DRAFT
7/23/97
[____________] Shares1
FAROUDJA, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_______, 1997
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY LLC
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & COMPANY
As Representatives of the several Underwriters
c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies/Gentlemen:
Faroudja, Inc., a Delaware corporation (the "COMPANY"), and certain
stockholders of the Company named in SCHEDULE B hereto (hereinafter called the
"SELLING STOCKHOLDERS") address you as the Representatives of each of the
persons, firms and corporations listed in SCHEDULE A hereto (herein collectively
called the "UNDERWRITERS") and hereby confirm their respective agreements with
the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
[_________] shares of its authorized and unissued Common Stock, $0.001 par value
per share, to the several Underwriters. The [_________] shares of Common Stock,
$0.001 par value per share, of the Company to be sold by the Company are
hereinafter called the "COMPANY SHARES." Certain Selling Stockholders also
propose to grant, severally and not jointly, to the Underwriters an option to
purchase up to [________] additional shares of the Company's Common Stock,
$0.001 par value per share (the "OPTION SHARES"), as provided in SECTION 7
hereof. As used in this Agreement, the term "SHARES" shall include the Company
Shares and the Option Shares. All shares of Common Stock, $0.001 par value per
share, of the Company to be
--------------------------------
1 Plus an option to purchase up to [_____________] additional
shares from certain stockholders of the Company to cover over-allotments.
outstanding after giving effect to the sales contemplated hereby, including the
Shares, are hereinafter referred to as "COMMON STOCK."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
SELLING STOCKHOLDERS.
I. The Company represents and warrants to and agrees with each Underwriter
that:
(a) A registration statement on Form S-1 (File No. 333-_____) with
respect to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "ACT"), and the applicable rules and regulations
(the "RULES AND REGULATIONS") of the Securities and Exchange Commission (the
"COMMISSION") under the Act and has been filed with the Commission; such
amendments to such registration statement, such amended prospectuses subject to
completion and such abbreviated registration statements pursuant to Rule 462(b)
of the Rules and Regulations as may have been required prior to the date hereof
have been similarly prepared and filed with the Commission; and the Company will
file such additional amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
as may hereafter be required. Copies of such registration statement and
amendments, of each related prospectus subject to completion (the "PRELIMINARY
PROSPECTUSES"), and of any abbreviated registration statement pursuant to
Rule 462(b) of the Rules and Regulations have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission the information omitted from the registration statement
pursuant to Rule 430A(a) or, if ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC, on behalf of
the several Underwriters, shall agree to the utilization of Rule 434 of the
Rules and Regulations, the information required to be included in any term sheet
filed pursuant to Rule 434(b) or (c), as applicable, of the Rules and
Regulations pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Company LLC, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or (c),
as applicable, of the Rules and Regulations. The term "REGISTRATION STATEMENT"
as used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files a
term sheet pursuant to Rule 434 of the Rules and Regulations, the information
deemed to be a part of the registration statement at the time it became
effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and Regulations)
and, in the event of any amendment thereto or the filing of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations
relating thereto after the effective date of such registration statement, shall
also mean (from and after the effectiveness of such amendment or the filing of
such abbreviated registration statement) such registration statement as so
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amended, together with any such abbreviated registration statement. The term
"PROSPECTUS" as used in this Agreement shall mean the prospectus relating to the
Shares as included in such Registration Statement at the time it becomes
effective (including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the Rules and Regulations); PROVIDED,
HOWEVER, that if in reliance on Rule 434 of the Rules and Regulations and with
the consent of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC, on behalf of the several
Underwriters, the Company shall have provided to the Underwriters a term sheet
pursuant to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Act, the
term "PROSPECTUS" shall mean the "prospectus subject to completion" (as defined
in Rule 434(g) of the Rules and Regulations) last provided to the Underwriters
by the Company and circulated by the Underwriters to all prospective purchasers
of the Shares (including the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 434(d) of the Rules
and Regulations). Notwithstanding the foregoing, if any revised prospectus
shall be provided to the Underwriters by the Company for use in connection with
the offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "PROSPECTUS" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such use.
If in reliance on Rule 434 of the Rules and Regulations and with the consent of
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC, on behalf of the several Underwriters, the
Company shall have provided to the Underwriters a term sheet pursuant to
Rule 434(b) or (c), as applicable, prior to the time that a confirmation is sent
or given for purposes of Section 2(10)(a) of the Act, the Prospectus and the
term sheet, together, will not be materially different from the prospectus in
the Registration Statement.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased,
(i) the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations and
will in all material respects conform to the requirements of the Act and the
Rules and Regulations, (ii) the Registration Statement, and any amendments or
supplements thereto, did not and will not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (iii) the
Prospectus, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that none of the
representations and warranties contained in this subparagraph (b) shall apply to
information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation thereof.
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(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation with full power and authority
(corporate and other) to own, lease and operate its properties and conduct its
business as described in the Prospectus; the Company owns all of the outstanding
capital stock of its subsidiaries free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities which are material to the conduct of
its business, all of which are valid and in full force and effect; neither the
Company nor any of its subsidiaries is in violation of its respective charter or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness, or in any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of its subsidiaries or their respective properties
may be bound; and neither the Company nor any of its subsidiaries is in material
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or over
their respective properties of which it has knowledge. The Company does not own
or control, directly or indirectly, any corporation, association or other entity
other than those listed on EXHIBIT 21.1 to the Registration Statement.
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective properties may be bound, (ii) the charter or bylaws of the Company or
any of its subsidiaries, or (iii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective properties is
required for the execution and delivery of this Agreement and
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the consummation by the Company or any of its subsidiaries of the transactions
herein contemplated, except such as may be required under the Act, the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") or under state
or other securities or Blue Sky laws, all of which requirements have been
satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company, any
of its subsidiaries or any of their respective officers or any of their
respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in any material adverse change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise or might materially and adversely affect their properties, assets or
rights, (ii) might prevent consummation of the transactions contemplated hereby
or (iii) is required to be disclosed in the Registration Statement or Prospectus
and is not so disclosed; and there are no agreements, contracts, leases or
documents of the Company or any of its subsidiaries of a character required to
be described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement by the Act or the Rules and
Regulations which have not been accurately described in all material respects in
the Registration Statement or Prospectus or filed as exhibits to the
Registration Statement.
