underwriters, at such office or
offices as the Representatives may designate, as many copies of the Prospectus
as the Representatives may reasonably request and (iii) thereafter from time to
time during the period in which a prospectus is required by law to be delivered
by an Underwriter, likewise
18
send to the Underwriters as many additional copies of the Prospectus and as many
copies of any supplement to the Prospectus and of any amended Prospectus, filed
by the Company with the Commission, as the Representatives may reasonably
request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter any event shall occur as a
result of which, in the opinion of counsel of the Representatives, it is
necessary to supplement or amend the Prospectus in order to make the Prospectus
not misleading or so that the Prospectus will not omit to state a material fact
necessary to be stated therein, in each case at the time the Prospectus is
delivered to a purchaser of the Shares, or if it shall be necessary to amend or
to supplement the Prospectus to comply with the Securities Act or the Rules and
Regulations, the Company will forthwith prepare and file with the Commission a
supplement to the Prospectus or an amended Prospectus so that the Prospectus as
so supplemented or amended will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein not misleading and so that it then will otherwise comply with
the Securities Act and the Rules and Regulations. If, after the public offering
of the Shares by the Underwriters commences and during such period, the
Underwriters propose to vary the terms of offering thereof by reason of changes
in general market conditions or otherwise, the Representatives will advise the
Company in writing of the proposed variation and if, in the opinion either of
counsel for the Company or counsel for the Underwriters, such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended Prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Shares may be sold by the
Underwriters to use the Prospectus, as from time to time so amended or
supplemented, in connection with the sale of the Shares in accordance with the
applicable provisions of the Securities Act and the Rules and Regulations for
such period.
(e) The Company will cooperate with the Representatives and
Underwriters' counsel in the qualification or registration of the Shares for
offer and sale under the securities or blue sky laws of such jurisdictions as
the Representatives may designate and, if applicable, in connection with
exemptions from such qualification or registration and, during the period in
which a Prospectus is required by law to be delivered by an Underwriter or a
dealer, in keeping such qualifications, registrations and exemptions in effect;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction in which it is not so qualified. The Company
will, from time to time, prepare and file such statements, reports and other
documents as are or may be required to continue such qualifications,
registrations and exemptions in effect for so long a period as the
Representatives may reasonably request for the distribution of the Shares.
(f) During a period of five years commencing with the date of this
Agreement, the Company will promptly furnish to the Representatives and to each
Underwriter who may so request in writing copies of (i) all periodic and special
reports furnished by it to Shareholders of the Company, (ii) all information,
documents and reports
19
filed by it with the Commission, the Nasdaq National Market, any securities
exchange or the NASD, (iii) all material press releases and material news items
or articles in respect of the Company, its products or affairs released or
prepared by the Company (other than promotional and marketing materials
disseminated solely to customers and potential customers of the Company in the
ordinary course of business) and (iv) any additional information concerning the
Company or its business which the Representatives may reasonably request.
(g) As soon as practicable, but not later than the 45th day following
the end of the fiscal quarter first ending after the first anniversary of the
Effective Date, the Company will make generally available to its securities
holders and furnish to the Representatives an earnings statement or statements
in accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(h) The Company agrees that, without FSVK's prior written consent,
the Company will not, and will not allow the Holders to, in each case directly
or indirectly, offer, sell, grant any option to purchase, contract to sell, or
otherwise sell or dispose of any shares of Common Stock, or any securities
convertible into or exchangeable for shares of Common Stock for a period of 180
days following the date of this Agreement, excluding only (i) the sale of the
Shares to be sold to the Underwriters pursuant to this Agreement and (ii) the
grant by the Company of options to purchase Common Stock (provided that none of
such options are or become exercisable during such 180-day period) or the
issuance by the Company of shares of Common Stock upon the exercise in
accordance with options previously granted under the Company's presently
authorized stock option plans as described in the Prospectus or in documents
incorporated therein, or upon the exercise in accordance with their terms of
previously granted warrants which are described in the Prospectus or in
documents incorporated therein.
(i) The Company will establish and maintain all financial control and
financial reporting systems customary for well-established public companies,
including but not limited to adequate management information and reporting
systems, and will employ and maintain, with adequate staffing levels at
headquarters and at each significant Subsidiary or significant functional
division, and at each level of responsibility, an employee staff of well trained
and highly qualified financial professionals.
(j) The Company will apply the net proceeds from the offering
received by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(k) The Company will, and at all times for a period of at least five
years after the date of this Agreement, unless such securities are then listed
on a national securities exchange, use its best efforts to cause the Common
Stock (including the Shares) to be included for listing on the Nasdaq National
Market, and the Company will comply with all registration, filing, reporting and
other requirements within its control of the Exchange Act and the Nasdaq
National Market which may from time to time be applicable to the Company.
20
(l) The Company will use commercially reasonable efforts to maintain
insurance of the types and in the amounts which it deems adequate for its
business consistent with insurance coverage maintained by companies of similar
size and engaged in similar businesses including, but not limited to, general
liability insurance covering all real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against.
(m) The Company will issue no press release prior to the purchase by
the Underwriters of all of the Option Shares or within 45 days after the Closing
Date, whichever is earlier, without prior consultation with ▇▇▇ ▇▇▇▇▇▇ with
respect to the contents thereof.
