CERADYNE, INC.
UNDERWRITING AGREEMENT
October, 1995
▇▇▇ ▇▇▇▇▇▇ & COMPANY
CRUTTENDEN ▇▇▇▇ INCORPORATED
As Representatives of the
several underwriters named in Schedule I,
c/o ▇▇▇ ▇▇▇▇▇▇ & Company
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Ceradyne, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters") 1,200,000 shares (the "Firm Stock") of the Company's Common
Stock, $0.01 par value (the "Common Stock"). In addition, the Company also
proposes to grant to the Underwriters an option to purchase up to an additional
180,000 shares of the Common Stock on the terms and for the purposes set forth
in Section 2(b) (the "Option Stock"). The Firm Stock and any Option Stock
purchased pursuant to this Agreement are referred to below as the "Stock." ▇▇▇
▇▇▇▇▇▇ & Company and Cruttenden ▇▇▇▇ Incorporated are acting as representatives
of the several Underwriters and in that capacity are referred to in this
Agreement as the "Representatives."
The Company hereby confirms its agreement with the several
Underwriters as set forth below.
1. Representations and Warranties of the Company. The Company
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hereby represents and warrants to and agrees with each Underwriter as follows:
(a) The Company meets the requirements for use of Form S-1 under
the Securities Act of 1933, as amended (the "Securities Act"), and a
registration statement (Registration No. 33-62345) on Form S-1, including such
amendments to such registration statement as may have been required to the date
of this Agreement, relating to the Stock has been prepared by the Company under
and in conformity with the provisions of the Securities Act, the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder and has been filed with the Commission.
After the execution of this Agreement, the Company will file with the Commission
either (i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Securities Act, either (A)
if the Company relies on Rule 434 under the Securities Act, a Term Sheet
(defined below) relating to the Stock, that identifies
the Preliminary Prospectus (defined below) that it supplements and contains such
information as is required or permitted by Rules 434, 430A and 424(b) of the
Rules and Regulations or (B) if the Company does not rely on Rule 434 under the
Securities Act, a prospectus in the form most recently included in an amendment
to such registration statement (or, if no such amendment has been filed, in such
registration statement), with such changes or insertions as are required by Rule
430A of the Rules and Regulations or permitted by Rule 424(b) of the Rules and
Regulations, and in the case of either (i)(A) or (i)(B) of this sentence, as has
been provided to and approved by the Representatives prior to the execution of
this Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the
Securities Act, an amendment to such registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and approved by the
Representatives prior to the execution of this Agreement. As used in this
Agreement, the term "Registration Statement" means such registration statement,
as amended, at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information omitted
therefrom pursuant to Rule 430A of the Rules and Regulations and included in the
Prospectus (defined below); the term "Preliminary Prospectus" means each
prospectus subject to completion filed with such registration statement or any
amendment thereto (including the prospectus subject to completion, if any,
included in the Registration Statement or any amendment thereto at the time it
was or is declared effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Securities Act, the
Term Sheet relating to the Stock that is first filed pursuant to Rule 424(b)(7)
under the Securities Act, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the Securities
Act, the prospectus first filed with the Commission pursuant to Rule 424(b)
under the Securities Act; or
(C) if the Company does not rely on Rule 434 under the Securities
Act and if no prospectus is required to be filed pursuant to Rule 424(b) under
the Securities Act, the prospectus included in the Registration Statement.
provided that if any revised prospectus that is provided to the Underwriters by
the Company for use in connection with the offering of the Stock differs from
the prospectus on file with the Commission at the time the Registration
Statement became or becomes, as the case may be, effective, whether or not the
revised prospectus is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations, the term "Prospectus" shall mean such
revised prospectus from and after the time it is first provided to the
Underwriters for such use. The term "Term Sheet" as used in this Agreement
means any term sheet that satisfies the requirements of Rules 434 and 424(b)
under the Securities Act. Any reference in this
2
Agreement to the "date" of a Prospectus that includes a Term Sheet means the
date of such Term Sheet.
(b) No order suspending the effectiveness of the Registration
Statement or preventing or suspending the issue of any Preliminary Prospectus or
the Prospectus has been issued and no proceedings for that purpose are pending
or, to the best knowledge of the Company, threatened or contemplated by the
Commission; no order suspending the sale of the Stock in any jurisdiction has
been issued and no proceedings for that purpose are pending or, to the best
knowledge of the Company, threatened or contemplated, and any request of the
Commission for additional information (to be included in the Registration
Statement, any Preliminary Prospectus or the Prospectus or otherwise) has been
complied with.
(c) When any Preliminary Prospectus was filed with the Commission
it (i) contained all statements required to be contained therein and complied in
all respects with the requirements of the Securities Act, the Rules and
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the Commission thereunder (the "Exchange
Act Rules and Regulations") and (ii) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement or any amendment thereto
was or is declared effective, it (i) contained or will contain all statements
required to be contained therein and complied or will comply in all respects
with the requirements of the Securities Act, the Rules and Regulations, the
Exchange Act and the Exchange Act Rules and Regulations and (ii) did not or will
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading. When the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or
supplement is not required to be so filed, when the Registration Statement or
the amendment thereto containing such amendment or supplement to the Prospectus
was or is declared effective) and at all times subsequent thereto up to and
including the Closing Date (defined below) and any date on which Option Stock is
to be purchased, the Prospectus, as amended or supplemented at any such time,
(i) contained or will contain all statements required to be contained therein
and complied or will comply in all respects with the requirements of the
Securities Act, the Rules and Regulations and the Exchange Act Rules and
Regulations and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The foregoing provisions of this paragraph (c) do not
apply to statements or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein.
3
(d) Each of the Company and Ceradyne Advanced Products, Inc. (the
"Subsidiary") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has full power (corporate and other) and authority to own or
lease its properties and conduct its business as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) and as currently being conducted and
proposed to be conducted by it and is duly qualified as a foreign corporation
and is in good standing in all jurisdictions in which the character of the
property owned or leased or the nature of the business transacted by it makes
qualification necessary (except where the failure to be so qualified would not
have a material effect on the business, properties, condition (financial or
otherwise), results of operations or prospects of the Company or its
subsidiaries). Each of the Company and the Subsidiary is in possession of and
operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from federal, state, local, foreign and other
governmental or regulatory authorities that are material to the conduct of its
business, all of which are valid and in full force and effect except where such
non-compliance or invalidity would not have a material adverse effect on the
Company and its subsidiaries. Except as may be disclosed in the Registration
Statement, the Company owns all of the outstanding capital stock of each of its
subsidiaries, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest of any type, kind or nature. None of
the subsidiaries of the Company, including the Subsidiary, is a "significant
subsidiary" as such term is defined in Rule 405 under the Securities Act. As
used in this Agreement, the word "subsidiary" means any corporation,
partnership, limited liability company or other entity of which the Company
directly or indirectly owns 50% or more of the equity or that the Company
directly or indirectly controls. The Company does not have any subsidiaries that
are not corporations.