(f) All outstanding shares of capital stock of the Company (including
the Option Shares) have been duly authorized and validly issued and are fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
the authorized and outstanding capital stock of the Company is as set forth in
the Prospectus under the caption "CAPITALIZATION" and conforms in all material
respects to the statements relating thereto contained in the Registration
Statement and the Prospectus (and such statements correctly state the substance
of the instruments defining the capitalization of the Company); the Company
Shares and the Option Shares have been duly authorized for issuance and sale to
the Underwriters pursuant to this Agreement and, when issued and delivered by
the Company and the Selling Stockholders against payment therefor in accordance
with the terms of this Agreement, will be duly and validly issued and fully paid
and nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right,
co-sale right, registration right, right of first refusal or other similar right
of stockholders exists with respect to any of the Company Shares or the Option
Shares or the issuance and sale thereof other than those that have been
expressly waived prior to the date hereof and those that will automatically
expire upon and will not apply to the consummation of the transactions
contemplated on the Closing Date and any later date on which the Option Shares
are to be purchased. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance and
sale or transfer of the Shares except as may be required under the Act, or under
state or other securities or Blue Sky laws. All issued and outstanding shares
of capital stock of each subsidiary of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, and were not issued in
violation of or subject to any preemptive right, or other rights to subscribe
for or purchase shares and are owned by the Company free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest.
Except as disclosed in the Prospectus and the financial statements of the
Company, and the related notes thereto, included in the Prospectus, neither the
Company nor any
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subsidiary has outstanding any options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to such plans, arrangements,
options and rights.
(g) Ernst & Young LLP, which has examined the consolidated financial
statements of the Company, together with the related schedules and notes, as of
December 31, 1995, December 31, 1996 and June 30, 1997 and for each of the years
in the three (3) years ended December 31, 1996 and the six months ended June 30,
1997 filed with the Commission as a part of the Registration Statement, which
are included in the Prospectus, are independent accountants within the meaning
of the Act and the Rules and Regulations; the audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, forming part of the
Registration Statement and Prospectus, fairly present the financial position and
the results of operations of the Company and its subsidiaries at the respective
dates and for the respective periods to which they apply; and all audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited consolidated financial information, filed
with the Commission as part of the Registration Statement, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved except as may be otherwise stated therein. The
selected and summary financial and statistical data included in the Registration
Statement present fairly the information shown therein and have been compiled on
a basis consistent with the audited financial statements presented therein. No
other financial statements or schedules are required to be included in the
Registration Statement.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i) any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise, (ii) any transaction that is material to the
Company and its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (iii) any obligation, direct or
contingent, that is material to the Company and its subsidiaries considered as
one enterprise, incurred by the Company or its subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of the Company or any of its subsidiaries that
is material to the Company and its subsidiaries considered as one enterprise,
(v) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its subsidiaries, or (vi) any loss or
damage (whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise.
(i) Except as set forth in the Registration Statement and Prospectus,
(i) each of the Company and its subsidiaries has good and marketable title to
all properties and assets described in the Registration Statement and Prospectus
as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than such as would not have a
material adverse effect on the
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condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise,
(ii) the agreements to which the Company or any of its subsidiaries is a party
described in the Registration Statement and Prospectus are valid agreements,
enforceable by the Company and its subsidiaries (as applicable), except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and, to the best
of the Company's knowledge, the other contracting party or parties thereto are
not in material breach or material default under any of such agreements, and
(iii) each of the Company and its subsidiaries has valid and enforceable leases
for all properties described in the Registration Statement and Prospectus as
leased by it, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles. Except as set forth in the Registration Statement and Prospectus,
the Company owns or leases all such properties as are necessary to its
operations as now conducted or as proposed to be conducted.
(j) The Company and its subsidiaries have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown thereon as due, and there is no tax deficiency that has been or, to
the best of the Company's knowledge, might be asserted against the Company or
any of its subsidiaries that might have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise; and
all tax liabilities are adequately provided for on the books of the Company and
its subsidiaries.
(k) The Company and its subsidiaries maintain insurance with insurers
of recognized financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, insurance covering real and personal property owned or leased by
the Company or its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for; and
neither the Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise.
(l) To the best of Company's knowledge, no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent; and
the Company is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, subassemblers, value added
resellers, subcontractors, original equipment manufacturers, authorized dealers
or international distributors that might be expected to result in a material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise. No collective bargaining agreement exists with any of the
Company's employees and, to the best of the Company's knowledge, no such
agreement is imminent.
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(m) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration Statement
and Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise; except as set forth in the Registration Statement and
Prospectus, the Company has not received any notice of, and has no knowledge of,
any infringement of or conflict with asserted rights of the Company by others
with respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise.
(n) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
(o) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 ACT"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it will not become an "INVESTMENT
COMPANY" or a company "CONTROLLED" by an "INVESTMENT COMPANY" within the meaning
of the 1940 Act and such rules and regulations.
(p) The Company has not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
(q) Neither the Company nor any of its subsidiaries has at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(s) Each officer and director of the Company, each Selling
Stockholder and each beneficial owner of shares of Common Stock has agreed in
writing that such person will not, for a period of
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180 days after the date of the Prospectus (the "LOCK-UP PERIOD"), offer to sell,
contract to sell, or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to (collectively, a "DISPOSITION") any shares of Common
Stock, any options or warrants to purchase any shares of Common Stock or any
securities convertible into or exchangeable for shares of Common Stock
(collectively, "SECURITIES") now owned or hereafter acquired directly by such
person or with respect to which such person has or hereafter acquires the power
of disposition, otherwise than (i) as a bona fide gift or gifts, provided the
donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners, limited liability company members or
stockholders of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii) with the prior
written consent of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC. The foregoing restriction
has been expressly agreed to preclude the holder of the Securities from engaging
in any hedging or other transaction which is designed to or reasonably expected
to lead to or result in a Disposition of Securities during the Lock-up Period,
even if such Securities would be disposed of by someone other than such holder.
Such prohibited hedging or other transactions would include, without limitation,
any short sale (whether or not against the box) or any purchase, sale or grant
of any right (including, without limitation, any put or call option) with
respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities. Furthermore, each such person
has also agreed and consented to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Securities held by such
person except in compliance with this restriction. The Company has provided to
counsel for the Underwriters a complete and accurate list of all securityholders
of the Company and the number and type of securities held by each
securityholder. The Company has provided to counsel for the Underwriters true,
accurate and complete copies of all of the agreements pursuant to which its
officers, directors and stockholders have agreed to such or similar restrictions
(the "LOCK-UP AGREEMENTS") presently in effect or effected hereby. The Company
hereby represents and warrants that it will not release any of its officers,
directors or other stockholders from any Lock-up Agreements currently existing
or hereafter effected without the prior written consent of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
Company LLC.