5. FURTHER AGREEMENT OF SELLING SHAREHOLDERS. The Selling Shareholders,
severally and not jointly, covenant and agree with the several Underwriters
that, without FSVK's prior written consent, such Selling Shareholder will not,
directly or indirectly, offer, sell, grant any option to purchase, contract to
sell, or otherwise dispose of any shares of Common Stock, or any securities
convertible into or exchangeable for shares of Common Stock for a period of 180
days following the date of this Agreement, excluding only the sale of the Firm
Shares to be sold to the Underwriters pursuant to this Agreement.
6. FEES AND EXPENSES.
(a) The Company and the Selling Shareholders agree with each
Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with or incident to: the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus, any drafts of each of them and any
amendments or supplements to any of them; the duplication or, if applicable,
printing (including all drafts thereof) and distribution, by mail, telex or
other means of communication of this Agreement, the Agreement Among
Underwriters, any Selected Dealer Agreements, the Underwriters' Questionnaire
and the Power of Attorney and the duplication and printing (including of drafts
thereof) of any other underwriting documents and material (including but not
limited to marketing memoranda and other marketing material) in connection with
the offering, purchase, sale and delivery of the Shares; the issuance, transfer
and delivery of the Shares under this Agreement to the several Underwriters,
including all expenses, taxes, duties, fees and commissions on the purchase and
sale of the Shares and Nasdaq National Market brokerage and transaction levies
with respect to the purchase and, if applicable, the sale of the Shares incident
to the sale and delivery of the Shares by the Company and the Selling
Shareholders to the Underwriters; the cost of printing all stock certificates;
the Transfer Agent's and Registrar's fees; the Custodian's fees; the fees and
disbursements of counsel for the Company; all fees and other charges of the
Company's independent public accountants and any other experts named in the
Prospectus; the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary
Prospectus(es) and the Prospectus, the agreements and other documents and
21
instruments referred to above and any amendments or supplements to any of the
foregoing; NASD filing fees and reasonable fees and disbursements of
Underwriters' counsel incurred in connection with the review by the NASD of the
terms of the Offering of the Shares; the cost of qualifying or registering the
Shares (or obtaining exemptions from qualification or registration) under the
laws of such jurisdictions as the Representatives may designate (including
filing fees in connection with such state securities or blue sky qualifications,
registrations and exemptions) and preparing any preliminary and any final Blue
Sky Memorandum (including reasonable fees and disbursements of Underwriters'
counsel in connection therewith); all fees and expenses in connection with
qualification of the Shares for inclusion for listing on the Nasdaq National
Market; the Company's share of roadshow expenses; and all other expenses
incurred by the Company in connection with the performance of its obligations
hereunder. The Selling Shareholders will pay and bear all costs associated with
the Custodian and Custodian's fees. Except as provided in this Section 6, the
Underwriters, including the Representatives, shall bear all expenses incurred by
it in connection with the offering, including (but not limited to) the expenses
of its own counsel. The provisions of this Section 7(a)(i) are intended to
relieve the Underwriters from the payment of the expenses and costs which the
Selling Shareholders and the Company hereby agree to pay, but shall not affect
any agreement which the Selling Shareholders and the Company may make, or may
have made, for the sharing of any of such expenses and costs. Such agreements
shall not impair the obligations of the Company and the Selling Shareholders
hereunder to the several Underwriters.
(ii) In addition to its obligations under Section 9(a) of this
Agreement, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any loss, claim, damage or liability described in Section 9(a) of
this Agreement, it will reimburse or advance to or for the benefit of the
Underwriters, and each of them, on a monthly basis (or more often, if requested)
for all legal and other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse or advance for the
benefit of the Underwriters for such expenses or the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any portion, or all, of any such interim
reimbursement payments or advances are so held to have been improper, the
Underwriters receiving the same shall promptly return such amounts to the
Company together with interest, compounded daily, at the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) announced
from time to time by Bank of America, NT&SA, San Francisco, California (the
"Prime Rate"), but not in excess of the maximum rate permitted by applicable
law. Any such interim reimbursement payments or advances that are not made to
or for the Underwriters within 30 days of a request for reimbursement or for an
advance shall bear interest at the Prime Rate, but not in excess of the maximum
rate permitted by applicable law, from the date of such request until the date
paid.
(b) In addition to their obligations under Section 9(c) of this
Agreement, the Underwriters severally and in proportion to their obligation to
purchase Firm Shares as
22
set forth on Schedule I hereto, agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any loss, claim, damage or liability described in
Section 9(c) of this Agreement, they will reimburse or advance to (for the
benefit of the Company on a monthly basis (or more often, if requested) for all
legal and other expenses incurred by the Company in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety or enforceability of the Underwriters' obligation to reimburse or
advance for the benefit of the Company for such expenses and the possibility
that such payments or advances might later be held to have been improper by a
court of competent jurisdiction. To the extent that any portion, or all, of any
such interim reimbursement payments or advances are so held to have been
improper, the Company shall promptly return such amounts to the Underwriters
together with interest, compounded daily, at the Prime Rate, but not in excess
of the maximum rate permitted by applicable law. Any such interim reimbursement
payments or advances that are not made to the Company within 30 days of a
request for reimbursement or for an advance shall bear interest at the Prime
Rate, but not in excess of the maximum rate permitted by applicable law, from
the date of such request until the date paid.