(e) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there has not been any
material loss or interference with the business of the Company or any of its
subsidiaries from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any court or governmental action, order or decree,
or any changes in the capital stock or long-term debt of the Company or any of
its subsidiaries, or any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company, or any material change, or a
development known to the Company that might cause or result in a material
change, in or affecting the business, properties, condition (financial or
otherwise), results of operation or prospects of the Company and its
subsidiaries taken as a whole, whether or not arising from transactions in the
ordinary course of business, in each case other than as may be set forth in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and since such dates, except
in the ordinary course of business, neither the Company nor any of its
subsidiaries has entered into any material transaction not described in the
Registration Statement and the
4
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(f) There is no agreement, contract, license, lease or other
document required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement which is
not described or filed as required. All contracts described in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), if any, are in full force and effect on the date hereof, and
neither the Company nor any of its subsidiaries nor, to the best knowledge of
the Company, any other party thereto is in material breach of or default under
any such contract.
(g) The authorized and outstanding capital stock of the Company is
as set forth in the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), and the description of the Common Stock
therein conforms with and accurately describes the rights set forth in the
instruments defining the same. The unissued shares of the Stock have been duly
and validly authorized and, when issued and delivered against payment therefor
as provided herein, will be duly and validly issued, fully paid and non-
assessable, and the issuance of the Stock is not subject to any preemptive or
similar rights, other than those which have been duly and validly waived.
(h) All of the outstanding shares of Common Stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all applicable federal and
state securities laws and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities. All
of the issued shares of each subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and, except for
directors' qualifying shares, are owned by the Company, free and clear of all
liens or encumbrances. The description of the Company's stock option, stock
bonus and other stock plans or arrangements, and the options or other rights
granted or exercised thereunder, set forth in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights. Other than this Agreement and
the options to purchase Common Stock described in the Prospectus, there are no
options, warrants or other rights outstanding to subscribe for or purchase any
shares of the Company's capital stock. There are no preemptive rights
applicable to any shares of capital stock of the Company.
(i) This Agreement has been duly authorized, executed and delivered
by, and constitutes the valid and binding obligation of, the Company,
enforceable against it in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable federal or state
securities laws. The filing of the Registration Statement does not give rise
5
to any rights, other than those which have been waived, for or relating to the
registration of any capital stock of the Company.
(j) Neither the Company nor any of its subsidiaries is, or with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution or delivery of this Agreement or the
completion of the transactions contemplated by this Agreement result in a
violation of or constitute a breach of or a default (including without
limitation with the giving of notice, the passage of time or otherwise) under,
the certificate or articles of incorporation, bylaws or other governing
documents of the Company or any of its subsidiaries or any obligation,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, deed of trust,
loan agreement, lease, license, joint venture or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which any of
its or their properties may be bound or affected. The Company has not incurred
any liability, direct or indirect, for any finders' or similar fees payable on
behalf of the Company or the Underwriters in connection with the transactions
contemplated by this Agreement. The performance by the Company of its
obligations under this Agreement will not violate any law, ordinance, rule or
regulation, or any order, writ, injunction, judgment or decree of any
governmental agency or body or of any court having jurisdiction over the
Company, its subsidiaries or any of their respective properties, or result in
the creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company or any of its subsidiaries. Except for permits
and similar authorizations required under the Securities Act, the Exchange Act
or under other securities or Blue Sky laws of certain jurisdictions, the
clearance of this offering with the National Association of Securities Dealers,
Inc. ("NASD") and for such permits and authorizations that have been obtained,
no consent, approval, authorization or order of any court, governmental agency
or body, financial institution or any other person is required in connection
with the completion of the transactions contemplated by this Agreement.
(k) Each of the Company and the Subsidiary owns, or has valid
rights to use, all items of real and personal property which are material to the
business of the Company and its subsidiaries taken as a whole and free and clear
of all liens, encumbrances and claims that might materially interfere with the
business, properties, condition (financial or otherwise), results of operations
or prospects of the Company and its subsidiaries taken as a whole.
(l) Each of the Company and the Subsidiary owns or possesses
adequate rights to use all material patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, tradenames and copyrights
described or referred to in the Registration Statement and the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus)
as owned by or used by any of them, or which are necessary for the conduct of
their business as described in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus); and neither the Company nor any
6
of its subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, tradenames or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material effect on the business,
properties, condition (financial or otherwise), results of operations or
prospects of the Company and its subsidiaries taken as a whole.
(m) There is no litigation or governmental proceeding to which the
Company or any of its subsidiaries is a party or to which any property of the
Company or any of its subsidiaries is subject which is pending or, to the best
knowledge of the Company, is threatened or contemplated against the Company or
any of its subsidiaries that might have a material effect on, or might result in
any material change in the business, properties, condition (financial or
otherwise), results of operations or prospects of the Company and its
subsidiaries taken as a whole, that might prevent consummation of the
transactions contemplated by this Agreement or that are required to be disclosed
in the Registration Statement or Prospectus (or, if the Prospectus is not in
existence, in the most recent Preliminary Prospectus) and are not so disclosed.
(n) Neither the Company nor any of its subsidiaries is in violation
of, and neither the Company nor any of its subsidiaries has received any notice
or claim from any governmental agency or third party that any of them is in
violation of, any law, order, ordinance, rule or regulation, or any order, writ,
injunction, judgment or decree of any governmental agency or body or of any
court, to which it or its properties (whether owned or leased) may be subject,
which violation might have a material effect on the business, properties,
condition (financial or otherwise), results of operations or prospects of the
Company and its subsidiaries taken as a whole.
(o) The Company has not taken and shall not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to cause or result in, under the Exchange
Act, the Exchange Act Rules and Regulations or otherwise, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Stock. No bid or purchase by the Company and, to the best
knowledge of the Company, no bid or purchase that could be attributed to the
Company (as a result of bids or purchases by an "affiliated purchaser" within
the meaning of Rule 10b-6 under the Exchange Act) for or of the Stock, the
Common Stock, any securities of the same class or series as the Common Stock or
any securities convertible into or exchangeable for or that represent any right
to acquire the Common Stock is now pending or in progress or will have commenced
at any time prior to the completion of the distribution of the Stock.
(p) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose reports appear in the Registration
Statement and the Prospectus, are, and during the periods covered by their
reports in the Registration Statement were, independent accountants as required
7
by the Securities Act and the Rules and Regulations. The financial statements
and schedules included in the Registration Statement, each Preliminary
Prospectus and the Prospectus present fairly (or, if the Prospectus has not been
filed with the Commission, as to the Prospectus, will present fairly) the
financial condition, results of operations, cash flow and changes in
stockholders' equity and the financial statements and schedules included in the
Registration Statement present fairly the information required to be stated
therein. Such financial statements and schedules have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods presented, except as may be stated therein. The
selected and summary financial and statistical data included in the Registration
Statement and the Prospectus present fairly (or, if the Prospectus has not been
filed with the Commission, as to the Prospectus, will present fairly) the
information shown therein and have been compiled on a basis consistent with the
audited financial statements presented therein. No other financial statements
or schedules are required to be included in the Registration Statement.
(q) The pro forma financial information and related notes, if any,
included in the Registration Statement, each Preliminary Prospectus and the
Prospectus comply (or, if the Prospectus has not been filed with the Commission,
as to the Prospectus, will comply) in all material respects with the
requirements of the Securities Act and the Rules and Regulations and present
fairly the pro forma information shown, as of the dates and for the periods
covered by such pro forma information. Such pro forma information, including
the related notes and schedules, have been prepared on a basis consistent with
the historical financial statements and other historical information, as
applicable, included in the Registration Statement, the Preliminary Prospectus
and the Prospectus (if filed with the Commission), except for the pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis to give effect to historical and proposed transactions
described in the Registration Statement, each Preliminary Prospectus and the
Prospectus (if filed with the Commission).