(t) Except as set forth in the Registration Statement and Prospectus,
(i) the Company is in compliance with all rules, laws and regulations relating
to the use, treatment, storage and disposal of toxic substances and protection
of health or the environment ("ENVIRONMENTAL LAWS") which are applicable to its
business, (ii) the Company has received no notice from any governmental
authority or third party of an asserted claim under Environmental Laws, which
claim is required to be disclosed in the Registration Statement and the
Prospectus, (iii) to the best of the Company's knowledge, the Company will not
be required to make future material capital expenditures to comply with
Environmental Laws and (iv) to the best of the Company's knowledge, no property
which is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601, ET SEQ.), or
otherwise designated as a contaminated site under applicable state or local law.
(u) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain
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accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(v) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
II. Each Selling Stockholder, severally and not jointly, represents and
warrants to and agrees with each Underwriter and the Company that:
(a) Such Selling Stockholder now has and on the Closing Date, and on
any later date on which Option Shares are purchased, will have valid marketable
title to the Option Shares to be sold by such Selling Stockholder, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest other than pursuant to this Agreement; and upon delivery of such Option
Shares hereunder and payment of the purchase price as herein contemplated, each
of the Underwriters will obtain valid marketable title to the Option Shares
purchased by it from such Selling Stockholder, free and clear of any pledge,
lien, security interest pertaining to such Selling Stockholder or such Selling
Stockholder's property, encumbrance, claim or equitable interest, including any
liability for estate or inheritance taxes, or any liability to or claims of any
creditor, devisee, legatee or beneficiary of such Selling Stockholder.
(b) Such Selling Stockholder has duly authorized (if applicable),
executed and delivered, in the form heretofore furnished to the Representatives,
an irrevocable Power of Attorney (the "POWER OF ATTORNEY") appointing
[___________] and [___________] 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 Stockholder, enforceable in accordance
with its terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles; and each of such Selling Stockholder's Attorneys, acting alone, is
authorized to execute and deliver this Agreement and the certificate referred to
in Section 6(j) hereof on behalf of such Selling Stockholder, to determine the
purchase price to be paid by the several Underwriters to such Selling
Stockholder as provided in Section 3 hereof, to authorize the delivery of the
Option Shares to be sold by such Selling Stockholder under this Agreement and to
duly endorse (in blank or otherwise) the certificate or certificates
representing such Option Shares or a stock power or powers with respect thereto,
to accept payment therefor, and otherwise to act on behalf of such Selling
Stockholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders required for
the execution and delivery by such Selling Stockholder of the Power of Attorney
and the Custody Agreement, the execution and delivery by or on behalf of such
Selling Stockholder of this Agreement and the sale and delivery of the Option
Shares to be sold by such Selling Stockholder under this Agreement (other than,
at the time of the execution
-10-
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 Stockholder,
if other than a natural person, has been duly organized and is validly existing
in good standing under the laws of the jurisdiction of its organization as the
type of entity that it purports to be; and such Selling Stockholder has full
legal right, power and authority to enter into and perform its obligations under
this Agreement and such Power of Attorney and Custody Agreement, and to sell,
assign, transfer and deliver the Option Shares to be sold by such Selling
Stockholder under this Agreement.
(d) Such Selling Stockholder will not, during the Lock-up Period,
effect the Disposition of any Securities now owned or hereafter acquired
directly by such Selling Stockholder or with respect to which such Selling
Stockholder has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to partners,
limited liability company members or stockholders of such Selling Stockholder,
provided that the distributees thereof agree in writing to be bound by the terms
of this restriction, or (iii) with the prior written consent of ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Company LLC. The foregoing restriction is expressly agreed to
preclude the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition of Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than the Selling Stockholder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from Securities. Such Selling Stockholder also agrees and
consents to the entry of stop transfer instructions with the Company's transfer
agent against the transfer of the securities held by such Selling Stockholder
except in compliance with this restriction.
(e) Certificates in negotiable form for all Option Shares to be sold
by such Selling Stockholder under this Agreement, together with a stock power or
powers duly endorsed in blank by such Selling Stockholder, have been placed in
custody with the Custodian for the purpose of effecting delivery hereunder.
(f) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person; this Agreement has been duly executed
and delivered by or on behalf of such Selling Stockholder and is a valid and
binding agreement of such Selling Stockholder, 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 the performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or violation of any
of the terms and provisions of or constitute a default under any bond,
debenture, note or other evidence of indebtedness, or under any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder, or any Option Shares to be sold by such Selling
Stockholder hereunder, may be bound
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or, to the best of such Selling Stockholders' 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 Stockholder or over the properties of such
Selling Stockholder, or, if such Selling Stockholder is other than a natural
person, result in any violation of any provisions of the charter, bylaws or
other organizational documents of such Selling Stockholder.
(g) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(h) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) All information furnished by or on behalf of such Selling
Stockholder relating to such Selling Stockholder and the Shares that is
contained in the representations and warranties of such Selling Stockholder in
such Selling Stockholder's Power of Attorney or set forth in the Registration
Statement or the Prospectus is, 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, and on any later date on which Option
Shares are to be purchased, was or will be, true, correct and complete, and 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 (hereinafter defined), and on any later date on which Option Shares are to
be purchased, will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make such
information not misleading.
(j) Such Selling Stockholder 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, or
any later date on which Option Shares are to be purchased, as the case may be,
and will advise one of its Attorneys and ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC prior
to the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, if any statement to be made on behalf of such
Selling Stockholder in the certificate contemplated by Section 6(j) would be
inaccurate if made as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be.
(k) Such Selling Stockholder does not have, or has waived prior to
the date hereof, any preemptive right, co-sale right or right of first refusal
or other similar right to purchase any of the Shares that are to be sold by the
Company or any of the other Selling Stockholders to the Underwriters pursuant to
this Agreement; such Selling Stockholder does not have, or has waived prior to
the date hereof, any registration right or other similar right to participate in
the offering made by the Prospectus, other than such rights of participation as
have been satisfied by the participation of such Selling Stockholder in the
transactions to which this Agreement relates in accordance with the terms of
this Agreement; and such Selling Stockholder does not own any warrants, options
or similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, rights, warrants, options or other securities from
the Company, other than those described in the Registration Statement and the
Prospectus.
-12-
(l) Such Selling Stockholder is not aware without having conducted
any investigation or inquiry that any of the representations and warranties of
the Company set forth in Section 2.I. above is untrue or inaccurate in any
material respect.