(c) Any controversy arising out of the operation of the interim
reimbursement and advance arrangements set forth in Sections 6(a)(ii) and 6(b)
above, including the amounts of any requested reimbursement payments or advance,
the method of determining such amounts and the basis on which such amounts shall
be apportioned among the indemnifying parties, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. If the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to the demand or notice is
authorized to do so. Any such arbitration will be limited to the interpretation
and obligations of the parties under the interim reimbursement and advance
provisions contained in Sections 6(a)(ii) and 6(b) above and will not resolve
the ultimate propriety or enforceability of the obligation to indemnify for or
contribute to expenses that is created by the provisions of Section 9 of this
Agreement.
(d) If the sale of the Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 7 of this Agreement is not satisfied, or because of any termination
pursuant to Section 11(b) of this Agreement, or because of any refusal,
inability or failure on the part of the Company to perform any material covenant
or agreement set forth in this Agreement or to comply with any material
provision of this Agreement other than by reason of a default by any of the
Underwriters, the Company agrees to reimburse the Representatives upon demand
for, or pay directly, all reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
the Representatives in connection with investigating, preparing to market or
marketing the Shares or otherwise in connection with this Agreement or the
offering of the Shares.
23
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase and pay for the Shares shall be subject, to the
reasonable satisfaction of the Representatives, to the accuracy as of the date
of execution of this Agreement, the Closing Date and the date on which the
Option Shares are to be purchased, as the case may be, of the representations
and warranties of the Company and the Selling Shareholders set forth in this
Agreement, to the accuracy of the statements of the Company, its officers and
the Selling Shareholders made in any certificate delivered pursuant to this
Agreement, to the performance by the Company and the Selling Shareholders of all
of their obligations to be performed under this Agreement at or prior to the
Closing Date or any later date on which Option Shares are to be purchased, as
the case may be, to the satisfaction of all conditions to be satisfied or
performed by the Company at or prior to that date and to the following
additional conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 462(b) under
the Act, such post-effective amendment shall become effective and the Company
shall have provided evidence satisfactory to the Representatives of such filing
and effectiveness) not later than 5:00 p.m., New York time, on the date of this
Agreement or at such later date and time as the Representatives may approve in
writing and, at the Closing Date or, with respect to the Option Shares, the date
on which such Option Shares are to be purchased; no stop order suspending the
effectiveness of the Registration Statement or any qualification, registration
or exemption from qualification or registration for the sale of the Shares in
any jurisdiction shall have been issued and no proceedings for that purpose
shall have been instituted or threatened; and any request for additional
information on the part of the Commission shall have been complied with to the
reasonable satisfaction of the Representatives and Underwriters' counsel.
(b) The Representatives shall have received from Troop, Steuber,
Pasich, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, counsel for the Underwriters, an opinion, dated as of the
Closing Date or, if applicable, the date on which the Option Shares are to be
purchased, and the Company shall have furnished such counsel with all documents
which they may reasonably request for the purpose of enabling them to pass upon
such matters.
(c) The Representatives shall have received on the Closing Date and
on any later date on which Option Shares are purchased, as the case may be, the
opinion of Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel for the Company and the
Selling Shareholders, addressed to the Underwriters and dated as of the Closing
Date or such later date, with reproduced copies or signed counterparts thereof
for each of the Underwriters, covering the matters set forth in Annex A to this
Agreement and in form and substance reasonably satisfactory to the
Representatives.
(d) The Representatives shall be satisfied that there has not been
any material change in the market for securities in general or in political,
financial or economic conditions as to render it impracticable in the
Representatives' sole judgment to make a
24
public offering of the Shares, or a material adverse change in market levels for
securities in general or financial or economic conditions which render it
inadvisable to proceed.
(e) The Representatives shall have received on or before the Closing
Date and on any later date on which Option Shares are purchased a certificate,
dated as of the Closing Date or such later date, as the case may be, and signed
by the President and the Chief Financial Officer of the Company stating that:
(i) the representations and warranties of the Company set forth
in Section 1 of this Agreement are true and correct with the same force and
effect as if expressly made at and as of the Closing Date or such later date,
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or such later date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or are threatened under the Securities Act; and
(iii) (A) the respective signers of the certificate have
carefully examined the Registration Statement in the form in which it originally
became effective and the Prospectus and any supplements or amendments to any of
them and, as of the Effective Date, the statements made in the Registration
Statement and the Prospectus were true and correct in all material respects and
neither the Registration Statement nor the Prospectus omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, (B) since the Effective Date, no event has
occurred that should have been set forth in an amendment to the Registration
Statement or a supplement or amendment to the Prospectus that has not been set
forth in such an amendment or supplement, (c) since the respective dates as of
which information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any Consolidated Material Adverse Effect or any development involving a
prospective Consolidated Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, neither the Company nor any of its
Subsidiaries has entered into any material transaction not referred to in the
Registration Statement in the form in which it originally became effective and
the Prospectus contained therein, (D) there are not any pending or known
threatened legal proceedings to which the Company or any of its Subsidiaries is
a party or of which property of the Company or any of its Subsidiaries is the
subject which are material and which are not disclosed in the Registration
Statement and the Prospectus and (E) there are not any license agreements,
contracts, leases or other documents that are required to be filed or
incorporated by reference as exhibits to the Registration Statement that have
not been filed or incorporated by reference as required.