(r) The statements in the Registration Statement and Prospectus
concerning the reserve information, if any, of the Company, its subsidiaries and
the pro forma reserve information giving effect to transactions referred to
therein are (or, if the Prospectus has not been filed with the Commission, will,
when the Prospectus is so filed, be) correct in all material respects and do not
and, if applicable, will not omit to state a material fact necessary to make the
statements made in the Registration Statement and the Prospectus not misleading.
(s) The books, records and accounts of the Company and each of its
subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in and dispositions of the assets of the Company and each of its
subsidiaries. The systems of internal accounting controls maintained by the
Company and each of its subsidiaries are sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
(x) to permit preparation of financial
8
statements in conformity with generally accepted accounting principles and (y)
to maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(t) The Company will not, and the Company has delivered to the
Representatives the written agreement of each of its officers and directors and
Ford Motor Company (collectively, "Material Holders") to the effect that each of
the Material Holders will not, in each case for a period of 90 days following
the date of this Agreement, in each case without the prior written consent of
the Representatives, offer, sell or contract to sell, or otherwise dispose of,
or announce the offer of, any Common Stock or options or convertible securities
exercisable or exchangeable for, or convertible into, Common Stock, in each case
without the prior written consent of the Representatives other than, in the case
of the Company, the issuance of Common Stock upon the exercise of outstanding
stock options and the grant of options to purchase Common Stock under the Stock
Option Plans described in the Registration Statement.
(u) No labor disturbance by the employees of the Company or any of
its subsidiaries exists, is imminent or, to the knowledge of the Company, is
contemplated or threatened; and the Company is not aware of an existing,
imminent or threatened labor disturbance by the employees of any principal
suppliers, contract manufacturing organizations, manufacturers, authorized
dealers or distributors that might be expected to result in any material change
in the business, properties, condition (financial or otherwise), results of
operations or prospects of the Company and its subsidiaries taken as a whole.
No collective bargaining agreement exists with any of the Company's or any of
the Company's subsidiaries' employees and, to the best knowledge of the Company,
no such agreement is imminent.
(v) Each of the Company and each of its subsidiaries has filed all
federal, state, local and foreign tax returns that are required to be filed or
has requested extension thereof and has paid all taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges to the extent
that the same have become due and payable. No tax assessment or deficiency has
been made or proposed against the Company or any of its subsidiaries nor has the
Company or any of its subsidiaries received any notice of any proposed tax
assessment or deficiency.
(w) Except as set forth in the Prospectus, there are no outstanding
loans, advances or guaranties of indebtedness by the Company to or for the
benefit of any of (i) its "affiliates," as such term is deemed in the Rules and
Regulations, (ii) any of the officers or directors of any of its subsidiaries or
(iii) any of the members of the families of any of them.
(x) Neither the Company nor any of its subsidiaries has, directly
or indirectly, at any time: (i) made any contributions to any candidate for
9
political office, or failed to disclose fully any such contribution, in
violation of law; (ii) made any payment to any local, state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or allowed by all applicable
laws; or (iii) violated any provision of the Foreign Corrupt Practices Act of
1977, as amended.
(y) Except as may be disclosed in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), neither the Company nor any of its subsidiaries has any
liability, absolute or contingent, relating to: (i) public health or safety;
(ii) worker health or safety; (iii) product defect or warranty; or (iv)
pollution, damage to or protection of the environment, including, without
limitation, relating to damage to natural resources, emissions, discharges,
releases or threatened releases of hazardous materials into the environment
(including, further without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or otherwise relating to the manufacture,
processing, use, treatment, storage, generation, disposal, transport or handling
of any hazardous materials, which, in any case or in the aggregate, would have a
material adverse effect on the Company and its subsidiaries taken as a whole.
As used herein, "hazardous material" includes chemical substances, wastes,
pollutants, contaminants, hazardous or toxic substances, constituents, materials
or wastes, whether solid, gaseous or liquid in nature.
(z) The Company has not distributed and will not distribute prior
to the Closing Date or on or prior to any date on which the Option Stock is to
be purchased, as the case may be, any prospectus or other offering material in
connection with the offering and sale of the Stock other than the Prospectus,
the Registration Statement and any other material which may be permitted by the
Securities Act and the Rules and Regulations.
(aa) The Stock has been approved for inclusion for listing on the
Nasdaq National Market, subject only to official notice of issuance.
(ab) The Company is not now, and intends to conduct its affairs in
the future in such a manner so that it will not become, an investment company
within the meaning of the Investment Company Act of 1940, as amended.
(ac) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) for which the
Company would have any liability; the Company has not incurred and does not
expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has
10
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
(ad) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of its
subsidiaries (or, to the knowledge of the Company, any of their predecessors in
interest) at, upon or from any of the property now or previously owned or leased
by the Company or its subsidiaries in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or remedial action
which would not have, or could not be reasonably likely to have, singularly or
in the aggregate with all such violations and remedial actions, a material
adverse effect on the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by the Company
or any of its subsidiaries or with respect to which the Company or any of its
subsidiaries have knowledge, except for any such spill, discharge, leak,
emission, injection, escape, dumping or release which would not have or would
not be reasonably likely to have, singularly or in the aggregate with all such
spills, discharges, leaks, emissions, injections, escapes, dumpings and
releases, a material adverse effect on the general affairs, management,
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries; and the terms "hazardous wastes," "toxic wastes,"
"hazardous substances" and "medical wastes" shall have the meanings specified in
any applicable local, state, federal and foreign laws or regulations with
respect to environmental protection.
2. Purchase, Sale and Delivery of the Stock.
----------------------------------------
(a) On the basis of the representations, warranties, covenants and
agreements of the Company contained in this Agreement and subject to the terms
and conditions set forth in this Agreement, the Company agrees to sell to the
several Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at a purchase price of $_____ per share
of Stock ("Purchase Price") the respective number of shares of Firm Stock set
forth opposite the name of such Underwriter on Schedule I to this Agreement
(subject to adjustment as provided in Section 8 of this Agreement).
(b) On the basis of the several (and not joint) representations,
warranties, covenants and agreements of the Underwriters contained in this
Agreement and subject to the terms and conditions set forth in this Agreement,
the Company grants an option to the several Underwriters to purchase from the
Company, severally and jointly, all or any portion of the Option Stock at the
11
Purchase Price. This option may be exercised only to cover over-allotments in
the sale of the Firm Stock by the Underwriters and may be exercised in whole or
in part at any time (but not more than once) on or before the 30th day after the
date of the Prospectus upon written, telecopied or telegraphic notice by the
Representatives to the Company setting forth the aggregate number of shares of
Option Stock as to which the several Underwriters are exercising the option and
the settlement date. The Option Stock shall be purchased severally, and not
jointly, by each Underwriter, if purchased at all, in the same proportion that
the number of shares of Firm Stock set forth opposite the name of the
Underwriter in Schedule I to this Agreement bears to the total number of shares
of Firm Stock to be purchased by the Underwriters under Section 2(a) above,
subject to such adjustments as the Representatives in its absolute discretion
shall make to eliminate any fractional Stock. Delivery of Option Stock, and
payment therefor, shall be made as provided in Section 2(c) and Section 2(d)
below.