3. PURCHASE, SALE AND DELIVERY OF COMPANY SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $[_____] per share, the
respective number of Company Shares as hereinafter set forth opposite the name
of the Company in SCHEDULE B hereto. The obligation of each Underwriter to the
Company shall be to purchase from the Company that number of Company Shares
which is set forth opposite the name of such Underwriter in SCHEDULE A hereto
(subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Company Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the several Underwriters by certified
or official bank check or checks drawn in same-day funds, payable to the order
of the Company (and the Company agrees not to deposit any such check in the bank
on which it is drawn, and not to take any other action with the purpose or
effect of receiving immediately available funds, until the business day
following the date of its delivery to the Company and, in the event of any
breach of the foregoing, the Company shall reimburse the Underwriters for the
interest lost and any other expenses borne by them by reason of such breach), at
the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as may be agreed upon among the
Representatives and the Company) at 7:00 A.M., San Francisco time (a) on the
third (3rd) full business day following the first day that Shares are traded,
(b) if this Agreement is executed and delivered after 1:30 P.M., San Francisco
time, the fourth (4th) full business day following the day that this Agreement
is executed and delivered or (c) at such other time and date not later than
seven (7) full business days following the first day that Shares are traded as
the Representatives and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"CLOSING DATE;" PROVIDED, HOWEVER, that if the Company has not made available to
the Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representatives. The certificates for the
Company Shares to be so delivered will be made available to you at such office
or such other location including, without limitation, in New York City, as you
may reasonably request for checking at least one (1) full business day prior to
the Closing Date and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to the Closing
Date. If the Representatives so elect, delivery of the Company Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the Representatives of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
-13-
Company Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Company Shares at an initial public
offering price of $[_____] per share. After the initial public offering, the
several Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), on the inside front
cover concerning stabilization and over-allotment by the Underwriters, and under
the [_____] and [_____] paragraphs under the caption "UNDERWRITING" in any
Preliminary Prospectus and in the Prospectus constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement, and you, on behalf of
the respective Underwriters, represent and warrant to the Company and the
Selling Stockholders that the statements made therein do not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; the Company will use its best efforts to
cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations as may be required subsequent to the date the Registration
Statement is declared effective to become effective as promptly as possible; the
Company will notify you, promptly after it shall receive notice thereof, of the
time when the Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of
Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to such Registration Statement as originally declared effective which
is declared effective by the Commission; if the Company files a term sheet
pursuant to Rule 434 of the Rules and Regulations, the Company will provide
evidence satisfactory to you that the Prospectus and term sheet meeting the
requirements of Rule 434(b) or (c), as applicable, of the Rules and Regulations,
have been filed, within the time period prescribed, with the Commission pursuant
to subparagraph (7) of Rule 424(b) of the Rules and Regulations; if for any
reason the filing of the final form of Prospectus is required under
Rule 424(b)(3) of the Rules and Regulations, it will provide evidence
satisfactory to you that the Prospectus contains such information and has been
filed with the Commission within the time period prescribed; it will notify you
promptly of any request by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional information;
promptly upon your request, it will prepare and file with the
-14-
Commission any amendments or supplements to the Registration Statement or
Prospectus which, in the opinion of counsel for the several Underwriters
("UNDERWRITERS' COUNSEL"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify you of the filing of, any
amendments or supplements to the Registration Statement or Prospectus which may
be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the Registration
Statement in connection with the sale of the Shares, it will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act; and it will file no amendment or supplement to the Registration
Statement or Prospectus which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act and
the Rules and Regulations, and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet under
Rule 434, in no event later than the first (1st) full business day following the
first day that Shares are traded, copies of the Registration Statement (three of
which will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as you may from time to time reasonably request.
Notwithstanding the foregoing, if ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC, on behalf
of the several Underwriters, shall agree to the utilization of Rule 434 of the
Rules and Regulations, the Company shall provide to you copies of a Preliminary
Prospectus updated in all respects through the date specified by you in such
quantities as you may from time to time reasonably request.
-15-
(e) The Company will make generally available to its securityholders
as soon as practicable, but in any event not later than the forty-fifth (45th)
day following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12) month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end of
each respective period, annual reports (including financial statements audited
by independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and the other several Underwriters hereunder, upon request
(i) concurrently with furnishing such reports to its stockholders, statements of
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's stockholders, (ii) concurrently with furnishing to
its stockholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of stockholders' equity, and of
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent certified public accountants,
(iii) as soon as they are available, copies of all reports (financial or other)
mailed to stockholders, (iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, any
securities exchange or the National Association of Securities Dealers, Inc.
("NASD"), (v) every material press release and every material news item or
article in respect of the Company or its affairs which was generally released to
stockholders or prepared by the Company or any of its subsidiaries, and (vi) any
additional information of a public nature concerning the Company or its
subsidiaries, or its business which you may reasonably request. During such
five (5) year period, if the Company shall have active subsidiaries, the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and
shall be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "USE OF
PROCEEDS" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR as applicable in conformity with
the requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company or any
Selling Stockholder to perform any agreement on their respective parts to be
performed hereunder or to fulfill any condition of the Underwriters' obligations
hereunder, or if the Company shall terminate this Agreement pursuant to
Section 11(a) hereof, or if the Underwriters shall terminate this Agreement
pursuant to Section 11(b)(i), the Company will reimburse the
-16-
several Underwriters for all out-of-pocket expenses (including fees and
disbursements of Underwriters' Counsel) incurred by the Underwriters in
investigating or preparing to market or marketing the Shares.
(k) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(l) During the Lock-up Period, the Company will not, without the
prior written consent of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Company LLC, effect the
Disposition of, directly or indirectly, any Securities other than the sale of
the Company Shares and the Option Shares; provided, however, that the Company
may grant options and issue shares thereunder pursuant to the Company's 1997
Non-Employee Directors Stock Option Plan, 1995 Stock Option Plan, 1997
Performance Stock Option Plan and Employee Stock Purchase Plan.
5. EXPENSES.
(a) The Company and the Selling Stockholders agree with each
Underwriter that:
(i) The Company and the Selling Stockholders will pay and bear
all costs and expenses in connection with the preparation, printing and filing
of the Registration Statement (including financial statements, schedules and
exhibits), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky Survey and
any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and Power of
Attorney, and any instruments related to any of the foregoing; the issuance and
delivery of the Shares hereunder to the several Underwriters, including transfer
taxes, if any, the cost of all certificates representing the Shares and transfer
agents' and registrars' fees; the fees and disbursements of counsel for the
Company; all fees and other charges of the Company's independent certified
public accountants; the cost of furnishing to the several Underwriters copies of
the Registration Statement (including appropriate exhibits), Preliminary
Prospectus and the Prospectus, and any amendments or supplements to any of the
foregoing; NASD filing fees and the cost of qualifying the Shares under the laws
of such jurisdictions as you may designate (including filing fees and fees and
disbursements of Underwriters' Counsel in connection with such NASD filings and
Blue Sky qualifications); and all other expenses directly incurred by the
Company and the Selling Stockholders in connection with the performance of their
obligations hereunder. Any additional expenses incurred as a result of the sale
of the Shares by the Selling Stockholders will be borne collectively by the
Company and the Selling Stockholders. The provisions of this Section 5(a)(i)
are intended to relieve the Underwriters from the payment of the expenses and
costs which the Selling Stockholders and the Company hereby agree to pay, but
shall not affect any agreement between the Selling Stockholders and the Company
requiring the Company to pay for all such expenses and costs. Such
-17-
agreements shall not impair the obligations of the Company and the Selling
Stockholders hereunder to the several Underwriters.