(f) The Representatives shall be satisfied that, and shall have
received a certificate, dated the Closing Date from the Attorneys for each
Selling Shareholder to the effect that, as of the date on which Option Shares
are to be purchased, they have not been informed that:
25
(i) The representations and warranties made by such Selling
Shareholder herein are not true or correct in any material respect on the
Closing Date; or
(ii) Such Selling Shareholder has not complied with any
obligation or satisfied any condition which is required to be performed or
satisfied on the part of such Selling Shareholder at or prior to the Closing
Date.
(g) The Representatives shall have received from Ernst & Young a
letter or letters, addressed to the Underwriters and dated as of the Closing
Date and any later date on which Option Shares are purchased, confirming that
they are independent accountants with respect to the Company within the meaning
of the Securities Act and the applicable Rules and Regulations thereunder and,
based upon the procedures described in their letter, referred to below,
delivered to the Representatives concurrently with the execution of this
Agreement (the "Original Letter"), but carried out to a date not more than five
business days prior to the Closing Date or such later date on which Option
Shares are purchased, (i) confirming, to the extent true, that the statements
and conclusions set forth in the Original Letter are accurate as of the Closing
Date or such later date, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter that are necessary to reflect any changes in the facts
described in the Original Letter since the date of the Original Letter or to
reflect the availability of more recent financial statements, data or
information. Such letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business, properties or
condition (financial or otherwise), results of operations or prospects of the
Company or any of its Subsidiaries which, in the Representatives' sole judgment,
makes it impractical or inadvisable to proceed with the public offering of the
Shares or the purchase of the Option Shares as contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus). In addition, the Representatives shall have received from Ernst &
Young, on or prior to the Closing Date, a letter addressed to the Company and
made available to the Representatives for the use of the Underwriters stating
that their review of the Company's system of internal controls, to the extent
they deemed necessary in establishing the scope of their examination of the
Company's consolidated financial statements as of June 30, 1999, or in
delivering their Original Letter, did not disclose any weaknesses in internal
controls that they considered to be a material weaknesses.
(h) Prior to the Closing Date, the Shares shall have been designated
national market system securities, duly authorized for listing on the Nasdaq
National Market upon official notice of issuance.
(i) On or prior to the Closing Date, the Representative shall have
received from all Holders executed agreements covering the matters described in
Section 1(r) of this Agreement.
(j) The Company shall have furnished to the Representatives such
further certificates and documents as the Representatives shall reasonably
request (including certificates of officers of the Company), as to the accuracy
of the representations and
26
warranties of the Company set forth in this Agreement, the performance by the
Company of its obligations under this Agreement and the other conditions
concurrent and precedent to the obligations of the Underwriters under this
Agreement. Counsel to the Representatives shall provide a written memorandum to
the Company identifying closing documents which such counsel deems necessary for
the Underwriters' review, not less than two business days before the Closing
Date.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement will be in compliance with the provisions of this
Agreement only if they are reasonably satisfactory to the Representatives. The
Company will furnish the Representatives with such number of conformed copies of
such opinions, certificates, letters and documents as the Representatives shall
reasonably request.
If any of the conditions specified in this Section 7 shall not have been
fulfilled in all material respects when and as provided in this Agreement, time
being of the essence, or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the Representatives and
Underwriters' counsel, this Agreement and all obligations of the Underwriters
hereunder may be canceled by the Representatives at, or at any time prior to,
the Closing Date or (with respect to the Option Shares) prior to the date upon
which the Option Shares are to be purchased, as the case may be. Notice of such
cancellation shall be given to the Company in writing or by telephone or
telecopy confirmed in writing. Any such termination shall be without liability
of the Company to the Underwriters (except as provided in Section 6 or Section 9
of this Agreement) and without liability of the Underwriters to the Company
(except to the extent provided in Section 9 of this Agreement).
8. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY AND THE SELLING
SHAREHOLDERS. The respective obligations of the Company and the Selling
Shareholders to sell and deliver the Shares required to be delivered as and when
specified in this Agreement shall be subject to the condition that, at the
Closing Date or (with respect to the Option Shares) the date upon which the
Option Shares are to be purchased by the Underwriters pursuant to this
Agreement, no stop order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings therefor shall be pending or
threatened by the Commission.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereof) who
controls any Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statute,
law or regulation, at common law or otherwise, specifically including but not
limited to losses, claims, damages or liabilities (or actions in respect
thereof) related to negligence on the part of any Underwriter, and the Company
agrees to reimburse each such
27
Underwriter and controlling person for any legal or other expenses (including,
except as otherwise provided below, settlement expenses and fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding that may be brought against, the respective indemnified parties, in
each case insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon, in whole or in part, (i) any
breach of any representation, warranty, covenant or agreement of the Company in
this Agreement, (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement in the form originally
filed or in any amendment thereto (including the Prospectus as part thereof) or
any post-effective amendment thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading or (iii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading or (iv) any untrue statement or alleged
untrue statement of a material fact contained in any application or other
document, or any amendment or supplement thereto, executed by the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify or register the Shares under the securities
or Blue Sky laws thereof or to obtain an exemption from such qualification or
registration or filed with the Commission or any securities association, the
Nasdaq National Market, or any securities exchange, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided, however, that (1) the indemnity
agreements of the Company contained in this Section 9(a) shall not apply to any
such losses, claims, damages, liabilities or expenses if such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of any Underwriter through the
Representatives specifically and expressly for use in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any such amendment
thereof or supplement thereto and (2) the indemnity agreement contained in this
Section 9(a) 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, liabilities or expenses purchased the Shares that are the
subject thereof (or to the benefit of any person controlling such Underwriter)
if the Company can demonstrate that at or prior to the written confirmation of
the sale of such Shares a copy of the Prospectus (or the Prospectus as amended
or supplemented) was not sent or delivered to such person and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented), unless the failure is the result of noncompliance by the Company
with Section 4 of this Agreement. The indemnity agreements of the Company
contained in this Section 9(a) and the representations and warranties of the
Company contained in Section 1 of this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall
28
survive the delivery of and payment for the Shares. This indemnity agreement
shall be in addition to any liabilities which the Company may have pursuant to
this Agreement or otherwise.