(c) Delivery of the Firm Stock and the Option Stock (if the option
granted by the Company in Section 2(b) above has been exercised not later than
6:30 a.m., San Francisco time, on the date two business days preceding the
Closing Date), and payment therefor, shall be made at the office of ▇▇▇ ▇▇▇▇▇▇ &
Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at 6:30 a.m., San
Francisco time, on the fourth business day after the date of this Agreement, or
at such time on such other day, not later than seven full business days after
such fourth business day, (but not in excess of the period specified in the
Rules and Regulations) as shall be agreed upon in writing by the Company and the
Representatives, or as provided in Section 8 of this Agreement. The date and
hour of delivery and payment for the Firm Stock are referred to in this
Agreement as the "Closing Date." As used in this Agreement, "business day"
means a day on which the American Stock Exchange is open for trading and on
which banks in New York and California are open for business and not permitted
by law or executive order to be closed.
(d) If the option granted by the Company in Section 2(b) above is
exercised after 6:30 a.m., San Francisco time, on the date two business days
preceding the Closing Date, delivery of the Option Stock and payment therefor
shall be made at the office of ▇▇▇ ▇▇▇▇▇▇ & Company, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at 6:30 a.m., San Francisco time, on the date specified by
the Representatives (which shall be three or four or fewer business days after
the exercise of the option, but not in excess of the period specified in the
Rules and Regulations).
(e) Payment of the Purchase Price for the Stock by the several
Underwriters shall be made by certified or official bank check or checks drawn
in next-day funds, payable to the order of the Company. Such payment shall be
made upon delivery of Stock to you for the respective accounts of the several
Underwriters. The Stock to be delivered to you shall be registered in such name
or names and shall be in such denominations as the Representatives may request
at least two business days before the Closing Date, in the case of Firm Stock,
and at least one business prior to the purchase of the Option Stock, in the case
of the Option Stock.
12
It is understood that the Representatives, individually and not on
behalf of the Underwriters, may (but shall not be obligated to) make payment to
the Company for Stock to be purchased by any Underwriter whose check shall not
have been received by the Representatives on the Closing Date or any later date
on which Option Stock is purchased for the account of such Underwriter. Any
such payment shall not relieve such Underwriter from any of its obligations
hereunder.
(f) It is understood that the several Underwriters propose to offer
the Stock for sale to the public as soon as the Representatives deem it
advisable to do so. The Firm Stock is to be initially offered to the public at
the public offering price set forth (or to be set forth) in the Prospectus. The
Representatives may from time to time thereafter change the public offering
price and other selling terms.
(g) The Company agrees that the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), the legends respecting stabilization and passive market making
set forth on the inside front cover page and the statements set forth under the
caption "Underwriting" in any Preliminary Prospectus and in the final form of
Prospectus filed pursuant to Rule 424(b) constitute the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement.
3. Further Agreements of the Company. The Company covenants and
---------------------------------
agrees with the several Underwriters as follows:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the time of execution
of this Agreement, to become effective as promptly as possible. If the
Registration Statement has become or becomes effective pursuant to Rule 430A, or
filing of the Prospectus is otherwise required under Rule 424(b), the Company
will file the Prospectus, properly completed (and in form and substance
reasonably satisfactory to the Underwriters) pursuant to Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will not file the
Prospectus, any amended Prospectus, any amendment (including post-effective
amendments) of the Registration Statement or any supplement to the Prospectus
without (i) advising the Representatives of and, a reasonable time prior to the
proposed filing of such amendment or supplement, furnishing the Representatives
with copies thereof and (ii) obtaining the prior consent of the Representatives
to such filing. The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendment to the Registration
Statement or supplement to the Prospectus that may be necessary or advisable in
connection with the distribution of the Stock by the Underwriters and use its
best efforts to cause the same to become effective as promptly as possible.
(b) The Company will promptly advise the Representatives (i) when
the Registration Statement becomes effective, (ii) when any post-effective
13
amendment thereof becomes effective, (iii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (v) of the
receipt by the Company of any notification with respect to the suspension of the
registration, qualification or exemption from registration or qualification of
the Stock for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best efforts to prevent
the issuance of any such stop order or suspension and, if issued, to obtain as
soon as possible the withdrawal thereof.
(c) The Company will (i) on or before the Closing Date, deliver to
each of you and your counsel a signed copy of the Registration Statement as
originally filed and of each amendment thereto filed prior to the time the
Registration Statement becomes effective and, promptly upon the filing thereof,
a signed copy of each post-effective amendment, if any, to the Registration
Statement (together with, in each case, all exhibits thereto unless previously
furnished to you) and will also deliver to you, for distribution to the several
Underwriters, a sufficient number of additional conformed copies of each of the
foregoing (excluding exhibits) so that one copy of each may be distributed to
each Underwriter, (ii) as promptly as possible deliver to each of you and send
to the several Underwriters, at such office or offices as you may designate, as
many copies of the Prospectus as you may reasonably request and (iii) thereafter
from time to time during the period in which a prospectus is required by law to
be delivered by an Underwriter or a dealer, likewise to send to the Underwriters
as many additional copies of the Prospectus and as many copies of any supplement
to the Prospectus and of any amended Prospectus, filed by the Company with the
Commission, as you may reasonably request for the purposes contemplated by the
Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or a dealer any event shall
occur as a result of which it is necessary to supplement or amend the Prospectus
in order to make the Prospectus not misleading or so that the Prospectus will
not omit to state a material fact necessary to be stated therein, in each case
at the time the Prospectus is delivered to a purchaser of the Stock, or if it
shall be necessary to amend or to supplement the Prospectus to comply with the
Securities Act or the Rules and Regulations, the Company will forthwith prepare
and file with the Commission a supplement to the Prospectus or an amended
Prospectus so that the Prospectus as so supplemented or amended will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and so that it then will otherwise
comply with the Securities Act and the Rules and Regulations. If, after the
public offering of the Stock by the Underwriters and during such period, the
Underwriters propose to vary the terms of offering thereof by reason of changes
in general market conditions or otherwise, you will advise the Company in
writing of the proposed variation and if, in the opinion either of counsel for
the Company or
14
counsel for the Underwriters, such proposed variation requires that the
Prospectus be supplemented or amended, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus setting forth such
variation. The Company authorizes the Underwriters and all dealers to whom any
of the Stock may be sold by the Underwriters to use the Prospectus, as from time
to time so amended or supplemented, in connection with the sale of the Stock in
accordance with the applicable provisions of the Securities Act and the Rules
and Regulations for such period.
(e) The Company will cooperate with you and your counsel in the
qualification or registration of the Stock for offer and sale under the
securities or blue sky laws of such jurisdictions as you may designate and, if
applicable, in connection with exemptions from such qualification or
registration and, during the period in which a Prospectus is required by law to
be delivered by an Underwriter or a dealer, in keeping such qualifications,
registrations and exemptions in effect; provided, however, that the Company
shall not be obligated to file any general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction in which it
is not so qualified. The Company will, from time to time, prepare and file such
statements, reports and other documents as are or may be required to continue
such qualifications, registrations and exemptions in effect for so long a period
as you may reasonably request for the distribution of the Stock.