(ii) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis for
all reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) listed from time to
time in The Wall Street Journal which represents the base rate on corporate
loans posted by a substantial majority of the nation's thirty (30) largest banks
(the "PRIME RATE"). Any such interim reimbursement payments which are not made
to the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(iii) In addition to their other obligations under Section 8(b)
hereof, each Selling Stockholder agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(b) hereof relating to such Selling Stockholder, it will
reimburse the Underwriters on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of such
Selling Stockholder's obligation to reimburse the Underwriters for such expenses
and the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters shall
promptly return such payment to the Selling Stockholders, together with
interest, compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments which are not made to the Underwriters within
thirty (30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(b) In addition to their other obligations under Section 8(c) hereof,
the Underwriters, severally and not jointly, agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(c) hereof, they will reimburse the Company and
each Selling Stockholder on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company and each such Selling
Stockholder for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company and each such Selling Stockholder shall promptly return
such payment to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
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payments which are not made to the Company and each such Selling Stockholder
within thirty (30) days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 5(a)(ii), 5(a)(iii)
and 5(b) hereof, including the amounts of any requested reimbursement payments,
the method of determining such amounts and the basis on which such amounts shall
be apportioned among the reimbursing parties, shall be settled by arbitration
conducted under the provisions of the Code of Arbitration Procedure of the NASD.
Any such arbitration must be commenced by service of a written demand for
arbitration or a written notice of intention to arbitrate, therein electing the
arbitration tribunal. In the event the party demanding arbitration does not
make such designation of an arbitration tribunal in such demand or notice, then
the party responding to said demand or notice is authorized to do so. Any such
arbitration will be limited to the operation of the interim reimbursement
provisions contained in Sections 5(a)(ii), 5(a)(iii) and 5(b) hereof and will
not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses which is created by the provisions of Sections 8(a), 8(b)
and 8(c) hereof or the obligation to contribute to expenses which is created by
the provisions of Section 8(e) hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Selling Stockholders
herein, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company, any Selling Stockholder or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been reasonably satisfactory to Underwriters' Counsel, and such counsel
shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to in
this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole
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judgment, impracticable or inadvisable to proceed with the public offering of
the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of counsel for the Company dated the Closing Date or such later date on
which Option Shares are to be purchased addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the Underwriters,
to the effect that:
(i) The Company and each "SIGNIFICANT SUBSIDIARY" (as that
term is defined in Regulation S-X of the Act) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction, if any, in which the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations
or business of the Company and its subsidiaries considered as one enterprise.
To such counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity other than those
subsidiaries listed on EXHIBIT 21.1 to the Registration Statement.
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption "CAPITALIZATION"
as of the dates stated therein, the issued and outstanding shares of capital
stock of the Company (including the Option Shares) have been duly and validly
issued and are fully paid and nonassessable, and, to such counsel's knowledge,
will not have been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other similar
right;
(v) All issued and outstanding shares of capital stock of
each Significant Subsidiary of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and, to such counsel's knowledge,
have not been issued in violation of or subject to any preemptive right, co-sale
right, registration right, right of first refusal or other similar right and are
owned by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest;
(vi) The Shares to be issued by the Company pursuant to the
terms of this Agreement have been duly authorized and, upon issuance and
delivery against payment therefor in accordance with the terms hereof, will be
duly and validly issued and fully paid and nonassessable, and will not have been
issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right.
-20-
(vii) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by you, is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except insofar as indemnification provisions may be
limited by applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles;
(ix) The Registration Statement has become effective under the
Act and, to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the Act;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom, as to which such
counsel need express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the requirements of
the Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the caption
"DESCRIPTION OF CAPITAL STOCK," to the extent that it constitutes matters of law
or legal conclusions, has been reviewed by such counsel and is a fair summary of
such matters and conclusions; and the forms of certificates evidencing the
Common Stock and filed as exhibits to the Registration Statement comply with
Delaware law;
(xii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the Act and the
applicable Rules and Regulations;
(xiii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which are
not described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation of
the transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
-21-
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations;
(xv) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except such as have been
obtained under the Act or such as may be required under state or other
securities or Blue Sky laws in connection with the purchase and the distribution
of the Shares by the Underwriters;
(xvi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Act or the Rules and Regulations other than
those described therein;
(xvii) To such counsel's knowledge, neither the Company nor any
of its subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any order, writ or decree of any
court or governmental agency or body having jurisdiction over the Company or any
of its subsidiaries, or over any of their properties or operations; and
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to securities of
the Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights known to such
counsel to registration of such shares of Common Stock or other securities in
the offering contemplated by this Agreement, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by reason
of lapse of time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration Statement
pursuant to the exercise of and in full satisfaction of such rights; and
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later date on which
Option Shares are to be purchased, the Registration Statement and any amendment
or supplement thereto (other than the financial statements including supporting
schedules and other financial and statistical information derived therefrom, as
to which such counsel need express no comment) contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or at the
Closing Date or any later date on which the Option Shares are to be purchased,
as the case may be, the Registration Statement, the Prospectus and any amendment
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or supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of California and
the State of Delaware upon opinions of local counsel, and as to questions of
fact upon representations or certificates of officers of the Company, the
Selling Stockholders or officers of the Selling Stockholders (when the Selling
Stockholder is not a natural person), and of government officials, in which case
their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of counsel for the Selling Stockholders, dated the Closing Date or such
later date on which Option Shares are to be purchased addressed to the
Underwriters and with reproduced copies or signed counterparts thereof for each
of the Underwriters, to the effect that:
(i) Each Selling Stockholder which is not a natural person
has full right, power and authority to enter into and to perform its obligations
under the Power of Attorney and Custody Agreement to be executed and delivered
by it in connection with the transactions contemplated herein; the Power of
Attorney and Custody Agreement of each Selling Stockholder that is not a natural
person has been duly authorized by such Selling Stockholder; the Power of
Attorney and Custody Agreement of each Selling Stockholder has been duly
executed and delivered by or on behalf of such Selling Stockholder; and the
Power of Attorney and Custody Agreement of each Selling Stockholder constitutes
the valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles;
(ii) Each of the Selling Stockholders has full right, power
and authority to enter into and to perform its obligations under this Agreement
and to sell, transfer, assign and deliver the Option Shares to be sold by such
Selling Stockholder hereunder;
(iii) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of each Selling Stockholder; and
(iv) Upon the delivery of and payment for the Option Shares as
contemplated in this Agreement, each of the Underwriters will receive valid
marketable title to the Option Shares purchased by it from such Selling
Stockholder, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest. In rendering such opinion, such counsel may assume
that the Underwriters are without notice of any defect in the title of the
Option Shares being purchased from the Selling Stockholders.