(b) Each Selling Shareholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter and each person (including each
partner or officer thereof) who controls any Underwriter within the meaning of
Section 15 of the Securities Act from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Securities Act, the Exchange Act or
other federal or state statute, law or regulation, at common law or otherwise,
specifically including but not limited to losses, claims, damages or liabilities
(or actions in respect thereof) related to negligence on the part of any
Underwriter, and each Selling Shareholder, severally and not jointly, agrees to
reimburse each such Underwriter and controlling person for any legal or other
expenses (including, except as otherwise provided below, settlement expenses and
fees and disbursements of counsel) incurred by the respective indemnified
parties in connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding that may be brought against, the respective indemnified parties, in
each case insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon, in whole or in part, (i) any
breach of any representation, warranty, covenant or agreement of such Selling
Shareholder in this Agreement, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement in the form
originally filed or in any amendment thereto (including the Prospectus as part
thereof) or any post-effective amendment thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (iii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (iv) any untrue
statement or alleged untrue statement of a material fact contained in any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify or register the Shares
under the securities or Blue Sky laws thereof or to obtain an exemption from
such qualification or registration or filed with the Commission or any
securities association, the Nasdaq National Market, or any securities exchange,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that (1) the indemnity agreements of the Selling Shareholders contained in this
Section 9(b) shall not apply to any such losses, claims, damages, liabilities or
expenses if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of any Underwriter through the Representatives specifically and expressly for
use in the Registration Statement, any Preliminary Prospectus or the Prospectus
or any such
29
amendment thereof or supplement thereto, (2) the indemnity agreement contained
in this Section 9(b) 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, liabilities or expenses purchased the Shares that are
the subject thereof (or to the benefit of any person controlling such
Underwriter) if the Selling Shareholder can demonstrate that at or prior to the
written confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented), unless the failure is the result of noncompliance by
the Company with Section 4 of this Agreement and (3) the indemnity agreements of
the Selling Shareholders contained in this Section 9(b) shall apply in the case
of subparagraphs (ii), (iii) and (iv) of this Section 9(b) to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or such Underwriter by such Selling
Shareholder, directly or through such Selling Shareholder's representatives,
specifically for use in the preparation thereof. The indemnity agreements of the
Selling Shareholders contained in this Section 9(b) and the representations and
warranties of the Selling Shareholders contained in Section 2 of this Agreement
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Shares. This indemnity agreement shall be in
addition to any liabilities which the Selling Shareholders may have pursuant to
this Agreement or otherwise. Notwithstanding anything to the contrary in this
Section 9, no Selling Shareholder shall be required to make any payments in
respect of any indemnity obligation arising under this Section 9(b) in excess of
the net proceeds from the Firm Shares sold by that Selling Shareholder.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, each of its officers who signs the Registration
Statement, each of its directors, each other Underwriter, each Selling
Shareholder and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Exchange Act, or other federal
or state statute, law or regulation or at common law or otherwise and to
reimburse each of them for any legal or other expenses (including, except as
otherwise hereinafter provided, settlement expenses and fees and disbursements
of counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding that may be
brought against, the respective indemnified parties, in each case arising out
of or based upon (i) any breach of any representation, warranty, covenant or
agreement of the indemnifying Underwriter in this Agreement, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof) or any post-
effective amendment thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
30
made, not misleading or (iii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, but in each case under clauses (ii) and
(iii) above, as the case may be, only if such statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such indemnifying Underwriter through the
Representatives specifically and expressly for use in the Registration
Statement, in any Preliminary Prospectus or the Prospectus or any such amendment
thereof or supplement thereto. The Company and the Selling Shareholders
acknowledge and agree that the matters described in Section 3(h) of this
Agreement constitute the only information furnished in writing by or on behalf
of the several Underwriters for inclusion in the Registration Statement, any
preliminary Prospectus or the Prospectus. The indemnity agreement of each
Underwriter contained in this Section 9(c) shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Shares.
This indemnity agreement shall be in addition to any liabilities which each
Underwriter may have pursuant to this Agreement or otherwise. Notwithstanding
anything to the contrary in this Section 9, no Underwriter shall be required to
make any payments in respect of any claim arising under this Section 9(c) in
excess of the underwriting discount applicable to the Shares purchased by that
Underwriter.