(f) During a period of five years commencing with the date of this
Agreement, the Company will promptly furnish to each of you and to each
Underwriter who may so request in writing copies of (i) all periodic and special
reports furnished by it to shareholders of the Company, (ii) all information,
documents and reports filed by it with the Commission, any securities exchange
on which any securities of the Company are then listed, Nasdaq or its National
Market or the NASD, (iii) all press releases and material news items or articles
in respect of the Company or its affairs released or prepared by the Company
(other than promotional and marketing materials disseminated solely to customers
and potential customers of the Company in the ordinary course of business) and
(iv) any additional information concerning the Company or its business which the
Representatives may reasonably request.
(g) As soon as practicable, but not later than the 45th day
following the end of the fiscal quarter first ending after the first anniversary
of the Effective Date, the Company will make generally available to its
securities holders and furnish to the Representatives an earnings statement or
statements in accordance with Section 11(a) of the Securities Act and Rule 158
of the Rules and Regulations.
(h) The Company will apply the net proceeds from the offering of
the Stock substantially in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
15
(i) The Company will cause the Common Stock (including the Stock)
to be listed on the Nasdaq National Market, and the Company will comply with all
registration, filing, reporting and other requirements of the Exchange Act and
any such exchange or the Nasdaq National Market which may from time to time be
applicable to the Company.
(j) The Company will use its best efforts to maintain insurance of
the types and in the amounts which it deems adequate for its business consistent
with insurance coverage maintained by companies of similar size and engaged in
similar businesses, including, but not limited to, general liability insurance
covering all real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against.
4. Fees and Expenses.
-----------------
(a) The Company agrees with each Underwriter that:
(i) The Company 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, any drafts of each of them and any amendments
or supplements to any of them; the duplication or, if applicable, printing
(including all drafts thereof) of this Agreement, the Agreement Among
Underwriters, any Selected Dealer Agreements, the Preliminary Blue Sky Survey
and any Supplemental Blue Sky Survey, the Underwriters' Questionnaire and the
Power of Attorney and the duplication and printing (including of drafts thereof)
of any other underwriting documents and material (including but not limited to
marketing memoranda and other marketing material) in connection with the
offering, purchase, sale and delivery of the Stock; the issuance and delivery of
the Stock under this Agreement to the several Underwriters; the cost of printing
the certificates for the Stock; the Transfer Agents' and Registrars' fees; the
fees and disbursements of counsel for the Company; all fees and other charges of
the Company's independent public accountants and any other experts named in the
Prospectus; the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary Prospectus
and the Prospectus, the agreements and other documents and instruments referred
to above and any amendments or supplements to any of the foregoing; the NASD
filing fees; the cost of qualifying or registering the Stock (or obtaining
exemptions from qualification or registration) under the laws of such
jurisdictions as you may designate (including filing fees and fees and
costs/disbursements of Underwriters' counsel in connection with such state
securities or
16
Blue Sky qualifications, registrations and exemptions and in preparing the
preliminary and any final Blue Sky Memorandum); all fees and expenses in
connection with listing of the Stock on the Nasdaq National Market; and all
other expenses incurred by the Company in connection with the performance of its
obligations hereunder. In addition, the Company will pay the Representatives a
non-accountable expense allowance of one and one-quarter percent (1.25%) of the
total proceeds of the offering of the Stock. Except as provided in this Section
4(a), Section 4(d) and Section 7(a) hereof, the Underwriters shall pay all of
their own expenses, including the fees and disbursements of their counsel
(excluding those relating to qualifications, registrations and exemptions under
Blue Sky laws and the Blue Sky memorandum referred to above). The
Representatives estimate that the legal fees for counsel for the Representatives
in connection with the offering of the Stock will not exceed $75,000.
(ii) In addition to its obligations under Section 7(a) of this
Agreement, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any loss, claim, damage or liability described in Section 7(a) of
this Agreement, it will reimburse or advance to or for the benefit of the
Underwriters, and each of them, on a monthly basis (or more often, if requested)
for all reasonable legal and other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's obligation to reimburse or
advance for the benefit of the Underwriters for such expenses or the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any portion, or all, of any such
interim reimbursement payments or advances are so held to have been improper,
the Underwriters receiving the same shall promptly return such amounts to the
Company together with interest, compounded daily, at the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) announced
from time to time by Bank of America, NT&SA, San Francisco, California (the
"Prime Rate"), but not in excess of the maximum rate permitted by applicable
law. Any such interim reimbursement payments or advances that are not made to
or for the Underwriters within 30 days of a request for reimbursement or for an
advance shall bear interest at the Prime Rate, compounded daily, but not in
excess of the maximum rate permitted by applicable law, from the date of such
request until the date paid.
(b) In addition to their obligations under Section 7(b) of this
Agreement, the Underwriters severally and in proportion to their obligation to
purchase Firm Stock as set forth on Schedule I hereto, agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any loss, claim, damage or
liability described in Section 7(b) of this Agreement, they will reimburse or
advance to or for the benefit of the Company on a monthly basis (or more often,
if requested) for all reasonable legal and other expenses incurred by the
Company in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety or enforceability of the
Underwriters' obligation to reimburse or advance for the benefit of the Company
for such expenses and the possibility that such payments or advances might later
be held to have been improper by a court of
17
competent jurisdiction. To the extent that any portion, or all, of any such
interim reimbursement payments or advances are so held to have been improper,
the Company shall promptly return such amounts to the Underwriters together with
interest, compounded daily, at the Prime Rate, but not in excess of the maximum
rate permitted by applicable law. Any such interim reimbursement payments or
advances that are not made to the Company within 30 days of a request for
reimbursement or for an advance shall bear interest at the Prime Rate,
compounded daily, but not in excess of the maximum rate permitted by applicable
law, from the date of such request until the date paid.
(c) It is agreed that any controversy arising out of the operation
of the interim reimbursement and advance arrangements set forth in Sections
4(a)(ii) and 4(b) above, including the amounts of any requested reimbursement
payments or advance, the method of determining such amounts and the basis on
which such amounts shall be apportioned among the indemnifying parties, shall be
settled by arbitration conducted under the provisions of the Code of Arbitration
Procedure of the National Association of Securities Dealers, Inc. Any such
arbitration must be commenced by service of a written demand for arbitration or
a written notice of intention to arbitrate, therein electing the arbitration
tribunal. If the party demanding arbitration does not make such designation of
an arbitration tribunal in such demand or notice, then the party responding to
the demand or notice is authorized to do so. Any such arbitration will be
limited to the interpretation and obligations of the parties under the interim
reimbursement and advance provisions contained in Sections 4(a)(ii) and 4(b)
above and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for or contribute to expenses that is created by the
provisions of Section 7 of this Agreement.
(d) If the sale of the Stock provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 5 of this Agreement is not satisfied, or because of any termination
pursuant to Section 9(b) of this Agreement, or because of any refusal, inability
or failure on the part of the Company to perform any covenant or agreement set
forth in this Agreement or to comply with any provision of this Agreement other
than by reason of a default by any of the Underwriters, the Company agrees to
reimburse the several Underwriters upon demand for all accountable out-of-pocket
expenses actually and reasonably incurred (including fees and disbursements of
counsel) by any or all of them in connection with investigating, preparing to
market or marketing the Stock or otherwise in connection with this Agreement.