-23-
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of California and
the State of Delaware upon opinions of local counsel, and as to questions of
fact upon representations or certificates of officers of the Company, the
Selling Stockholders or officers of the Selling Stockholders (when the Selling
Stockholder is not a natural person), and of government officials, in which case
their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of the Company's intellectual property counsel (satisfactory to you and
the Underwriters), dated the Closing Date or such later date on which Option
Shares are to be purchased, addressed to the Underwriters and with reproduced
copies or signed counterparts thereof for each of the Underwriters, to the
effect that:
(i) The Company owns or has exclusive rights to all (1) patents,
(2) trademarks, trade names and service marks (and registrations therefor),
(3) copyrights, including rights in maskworks, (4) licenses, (5) ideas,
inventions, trade secrets, and know-how (whether or not patented or
patentable), (6) confidential information (7) all other personal and
proprietary rights and all other rights similar to or in the nature of any
of the foregoing rights (and applications for any of the above) described
in the Registration Statement or the Prospectus as being owned by or
exclusively licensed to the Company or necessary for or material to the
conduct of the Company's business, and (A) except as set forth in the
Registration Statement and the Prospectus, such counsel is not aware of any
claim to the contrary or any challenge by any other person to the ownership
or license rights of the Company with respect to the foregoing and (B) such
counsel is unaware of any contingency or circumstance that would cause any
such right to expire or to be modified, altered or terminated;
(ii) That certain license agreement between Yves Faroudja and the
Company dated January 20, 1997, including without limitation the grants of
exclusive licenses to the Company set forth therein, is enforceable by the
Company in accordance with its terms, and the rights granted to the Company
pursuant to such agreement are sufficient to permit the Company in
perpetuity to exclude all others from exploiting in any manner the
technology described therein;
(iii) No fact has come to such counsel's attention that would lead
such counsel to believe that the patents (or any other intellectual
property rights necessary for or material to the conduct of the Company's
business) presently issued to or held by (or exclusively licensed to) the
Company are not valid and enforceable by the Company;
(iv) Such counsel is not aware of any material fact with respect to
the patent applications of (or licensed to) the Company presently on file
that (a) would preclude the issuance of patents with respect to such
applications or (b) would lead such counsel to believe that such patents,
when issued, would not be valid or enforceable by the Company;
-24-
(v) Such counsel is not aware of any legal actions, claims or
proceedings pending or threatened against the Company alleging that the
Company has infringed or currently is infringing or otherwise violating any
patent rights, trademark rights, service ▇▇▇▇ rights, trade name rights,
maskwork rights, copyrights, license rights, rights to inventions, trade
secret rights or any other personal or proprietary right or any right
similar to any of the foregoing (all such rights, "Intellectual Property
Rights") owned by any other person or entity, and no fact has come to such
counsel's attention indicating or tending to indicate that any of the
Company's present or proposed products or processes described in the
Registration Statement or the Prospectus have infringed or currently
infringe any Intellectual Property Rights of any other person or entity;
(vi) Such counsel has reviewed the descriptions of the Company's
intellectual property rights under the captions ["RISK FACTORS -- LIMITED
PROTECTION OF PROPRIETARY RIGHTS; RISK OF THIRD PARTY INFRINGEMENT,"
"BUSINESS -- PROPRIETARY RIGHTS AND LICENSES", "BUSINESS
--TECHNOLOGY,""BUSINESS -- NEW PRODUCT DEVELOPMENT," AND "CERTAIN
TRANSACTIONS -- YVES FAROUDJA LICENSE AGREEMENT"] in the Registration
Statement and Prospectus, and, to the extent that they constitute matters
of fact, matters of law or legal conclusions, these descriptions are true
and correct in all material respects and fairly present the intellectual
property situation of the Company; and
(vii) Nothing has come to such counsel's attention that causes such
counsel to believe that, as of the date on which the Registration Statement
became effective and as of the date of such opinion, the statements set
forth under the captions ["RISK FACTORS -- LIMITED PROTECTION OF
PROPRIETARY RIGHTS; RISK OF THIRD PARTY INFRINGEMENT," "BUSINESS --
PROPRIETARY RIGHTS AND LICENSES", "BUSINESS --TECHNOLOGY,""BUSINESS -- NEW
PRODUCT DEVELOPMENT," AND "CERTAIN TRANSACTIONS -- YVES FAROUDJA LICENSE
AGREEMENT"] in the Registration Statement and Prospectus contain any untrue
or misleading statement of a material fact or omit to state a material fact
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an opinion
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., in form and substance satisfactory to
you, with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(h) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a letter
from Ernst & Young LLP addressed to the Underwriters, dated the Closing Date or
such later date on which Option Shares are to be purchased, as the case may be,
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations and based upon the procedures described in such letter delivered
to you concurrently with the execution of this Agreement (herein called the
"ORIGINAL LETTER"), but carried out to a date not more than five (5) business
days prior to the Closing
-25-
Date or such later date on which Option Shares are to be purchased, as the case
may be, (i) confirming, to the extent true, that the statements and conclusions
set forth in the Original Letter are accurate as of the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be, and
(ii) setting forth any revisions and additions to the statements and conclusions
set forth in the Original Letter which are necessary to reflect any changes in
the facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise from that set
forth in the Registration Statement or Prospectus, which, in your sole judgment,
is material and adverse and that makes it, in your sole judgment, impracticable
or inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus. The Original Letter from Ernst & Young LLP shall be
addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the consolidated balance sheet of the Company as of December 31, 1995, December
31, 1996 and June 30, 1997 and related consolidated statements of operations,
stockholders' equity, and cash flows for the three (3) years in the period ended
December 31, 1996 and the six months ended June 30, 1997, (iii) state that Ernst
& Young LLP has performed the procedures set out in Statement on Auditing
Standards No. 71 ("SAS 71") for a review of interim financial information and
providing the report of Ernst & Young LLP as described in SAS 71 on the
financial statements for each of the quarters in the six-quarter period ended
June 30, 1997 (the "QUARTERLY FINANCIAL STATEMENTS"), (iv) state that in the
course of such review, nothing came to their attention that leads them to
believe that any material modifications need to be made to any of the Quarterly
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, and (v) address other matters agreed upon by Ernst & Young LLP and
you. In addition, you shall have received from Ernst & Young LLP a letter
addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of June 30, 1997 did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(i) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect
that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or any
later date on which Option Shares are to be purchased, as the case may be, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be;
-26-
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto contained all material information required to be included therein by
the Act and the Rules and Regulations and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, the Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (b) any transaction that is material
to the Company and its subsidiaries considered as one enterprise, except
transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(d) any change in the capital stock or outstanding indebtedness of the Company
or any of its subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries, or (f) any loss or damage (whether or not insured) to the property
of the Company or any of its subsidiaries which has been sustained or will have
been sustained which has a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(j) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for each Selling
Stockholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have NOT been
informed that:
(i) The representations and warranties made by such Selling
Stockholder herein are not true or correct in any material respect on the
Closing Date or on any later date on which Option Shares are to be purchased, as
the case may be; or
(ii) Such Selling Stockholder has not complied with any
obligation or satisfied any condition which is required to be performed or
satisfied on the part of such Selling Stockholder at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the case
may be.