(d) Each person or entity indemnified under the provisions of
Sections 9(a), 9(b) and 9(c) above agrees that, upon the service of a summons or
other initial legal process upon it in any action or suit instituted against it
or upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
Sections, it will, if a claim in respect thereunder is to be made against the
indemnifying party or parties under this Section 9, and give written notice (the
"Notice") of such service or notification to the party or parties from whom
indemnification may be sought hereunder within ten (10) calendar days after
receipt by them of written notice of the commencement of any actions against
them. No indemnification provided for in Sections 9(a), 9(b) and 9(c) above
shall be available to any person who fails to so give the Notice if the party
to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related, but
only to the extent such party was materially prejudiced by the failure to
receive the Notice, and the omission to so notify such indemnifying party or
parties shall not relieve such indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or otherwise
than on account of Sections 8(a), 9(b) and 9(c). Any indemnifying party shall
be entitled at its own expense to participate in the defense of any action, suit
or proceeding against, or investigation or inquiry of, an indemnified party.
Any indemnifying party shall be entitled, if it so elects within a reasonable
time after receipt of the Notice by giving written notice (the "Notice of
Defense") to the indemnified party, to assume (alone or in conjunction with any
other indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at
31
the expense of the indemnifying party or parties, by counsel chosen by such
indemnifying party or parties and reasonably satisfactory to the indemnified
party or parties; provided, however, that (i) if the indemnified party or
parties reasonably determine that there may be a conflict between the positions
of the indemnifying party or parties and of the indemnified party or parties in
conducting the defense of such action, suit, investigation, inquiry or
proceeding or that there may be legal defenses or rights available to such
indemnified party or parties different from or in addition to those available to
the indemnifying party or parties, then separate counsel for and selected by the
indemnified party or parties shall be entitled to conduct, at the expense of the
indemnifying parties, the defense of the indemnified parties to the extent
determined by such counsel to be necessary to protect the interests of the
indemnified party or parties, and (ii) provided, further, that the indemnifying
party shall not be liable for the fees and expenses of more than one separate
counsel, reasonably approved by the indemnifying party, for all of the
indemnified parties, plus, if applicable, one local counsel in each
jurisdiction. In addition, in any event, the indemnified party or parties shall
be entitled to have counsel selected by such indemnified party or parties
participate in, but not conduct, the defense. If, within a reasonable time after
receipt of the Notice, an indemnifying party gives a Notice of Defense and,
unless separate counsel is to be chosen by the indemnified party or parties as
provided above, the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under Sections 9(a), 9(b) and 9(c) for any
legal or other expenses subsequently incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding, except that (A) the indemnifying party or parties shall
bear and pay the legal and other expenses incurred in connection with the
conduct of the defense as referred to in clause (i) of the proviso to the
preceding sentence and (B) the indemnifying party or parties shall bear and pay
such other expenses as it or they have authorized to be incurred by the
indemnified party or parties. If, within a reasonable time after receipt of the
Notice, no Notice of Defense has been given, the indemnifying party or parties
shall be responsible for any legal or other expenses incurred by the indemnified
party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 9
but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right to appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in Section 9(a), 9(b) and
9(c) above (i) in such proportion as is appropriate to reflect the relative
benefits received by each indemnifying party from the offering of the Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each party in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company, the Selling Shareholders and the
32
Underwriters shall be deemed to be in the same respective proportions as the
total proceeds from the offering of the Shares, net of the underwriting
discounts, received by the Company and the Selling Shareholders and the total
underwriting discount retained by the Underwriters bear to the aggregate public
offering price of the Shares. Relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by a party and the party's relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 9(e) were to be determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to in the first sentence of the first paragraph of this
Section 9(e) and to the considerations referred to in the third sentence of the
first paragraph of this Section 9(e). The amount paid by an indemnified party as
a result of the losses, claims, damages or liabilities, or actions in respect
thereof, referred to in the first sentence of the first paragraph of this
Section 9(e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating, preparing
to defend or defending against any action or claim which is the subject of this
Section 9(e). Notwithstanding the provisions of this Section 9(e), no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by that Underwriter and
no Selling Shareholder shall be required to contribute any amount in excess of
the net proceeds from the Firm Shares sold by that Selling Shareholder. For
purposes of this Section 9(e), each person who controls an Underwriter within
the meaning of the Securities Act shall have the same rights to contribution as
such Underwriter, and each person who controls the Company within the meaning of
the Securities Act, each officer of the Company who signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the immediately preceding
and immediately following sentences. No person guilty of fraudulent
misrepresentation (within the meaning of Section 1l(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute in
this Section 9(e) are several and not joint in proportion to their respective
underwriting obligations.
Each party or other entity entitled to contribution agrees that upon the
service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in Section 9(d) above). This Section 9(e) shall not be
operative as to any Underwriter to the extent that the Company is entitled to
receive or has received indemnity under this Section 9.
33
(f) The Company shall not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning of
Section 15 of the Securities Act is a party to such claim, action, suit or
proceeding), which consent shall not be unreasonably withheld, unless such
settlement, compromise or consent includes an unconditional release of each such
Underwriter and each such controlling person from all liability arising out of
such claim, action, suit or proceeding.