5. Conditions of Underwriters' Obligations. The several
---------------------------------------
obligations of the Underwriters to purchase and pay for the Stock shall be
subject to the accuracy as of the date of execution of this Agreement, the
Closing Date and the date and time at which the Option Stock is to be purchased,
as the case may be, of the representations and warranties of the Company set
forth in this Agreement, to the accuracy of the statements of the Company and
its officers made in any certificate
18
delivered pursuant to this Agreement, to the performance by the Company of all
of its obligations to be performed under this Agreement at or prior to the
Closing Date or any later date on which Option Stock is to be purchased, as the
case may be, to the satisfaction of all conditions to be satisfied or performed
by the Company at or prior to that date and to the following additional
conditions:
(a) The Registration Statement shall have become effective (or, if
a post-effective amendment is required to be filed pursuant to Rule 430A under
the Act, such post-effective amendment shall become effective and the Company
shall have provided evidence satisfactory to the Representatives of such filing
and effectiveness) not later than 5:00 p.m., New York time, on the date of this
Agreement or at such later date and time as you may approve in writing and, at
the Closing Date or, with respect to the Option Stock, the date on which such
Option Stock is to be purchased, no stop order suspending the effectiveness of
the Registration Statement or any qualification, registration or exemption from
qualification or registration for the sale of the Stock in any jurisdiction
shall have been issued and no proceedings for that purpose shall have been
instituted or threatened; and any request for additional information on the part
of the Commission shall have been complied with to the reasonable satisfaction
of the Representatives and their counsel.
(b) The Representatives shall have received from ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
Freidenrich, counsel for the Underwriters, an opinion, on and dated as of the
Closing Date and, if applicable, the date on which Option Stock is to be
purchased, with respect to the issuance and sale of the Stock and such other
related matters as the Representatives may reasonably require, and the Company
shall have furnished such counsel with all documents which they may request for
the purpose of enabling them to pass upon such matters.
(c) The Representatives shall have received on the Closing Date
and, if applicable, the date on which Option Stock is purchased the opinion of
Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel for the Company, addressed to the
Underwriters and dated the Closing Date or such later date, with reproduced
copies or signed counterparts thereof for each of the Underwriters, covering the
matters set forth in Annex A to this Agreement and in form and substance
satisfactory to you.
(d) The Representatives shall be satisfied that there has not been
any material change in the market for securities in general or in political,
financial or economic conditions as to render it impracticable in your sole
judgment to make a public offering of the Stock, or a material adverse change in
market levels for securities in general (or those of companies in particular) or
financial or economic conditions which render it inadvisable to proceed.
(e) The Representatives shall have received on the Closing Date and
on any later date on which Option Stock is purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by the President
and the Chief Financial Officer of the Company stating that:
19
(i) the representations and warranties of the Company set forth in
Section 1 of this Agreement are true and correct with the same force and effect
as if expressly made at and as of the Closing Date or such later date, and the
Company has complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date or such
later date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending or are threatened under the Securities Act;
(iii) the Stock has been approved for listing on the Nasdaq National
Market, subject only to notice of issuance, and the outstanding shares of the
Common Stock of the Company are listed on the Nasdaq National Market; and
(iv) (A) the respective signers of such certificate have carefully
examined the Registration Statement in the form in which it originally became
effective and the Prospectus and any supplements or amendments to any of them
and, as of the Effective Date, the statements made in the Registration Statement
and the Prospectus were true and correct in all material respects and neither
the Registration Statement nor the Prospectus omitted to state any material fact
required to be stated therein, or necessary, in light of the circumstances under
which they were made, in order to make the statements therein not misleading,
(B) since the effective date of the Registration Statement, no event has
occurred that should have been set forth in an amendment to the Registration
Statement or a supplement or amendment to the Prospectus that has not been set
forth in such an amendment or supplement, (C) since the respective dates as of
which information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus, there has not been any material
adverse change or any development involving a prospective material change in or
affecting the business, properties, condition (financial or otherwise), results
of operations or prospects of the Company and its subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary course of business,
and, since such dates, neither the Company nor any of its subsidiaries has
entered into any material transaction not referred to in the Registration
Statement in the form in which it originally became effective and the Prospectus
contained therein, (D) there are not any pending or known threatened legal
proceedings to which the Company or any of its subsidiaries is a party or of
which property of the Company or any of its subsidiaries is the subject which
are material and which are not disclosed in the Registration Statement and the
Prospectus and (E) there are not any license agreements, contracts, leases or
other documents that are required to be filed as exhibits to the Registration
Statement that have not been filed as required.
(f) The Representatives shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
Co. LLP a letter or letters, addressed to the Underwriters and dated the Closing
Date and any later date on which Option Stock is purchased, confirming that they
are independent accountants with respect to the Company, as applicable, within
20
the meaning of the Securities Act and the applicable published Rules and
Regulations thereunder and, based upon the procedures described in their letter
delivered to you concurrently with the execution of this Agreement (the
"Original Letter"), but carried out to a date not more than five business days
prior to the Closing Date or such later date on which Option Stock is purchased,
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing Date or such later
date, as the case may be, and (ii) setting forth any revisions and additions to
the statements and conclusions set forth in the Original Letter that are
necessary to reflect any changes in the facts described in the Original Letter
since the date of the Original Letter or to reflect the availability of more
recent financial statements, data or information. Such letters shall not
disclose any change, or any development involving a prospective change, in or
affecting the business, properties or condition (financial or otherwise),
results of operations or prospects of the Company or any of its subsidiaries
which, in your sole judgment, makes it impractical or inadvisable to proceed
with the public offering of the Stock or the purchase of the Option Stock as
contemplated by the Prospectus. In addition, you shall have received from ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co. LLP, on or prior to the Closing Date, 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 controls, to the extent they
deemed necessary in establishing the scope of their examination of the Company's
consolidated financial statements as of December 31, 1994 or in delivering their
Original Letter, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(g) Prior to the Closing Date, the Stock shall have been approved
for listing on the Nasdaq National Market, subject only to official notice of
issuance and the outstanding shares of the Common Stock of the Company shall be
listed on the Nasdaq National Market.
(h) On or prior to the Closing Date, the Representatives shall have
received from all Material Holders executed agreements covering the matters
described in Section 1(f) of this Agreement.
(i) The Company shall have furnished to the Representatives such
further certificates and documents as you shall reasonably request (including
certificates of officers of the Company) as to the accuracy of the
representations and warranties of the Company set forth in this Agreement, the
performance by the Company of its obligations under this Agreement and such
other matters as the Representatives may have then reasonably requested.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement will be in compliance with the provisions of this
Agreement only if they are satisfactory to the Representatives. The Company
will furnish you with such number of conformed copies of such opinions,
certificates, letters and documents as you shall reasonably request.
21
If any of the conditions specified in this Section 5 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
time being of the essence, or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement shall not be in all material respects
satisfactory in form and substance to the Representatives and its counsel, this
Agreement and all obligations of the Underwriters hereunder may be canceled by
the Representatives at, or at any time prior to, the Closing Date or, with
respect to the Option Stock, prior to the date which the Option Stock is to be
purchased, as the case may be. Notice of such cancellation shall be given to
the Company in writing or by telephone, telecopy or telegraph confirmed in
writing. Any such termination shall be without liability of the Company to the
Underwriters (except as provided in Section 4 or Section 7 of this Agreement)
and without liability of the Underwriters to the Company (except to the extent
provided in Section 7 of this Agreement).
6. Conditions of the Obligation of the Company. The obligations
-------------------------------------------
of the Company to sell and deliver the Stock required to be delivered as and
when specified in this Agreement shall be subject to the condition that, at the
Closing Date or, with respect to the Option Stock, the date and time at which
the Option Stock is to be purchased, no stop order suspending the effectiveness
of the Registration Statement shall be in effect and no proceedings therefor
shall be pending or threatened by the Commission.
7. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereto) who
controls any Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statute,
law or regulation, at common law or otherwise, specifically including but not
limited to losses, claims, damages or liabilities (or actions in respect
thereof) related to negligence on the part of any Underwriter, and the Company
agrees to reimburse each such Underwriter and controlling person for any
reasonable legal or other expenses (including, except as otherwise provided
below, settlement expenses and reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding that may be brought
against, the respective indemnified parties, in each case insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon, in whole or in part, (i) any breach of any representation,
warranty, covenant or agreement of the Company in this Agreement, (ii) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement in the form originally filed or in any amendment thereto
(including the Prospectus as part thereof) or any post-effective amendment
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
22
therein, in light of the circumstances under which they were made, not
misleading or (iii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading or (iv) any untrue statement or alleged
untrue statement of a material fact contained in any application or other
document, or any amendment or supplement thereto, executed by the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify or register the Stock under the securities
or Blue Sky laws thereof or to obtain an exemption from such qualification or
registration or filed with the Commission, any securities association or the
Nasdaq National Market, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
contained in this Section 7(a) shall not apply to such losses, claims, damages,
liabilities or expenses if such statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Underwriter through the Representatives specifically for use in
any Preliminary Prospectus or the Registration Statement or the Prospectus or
any such amendment thereof or supplement thereto and (2) the indemnity agreement
contained in this Section 7(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages, liabilities or expenses purchased the Stock that
is the subject thereof (or to the benefit of any person controlling such
Underwriter) if the Company can demonstrate that at or prior to the written
confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) or, for this purpose, if applicable, a
copy of the then most recent Preliminary Prospectus was not sent or delivered to
such person and the untrue statement or omission of a material fact contained in
such Preliminary Prospectus or, if applicable, prior Preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as amended or supplemented) or,
if applicable, the then most recent Preliminary Prospectus, unless the failure
is the result of noncompliance by the Company with Section 3(b) of this
Agreement. The indemnity agreements of the Company contained in this Section
7(a) and the representations and warranties of the Company contained in Section
1 of this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or behalf of any indemnified party and
shall survive the delivery of and payment for the Stock. This indemnity
agreement shall be in addition to any liabilities which the Company may
otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company, each of its officers who signs the
Registration Statement, each of its directors, each other Underwriter and each
person (including each partner or officer thereof) who controls the Company or
any such
23
other Underwriter within the meaning of Section 15 of the Securities Act from
and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or other federal or state statute,
law or regulation or at common law or otherwise and to reimburse each of them
for any reasonable legal or other expenses (including, except as otherwise
hereinafter provided, settlement expenses and reasonable fees and disbursements
of counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding that may be
brought against, the respective indemnified parties, in each case arising out of
or based upon (i) any breach of any covenant or agreement of the indemnifying
Underwriter in this Agreement, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (including
the Prospectus as part thereof) or any post-effective amendment thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (iii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case under clauses (i), (ii) and (iii) above, as the
case may be, only if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of such indemnifying Underwriter through the Representatives specifically for
use in any Preliminary Prospectus, the Registration Statement or the Prospectus
or any such amendment thereof or supplement thereto. The Company acknowledges
and agrees that the matters described in Section 2(g) of this Agreement
constitute the only information furnished in writing by or on behalf of any of
the several Underwriters for inclusion in the Registration Statement or the
Prospectus or in any Preliminary Prospectus. The several indemnity agreement of
each Underwriter contained in this Section 7(b) shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Stock. This indemnity agreement shall be in addition to any liabilities which
each Underwriter may otherwise have.
(c) Each person or entity indemnified under the provisions of
Sections 7(a) and 7(b) above agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
Sections, it will, if a claim in respect thereunder is to be made against the
indemnifying party or parties under this Section 7, promptly give written notice
(the "Notice") of such service or notification to
24
the party or parties from whom indemnification may be sought hereunder. No
indemnification provided for in Sections 7(a) or 7(b) above shall be available
to any person who fails to so give the Notice if the party to whom such Notice
was not given was unaware of the action, suit, investigation, inquiry or
proceeding to which the Notice would have related, but only to the extent such
party was materially prejudiced by the failure to receive the Notice, and the
omission to so notify such indemnifying party or parties shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of Sections
7(a) and 7(b). Any indemnifying party shall be entitled at its own expense to
participate in the defense of any action, suit or proceeding against, or
investigation or inquiry of, an indemnified party. Any indemnifying party shall
be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (the "Notice of Defense") to the indemnified
party, to assume (alone or in conjunction with any other indemnifying party or
parties) the entire defense of such action, suit, investigation, inquiry or
proceeding, in which event such defense shall be conducted, at the expense of
the indemnifying party or parties, by counsel chosen by such indemnifying party
or parties and reasonably satisfactory to the indemnified party or parties;
provided, however, that (i) if the indemnified party or parties reasonably
determine that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses or rights available to such indemnified party or parties
different from or in addition to those available to the indemnifying party or
parties, then separate counsel for and selected by the indemnified party or
parties shall be entitled, at the expense of the indemnifying parties, to
conduct the defense of the indemnified parties to the extent determined by
counsel to the indemnified parties to be necessary to protect the interests of
the indemnified party or parties (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel representing the indemnified parties who are parties to such
action) and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel selected by such indemnified party or parties
participate in, but not conduct, the defense. If, within a reasonable time after
receipt of the Notice, an indemnifying party gives a Notice of Defense and,
unless separate counsel is to be chosen by the indemnified party or parties as
provided above, the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under Sections 7(a) through 7(c) for any
legal or other expenses subsequently incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding, except that (A) the indemnifying party or parties shall
bear and pay the reasonable legal and other expenses incurred in connection with
the conduct of the defense as referred to in clause (i) of the "provided,
however" clause in the preceding sentence and (B) the indemnifying party or
parties shall bear and pay such other expenses as it or they have authorized to
be incurred by the indemnified party or parties. If, within a reasonable time
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding. In no event
shall any indemnifying party be liable in respect to any amounts paid in
settlement of any claim or action unless the indemnifying party shall have
approved the terms of such settlement, such approval not to be unreasonably
withheld.
25
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 7
but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right to appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in Section 7(a) or 7(b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by each indemnifying party from the offering of the Stock or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each indemnifying
party in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same respective
proportions as the total proceeds from the offering of the Stock, net of the
underwriting discounts, received by the Company and the total underwriting
discount retained by the Underwriters bear to the aggregate public offering
price of the Stock. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by each indemnifying party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this Section
7(d) and to the considerations referred to in the third sentence of the first
paragraph of this Section 7(d). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities, or actions in respect
thereof, referred to in the first sentence of this Section 7(d) shall be deemed
to include any legal or other expenses incurred by such indemnified party in
connection with investigating, preparing to defend or defending against any
action or claim which is the subject of this Section 7(d). Notwithstanding the
provisions of this Section 7(d), no Underwriter shall be required to contribute
any amount in excess of the underwriting discount applicable to the Stock
purchased by that Underwriter. For purposes of this Section 7(d), each person
who controls an Underwriter within the meaning of the Securities Act shall have
the same rights to contribution as such Underwriter, and each person who
controls the Company within the meaning of the Securities Act, each officer of
the Company who signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the following sentence. No person guilty of fraudulent
26
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute in
this Section 7(d) are several in proportion to their respective underwriting
obligations and not joint.