-27-
(k) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company, each Selling
Stockholder and each beneficial owner of shares of Common Stock in writing prior
to the date hereof that such person will not, during the Lock-up Period, effect
the Disposition of any Securities now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts, provided
the donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners, limited liability company members or
stockholders of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii) with the prior
written consent of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC. The foregoing restriction
shall have been expressly agreed to preclude the holder of the Securities from
engaging in any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than the
such holder. Such prohibited hedging or other transactions would including,
without limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Furthermore, such
person will have also agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
Securities held by such person except in compliance with this restriction.
(l) The Company and the Selling Stockholders shall have furnished
to you such further certificates and documents as you shall reasonably request
(including certificates of officers of the Company, the Selling Stockholders or
officers of the Selling Stockholders (when the Selling Stockholder is not a
natural person) as to the accuracy of the representations and warranties of the
Company and the Selling Stockholders herein, as to the performance by the
Company and the Selling Stockholders of their respective obligations hereunder
and as to the other conditions concurrent and precedent to the obligations of
the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company and the Selling Stockholders will furnish
you with such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
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7. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Selling Stockholders hereby grant to the several Underwriters, for the purpose
of covering over-allotments in connection with the distribution and sale of the
Company Shares only, a nontransferable option to purchase up to an aggregate of
[________] Option Shares at the purchase price per share for the Company Shares
set forth in Section 3 hereof. Such option may be exercised by the
Representatives on behalf of the several Underwriters on one (1) or more
occasions in whole or in part during the period of thirty (30) days after the
date on which the Company Shares are initially offered to the public, by giving
written notice to the Company and the Attorneys. The number of Option Shares to
be purchased by each Underwriter upon the exercise of such option shall be the
same proportion of the total number of Option Shares to be purchased by the
several Underwriters pursuant to the exercise of such option as the number of
Company Shares purchased by such Underwriter (set forth in SCHEDULE A hereto)
bears to the total number of Company Shares purchased by the several
Underwriters (set forth in SCHEDULE A hereto), adjusted by the Representatives
in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in same-day funds, payable to the order of the Custodian for the
respective accounts of the Selling Stockholders (and the Selling Stockholders
agree not to deposit and to cause the Custodian not to deposit any such check in
the bank on which it is drawn, and not to take any other action with the purpose
or effect of receiving immediately available funds, until the business day
following the date of its delivery to the Custodian). In the event of any
breach of the foregoing, the Selling Stockholders shall reimburse the
Underwriters for the interest lost and any other expenses borne by them by
reason of such breach. Such delivery and payment shall take place at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other place as may be agreed upon among the
Representatives and the Attorneys (i) on the Closing Date, if written notice of
the exercise of such option is received by the Company and the Attorneys at
least two (2) full business days prior to the Closing Date, or (ii) on a date
which shall not be later than the third (3rd) full business day following the
date the Company and the Attorneys receive written notice of the exercise of
such option, if such notice is received by the Company and the Attorneys less
than two (2) full business days prior to the Closing Date.
The certificates in negotiable form for the Option Shares have been
placed in custody (for delivery under this Agreement) under the Custody
Agreement. Each Selling Stockholder agrees that the certificates for the Option
Shares of such Selling Stockholder so held in custody are subject to the
interests of the Underwriters hereunder, that the arrangements made by such
Selling Stockholder for such custody, including the Power of Attorney, is to
that extent irrevocable and that the obligations of such Selling Stockholder
hereunder shall not be terminated by the act of such Selling Stockholder or by
operation of law, whether by the death or incapacity of such Selling Stockholder
or the occurrence of any other event, except as specifically
-29-
provided herein or in the Custody Agreement. If any Selling Stockholder should
die or be incapacitated, or if any other such event should occur, before the
delivery of the certificates for the Option Shares hereunder, the Option Shares
to be sold by such Selling Stockholder shall, except as specifically provided
herein or in the Custody Agreement, be delivered by the Custodian in accordance
with the terms and conditions of this Agreement as if such death, incapacity or
other event had not occurred, regardless of whether the Custodian shall have
received notice of such death or other event.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company and the Selling
Stockholders herein, to the accuracy of the statements of the Company, the
Selling Stockholders and officers of the Company made pursuant to the provisions
hereof, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder, to the conditions set forth in Section 6
hereof, and to the condition that all proceedings taken at or prior to the
payment date in connection with the sale and transfer of such Option Shares
shall be satisfactory in form and substance to you and to Underwriters' Counsel,
and you shall have been furnished with all such documents, certificates and
opinions as you may request in order to evidence the accuracy and completeness
of any of the representations, warranties or statements, the performance of any
of the covenants or agreements of the Company and the Selling Stockholders or
the satisfaction of any of the conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "QUALIFIED INDEPENDENT
UNDERWRITER" within the meaning of SCHEDULE E of the Bylaws of the NASD), under
the Act, the Exchange Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities (or actions in respect thereof)
arising out of or based upon (i) any breach of any representation, warranty,
agreement or covenant of the Company herein contained, (ii) any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission
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to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (iii) any untrue statement or
alleged untrue statement of any material fact contained in any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, PROVIDED FURTHER, that the indemnity agreement provided in this
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which the
Company may otherwise have.