(g) No Underwriter shall, without the consent of the Company, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not the Company is a party
to such claim, action, suit or proceeding), which consent shall not be
unreasonably withheld, unless such settlement, compromise or consent includes an
unconditional release of the Company, each of its officers who signed the
Registration Statement, each of its directors, each Selling Shareholder and each
person who controls the Company within the meaning of Section 15 of the
Securities Act, from all liability arising out of such claim, action, suit or
proceeding.
(h) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of Sections 6(a)(ii), 6(b) and 6(c) and this Section
9 of this Agreement and that they are fully informed regarding all such
provisions. They further acknowledge that the provisions of Sections 6(a)(ii),
6(b) and 6(c) and this Section 9 of this Agreement fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement, each Preliminary Prospectus and the Prospectus as required by the
Securities Act, the Rules and Regulations, the Exchange Act and the rules and
regulations of the Commission under the Exchange Act. The parties are advised
that federal or state policy, as interpreted by the courts in certain
jurisdictions, may be contrary to certain provisions of Sections 6(a)(ii), 6(b)
and 8(c) and this Section 9 of this Agreement and, to the extent permitted by
law, the parties hereto hereby expressly waive and relinquish any right or
ability to assert such public policy as a defense to a claim under Sections
6(a)(ii), 6(b) or 6(c) or this Section 9 of this Agreement and further agree not
to attempt to assert any such defense.
10. SUBSTITUTION OF UNDERWRITERS. If for any reason one or more of the
Underwriters fails or refuses (otherwise than for a reason sufficient to justify
the termination of this Agreement under the provisions of Section 7 or Section
11 of this Agreement) to purchase and pay for the number of Firm Shares agreed
to be purchased by such Underwriter or Underwriters, the Company shall
immediately give notice thereof to the Representatives and the non-defaulting
Underwriters shall have the right within 24 hours after the receipt by the
Representatives of such notice to purchase, or procure one or more other
Underwriters to purchase, in such proportions as may be agreed upon among the
Representatives and such purchasing Underwriter or Underwriters and upon the
terms set
34
forth herein, all or any part of the Firm Shares that such defaulting
Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail to make such arrangements with respect to all such Shares, the
number of Firm Shares that each non-defaulting Underwriter is otherwise
obligated to purchase under this Agreement shall be automatically increased on a
pro rata basis to absorb the remaining Shares that the defaulting Underwriter or
Underwriters agreed to purchase, provided, however, that the non-defaulting
Underwriters shall not be obligated to purchase the Shares that the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate number of such
Shares exceeds 10% of the total number of Firm Shares that all Underwriters
agreed to purchase under this Agreement. If the total number of Firm Shares that
the defaulting Underwriter or Underwriters agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the first 24-hour
period above referred to, to make arrangements with other underwriters or
purchasers satisfactory to the Representatives for purchase of such Shares on
the terms set forth in this Agreement. In any such case, either the
Representatives or the Company shall have the right to postpone the Closing Date
determined as provided in Section 3(c) of this Agreement for not more than seven
business days after the date originally fixed as the Closing Date pursuant to
said Section 3(c) in order that any necessary changes in the Registration
Statement, the Prospectus or any other documents or arrangements may be made.
If neither the non-defaulting Underwriters nor the Company makes
arrangements within the time periods provided in the first three sentences of
the first paragraph of this Section 10 for the purchase of all the Firm Shares
that the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter (except
as provided in Section 6 or Section 9 of this Agreement) and without
anyliability on the part of any non-defaulting Underwriter to the Company
(except to the extent provided in Section 9 of this Agreement). Nothing in this
Section 10, and no action taken hereunder, shall relieve any defaulting
Underwriter from liability, if any, to the Company, the Selling Shareholders or
any non-defaulting Underwriter for damages occasioned by its default under this
Agreement. The term "Underwriter" in this Agreement shall include any persons
substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
(a) If the Registration Statement has not been declared effective
prior to the date of this Agreement, this Agreement shall become effective at
such time, after notification of the effectiveness of the Registration Statement
has been released by the Commission, as the Representatives and the Company
shall agree upon the public offering price and the purchase price of the Shares.
If the public offering price and the purchase price of the Shares shall not have
been determined prior to 5:00 p.m., New York time, on the fifth full business
day after the Registration Statement has become effective, this Agreement shall
thereupon terminate without liability on the part of the Company or the Selling
Shareholders to the Underwriters (except as provided in Section 6 or Section 9
of this Agreement) or the Underwriters to the Company or the Selling
Shareholders (except as set
35
forth in Section 9 of this Agreement). By giving notice before the time this
Agreement becomes effective, the Representatives may prevent this Agreement from
becoming effective without liability of any party to the other party, except
that the Company shall remain obligated to pay costs and expenses to the extent
provided in Section 6 and Section 9 of this Agreement. If the Registration
Statement has been declared effective prior to the date of this Agreement, this
Agreement shall become effective upon execution and delivery by the
Representatives, the Company and the Attorneys.
(b) This Agreement may be terminated by the Representatives in their
absolute discretion by giving written notice to the Company at any time on or
prior to the Closing Date or, with respect to the purchase of the Option Shares,
on or prior to any later date on which the Option Shares are to be purchased, as
the case may be, if prior to such time any of the following has occurred or, in
the Representatives' reasonable opinion, is likely to occur: (i) after the
respective dates as of which information is given in the Registration Statement
and the Prospectus, any Consolidated Material Adverse Effect or development
involving a prospective Consolidated Material Adverse Effect in or affecting
particularly the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company and its direct and indirect
subsidiaries, taken as a whole, whether or not arising in the ordinary course of
business, occurs which would, in the Representatives' reasonable judgment, make
the offering or the delivery of the Shares impracticable or inadvisable; or (ii)
if there shall have been the engagement in hostilities or an escalation of major
hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, or any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions, if the effect of such outbreak, calamity,
crisis or change in economic or political conditions on the financial markets of
the United States would, in the Representatives' reasonable judgment, make the
offering or delivery of the Shares impracticable or inadvisable; or (iii) if
there shall have been suspension of trading in securities generally or a
material adverse decline in value of securities generally on the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National Market, or
limitations on prices (other than limitations on hours or numbers of days of
trading) for securities on either such exchange or system; or (iv) if there
shall have been the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of, or commencement of any
proceeding or investigation by, any court, legislative body, agency or other
governmental authority which in the Representatives' reasonable judgment has or
may have a Consolidated Material Adverse Effect; or (v) if there shall have been
the declaration of a banking moratorium by federal, New York or California state
authorities; or (vi) if there shall have been the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in the Representatives' reasonable judgment has a material
adverse effect on the securities markets in the United States; or (vii) existing
international monetary conditions shall have undergone a material adverse change
which, in the Representatives reasonable judgment, makes the offering or
delivery of the Shares impracticable or inadvisable. If this Agreement shall be
terminated pursuant to this Section 11, there shall be no liability of the
Company or the Selling Shareholders to the Underwriters (except pursuant to
Section 6 and Section 9 of this Agreement) and no liability of the Underwriters
to the
36
Company or the Selling Shareholders (except to the extent provided in Section 9
of this Agreement).
12. NOTICES. Except as otherwise provided herein, all communications hereunder
shall be in writing and, if to the Underwriters, shall be mailed, faxed or
delivered to First Security ▇▇▇ ▇▇▇▇▇▇ , ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ (facsimile: (310) 443-
3400) with a copy to Troop ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
Esq. (facsimile: (▇▇▇) ▇▇▇-▇▇▇▇); and if to the Company or the Selling
Shareholders, shall be mailed, faxed or delivered to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (facsimile: (▇▇▇) ▇▇▇-▇▇▇▇) Attention: President,
with a copy to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
(facsimile: (▇▇▇) ▇▇▇-▇▇▇▇). All notices given by facsimile shall be promptly
confirmed by letter.
13. PERSONS ENTITLED TO THE BENEFIT OF THIS AGREEMENT. This Agreement
shall inure to the benefit of the Company, the Selling Shareholders and the
several Underwriters and, with respect to the provisions of Section 6 and
Section 9 of this Agreement, the several parties (in addition to the Company,
the Selling Shareholders and the several Underwriters) indemnified under the
provisions of Section 6 and Section 9, and their respective personal
Representatives, successors and assigns. Nothing in this Agreement is intended
or shall be construed to give to any other person, firm or corporation any legal
or equitable remedy or claim under or in respect of this Agreement or any
provision contained herein. The term "successors and assigns" as herein used
shall not include any purchaser, as such purchaser, of any of the Shares from
the several Underwriters.
14. GENERAL. Notwithstanding any provision of this Agreement to the
contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties, covenants and
agreements in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof or by or on behalf of
the Company or any Selling Shareholder or their respective directors or officers
and (c) delivery and payment for the Shares under this Agreement; provided,
however, that if this Agreement is terminated prior to the Closing Date, the
provisions of Sections 4(f)-4(m) of this Agreement shall be of no further force
or effect. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which together shall constitute
one and the same instrument, and may be delivered by facsimile transmission.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS, AND NOT THE LAWS PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF
THE STATE OF CALIFORNIA.
15. AUTHORITY OF THE REPRESENTATIVES. In connection with this Agreement,
the Representatives will act for and on behalf of the several Underwriters, and
any action taken under this Agreement by the Representatives, as Representatives
of the several Underwriters, will be binding on all the Underwriters.
37
If the foregoing correctly sets forth your understanding, please so
indicate by signing in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among the Company, the Selling
Shareholders and the several Underwriters.
Very truly yours,
QUALSTAR CORPORATION, INC.
By:________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
SELLING SHAREHOLDERS
By:_______________________________________________
Attorney-in-Fact for the Selling Shareholders
named in Schedule II hereto
The foregoing Agreement is hereby confirmed and accepted as of the date
first above written.
On their own behalf and on behalf of each of the several Underwriters named
in Schedule I hereto.
FIRST SECURITY VAN ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & COMPANY, INC.
WEDBUSH ▇▇▇▇▇▇ SECURITIES
As Representatives of the
Several Underwriters
By: First Security ▇▇▇ ▇▇▇▇▇▇
By:________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President
38
SCHEDULE I
UNDERWRITERS
Number of Firm Shares
Underwriters to be Purchased:
------------------------------------------- ---------------------
First Security ▇▇▇ ▇▇▇▇▇▇..................
▇▇▇▇▇▇▇ & Company, Inc.....................
Wedbush ▇▇▇▇▇▇ Securities..................
Total....................................
39
SCHEDULE II
Number of Firm Shares
Selling Shareholder to be Sold:
------------------------------------------- ---------------------
40