(b) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject
(including, without limitation, in its capacity as an Underwriter or as a
"QUALIFIED INDEPENDENT UNDERWRITER" within the meaning of SCHEDULE E or the
Bylaws of the NASD) under the Act, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Selling Stockholder
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each Underwriter for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
indemnity agreement provided in this Section 8(b) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any losses, claims, damages, liabilities or actions
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged
-31-
omission to state therein a material fact purchased Shares, if a copy of the
Prospectus in which such untrue statement or alleged untrue statement or
omission or alleged omission was corrected had not been sent or given to such
person within the time required by the Act and the Rules and Regulations, unless
such failure is the result of noncompliance by the Company with Section 4(d)
hereof.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which such Selling Stockholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and each Selling Stockholder against any
losses, claims, damages or liabilities, joint or several, to which the Company
or such Selling Stockholder may become subject under the Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(c) to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof, and agrees to reimburse the Company and each such Selling Stockholder
for any legal or other expenses reasonably incurred by the Company and each such
Selling Stockholder in connection with investigating or defending any such loss,
claim, damage, liability or action.
The indemnity agreement in this Section 8(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, each Selling Stockholder and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which
each Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought against
any indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the
-32-
defense thereof, with counsel reasonably satisfactory to such indemnified party;
PROVIDED, HOWEVER, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of the indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section 8(a),
8(b) or 8(c) hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; PROVIDED that such
consent shall not be unreasonably withheld. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnification could have
been sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such proceeding.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 8
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that, except as set forth
in Section 8(f) hereof, the Underwriters severally and not jointly are
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company and the Selling Stockholders are responsible for the remaining portion,
PROVIDED, HOWEVER, that (i) no Underwriter shall be required to contribute any
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter exceeds the amount of damages which
such Underwriter has otherwise required to pay and (ii) no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this Section 8(e)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter, the Company or
any Selling Stockholder within the meaning of the Act or the Exchange Act and
each officer of the Company who signed the Registration Statement and each
director of the Company.
-33-
(f) The liability of each Selling Stockholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 8 shall be
limited to an amount equal to the initial public offering price of the Option
Shares sold by such Selling Stockholder to the Underwriters minus the amount of
the underwriting discount paid thereon to the Underwriters by such Selling
Stockholder. The Company and such Selling Stockholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company, the Selling Stockholders and the Underwriters herein or in certificates
delivered pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or any Selling Stockholder, or
any of its officers, directors or controlling persons within the meaning of the
Act or the Exchange Act, and shall survive the delivery of the Shares to the
several Underwriters hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Shares
in accordance with the terms hereof, and if the aggregate number of Shares which
such defaulting Underwriter or Underwriters so agreed but failed to purchase
does not exceed ten percent (10%) of the Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Shares of such defaulting Underwriter or
Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed to take up and pay for exceeds ten percent (10%) of the Shares, the
remaining Underwriters shall have the right, but shall not be obligated, to take
up and pay for (in such proportions as may be agreed upon among them) the Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or
underwriters shall have been substituted as aforesaid by such postponed Closing
Date, the Closing Date may, at the option of the Company, be postponed for a
further twenty-four (24) hours, if necessary, to allow the Company the privilege
of finding another underwriter or underwriters, satisfactory to
-34-
you, to purchase the Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted underwriter or underwriters to take up the Shares of
the defaulting Underwriter or Underwriters as provided in this Section 10,
(i) the Company shall have the right to postpone the time of delivery for a
period of not more than seven (7) full business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees promptly to file any amendments to the Registration Statement,
supplements to the Prospectus or other such documents which may thereby be made
necessary and (ii) the respective number of Shares to be purchased by the
remaining Underwriters and substituted underwriter or underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Shares so agreed to be
purchased by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or shall
not elect to seek another underwriter or underwriters for such Shares as
aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company nor any Selling
Stockholder shall be liable to any Underwriter (except as provided in Sections 5
and 8 hereof) nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, the Selling
Stockholders and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company or any Selling Stockholder (except to the
extent provided in Sections 5 and 8 hereof).
The term "UNDERWRITER" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of
(i) 6:30 A.M., San Francisco time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set
forth in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(j), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
or any Selling Stockholder shall have failed, refused or been unable to perform
any agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings,
-35-
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise from that set forth in the Registration Statement
or Prospectus, which, in your sole judgment, is material and adverse, or (ii) if
additional material governmental restrictions, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange or on the American Stock Exchange or in the over the counter
market by the NASD, or trading in securities generally shall have been suspended
on either such exchange or in the over the counter market by the NASD, or if a
banking moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or
(iv) if there shall have been a material adverse change in the general political
or economic conditions or financial markets as in your reasonable judgment makes
it inadvisable or impracticable to proceed with the offering, sale and delivery
of the Shares, or (v) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the reasonable opinion of
the Representatives, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. In the event
of termination pursuant to subparagraph (i) above, the Company shall remain
obligated to pay costs and expenses pursuant to Sections 4(j), 5 and 8 hereof.
Any termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party except as provided in
Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC, ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, telecopier
number (▇▇▇) ▇▇▇-▇▇▇▇, Attention: General Counsel; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Faroudja, Inc., ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, fax number (408) , Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President; if sent to one or more of the Selling Stockholders, such notice shall
be sent mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by letter) to [NAME OF ATTORNEY-IN-FACT FOR SELLING
STOCKHOLDERS], as Attorney-in-Fact for the Selling Stockholders, at ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, fax number (408) .
13. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and the Selling Stockholders and
their respective executors, administrators, successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons
within the meaning of the Act or the Exchange Act, officers and directors
referred to in Section 8 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions herein contained, this Agreement
and all conditions and provisions hereof being
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intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors and assigns
and said controlling persons and said officers and directors, and for the
benefit of no other person or entity. No purchaser of any of the Shares from
any Underwriter shall be construed a successor or assign by reason merely of
such purchase.
In all dealings with the Company and the Selling Stockholders under
this Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and the Selling Stockholders shall be entitled to act and rely upon
any statement, request, notice or agreement made or given by you jointly or by
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC on behalf of you.
14. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
15. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
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If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Selling Stockholders
and the several Underwriters.
Very truly yours,
FAROUDJA, INC.
By
------------------------------------------
SELLING STOCKHOLDERS
By
------------------------------------------
Attorney-in-Fact for the Selling Stockholders
named in SCHEDULE B hereto
Accepted as of the date first above written:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY LLC
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & COMPANY
On their behalf and on behalf of each of the
several Underwriters named in SCHEDULE A hereto.
By ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY LLC
By ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY GROUP, L.L.C.
By
-------------------------------
Authorized Signatory
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SCHEDULE A
Number of
Company
Shares To Be
Underwriters Purchased
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC . . . . . . . . . . .
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & Company. . . . . . . . . . . . . .
SCHEDULE B
Number of
Company Shares
Faroudja, Inc. To Be Sold
Total . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Option Shares
Name of Selling Stockholder To Be Sold
Total . . . . . . . . . . . . . . . . . . . . . . . . .