Each party or other entity entitled to contribution agrees that upon
the service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in Section 7(c) above).
(e) The Company shall not, without the prior written consent of
each Underwriter, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not
such Underwriter or any person who controls such Underwriter within the meaning
of Section 15 of the Securities Act is a party to such claim, action, suit or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of each such Underwriter and each such controlling person
from all liability arising out of such claim, action, suit or proceeding.
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of Sections 4(a)(ii), 4(b) and 4(c) and this Section
7 of this Agreement and that they are fully informed regarding all such
provisions. They further acknowledge that the provisions of Sections 4(a)(ii),
4(b) and 4(c) and this Section 7 of this Agreement fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement and Prospectus as required by the Securities Act, the Rules and
Regulations, the Exchange Act and the rules and regulations of the Commission
under the Exchange Act. The parties are advised that federal or state policy,
as interpreted by the courts in certain jurisdictions, may be contrary to
certain provisions of Sections 4(a)(ii), 4(b) and 4(c) and this Section 7 of
this Agreement and, to the extent permitted by law, the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public policy
as a defense to a claim under Sections 4(a)(ii), 4(b) or 4(c) or this Section 7
of this Agreement and further agree not to attempt to assert any such defense.
8. Substitution of Underwriters. If for any reason one or more of
-----------------------------
the Underwriters fails or refuses (otherwise than for a reason sufficient to
justify the termination of this Agreement under the provisions of Section 5 or
Section 9 of this Agreement) to purchase and pay for the number of shares of
Firm Stock agreed to be
27
purchased by such Underwriter or Underwriters, the Company shall immediately
give notice thereof to the Representatives and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by the Representatives of
such notice to purchase, or procure one or more other Underwriter to purchase,
in such proportions as may be agreed upon among the Representatives and such
purchasing Underwriter or Underwriters and upon the terms set forth herein, all
or any part of the Firm Stock that such defaulting Underwriter or Underwriters
agreed to purchase. If the non-defaulting Underwriters fail to make such
arrangements with respect to all such Stock, the number of shares of Firm Stock
that each non-defaulting Underwriter is otherwise obligated to purchase under
this Agreement shall be automatically increased on a pro rata basis to absorb
the remaining shares of Stock that the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting Underwriters
shall not be obligated to purchase the Stock that the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate principal amount of such Stock
exceeds 10% of the aggregate principal amount of Firm Stock that all
Underwriters agreed to purchase under this Agreement. If the total number of
shares of Firm Stock that the defaulting Underwriter or Underwriters agreed to
purchase shall not be purchased or absorbed in accordance with the two preceding
sentences, the Company shall have the right, within 24 hours next succeeding the
first 24-hour period above referred to, to make arrangements with other
underwriters or purchasers satisfactory to the Representatives for purchase of
such Stock on the terms set forth in this Agreement. In any such case, either
the Representatives or the Company shall have the right to postpone the Closing
Date determined as provided in Section 2(c) of this Agreement for not more than
seven business days after the date originally fixed as the Closing Date pursuant
to Section 2(c) in order that any necessary changes in the Registration
Statement, the Prospectus or any other documents or arrangements may be made.
If neither the non-defaulting Underwriters nor the Company shall make
arrangements within the time periods provided in the first three sentences of
the first paragraph of this Section 8 for the purchase of all the Firm Stock
that the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter (except
as provided in Section 4 or Section 7 of this Agreement) and without any
liability on the part of any non-defaulting Underwriters to the Company (except
to the extent provided in Section 7 of this Agreement). Nothing in this Section
8, and no action taken hereunder, shall relieve any defaulting Underwriter from
liability, if any, to the Company or any non-defaulting Underwriter for damages
occasioned by its default under this Agreement. The term "Underwriter" in this
Agreement shall include any persons substituted for an Underwriter under this
Section 8.
9. Effective Date of Agreement and Termination.
-------------------------------------------
(a) If the Registration Statement has not been declared effective
prior to the date of this Agreement, this Agreement shall become effective at
28
such time, after notification of the effectiveness of the Registration Statement
has been released by the Commission, as you and the Company shall agree upon the
public offering price and other terms and the purchase price of the Stock. If
the public offering price and other terms and the purchase price of the Stock
shall not have been determined prior to 5:00 p.m., New York time, on the third
full business day after the Registration Statement has become effective, this
Agreement shall thereupon terminate without liability on the part of the Company
to the Underwriters (except as provided in Section 4 or Section 7 of this
Agreement). By giving notice before the time this Agreement becomes effective,
you, as Representatives of the several Underwriters, may prevent this Agreement
from becoming effective without liability of any party to the other party,
except that the Company shall remain obligated to pay costs and expenses to the
extent provided in Section 4 and Section 7 of this Agreement. If the
Registration Statement has been declared effective prior to the date of this
Agreement, this Agreement shall become effective upon execution and delivery by
you and the Company.
(b) This Agreement may be terminated by you in your sole discretion
by giving written notice to the Company at any time on or prior to the Closing
Date or, with respect to the purchase of the Option Stock, on or prior to any
later date on which the Option Stock is to be purchased, as the case may be, if
prior to such time any of the following has occurred or, in your opinion, is
likely to occur: (i) after the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse change or
development involving a prospective adverse change in or affecting the business,
properties, condition (financial or otherwise), results of operations or
prospects of the Company and its subsidiaries taken as a whole, whether or not
arising in the ordinary course of business, which would, in your sole judgment,
make the offering or the delivery of the Stock impracticable or inadvisable; or
(ii) if there shall have been suspension of trading in securities generally or a
material adverse decline in value of securities generally on the Nasdaq National
Market, or limitations on prices (other than limitations on hours or numbers of
days of trading) for securities on any such exchange or system; or (iii) if
there shall have been the enactment, publication, decree or other promulgation
of any federal or state statute, regulation, rule or order of, or commencement
of any proceeding or investigation by, any court, legislative body, agency or
other governmental authority which in your sole judgment materially and
adversely affects or may materially and adversely affect the business,
properties, condition (financial or otherwise), results of operations or
prospects of the Company and its subsidiaries taken as a whole; or (iv) if there
shall have been the declaration of a banking moratorium by federal, New York or
California or state authorities; (v) existing international monetary conditions
shall have undergone a material change which, in your sole judgment, makes the
offering or delivery of the Stock impracticable or inadvisable. If this
Agreement shall be terminated pursuant to this Section 9, there shall be no
liability of the Company to the Underwriters (except pursuant to Section 4 and
Section 7 of this Agreement) and no liability of the Underwriters to the Company
(except to the extent provided in Section 7 of this Agreement).
29
10. Notices. Except as otherwise provided herein, all
-------
communications hereunder shall be in writing or by either telecopier or
telegraph and, if to the Underwriters, shall be mailed, telecopied or
telegraphed or delivered to ▇▇▇ ▇▇▇▇▇▇ & Company, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(telecopier: (▇▇▇) ▇▇▇-▇▇▇▇); and if to the Company, shall be mailed,
telecopied, telegraphed or delivered to it at its office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (telecopier: (▇▇▇) ▇▇▇-▇▇▇▇) Attention: ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇. All notices given by telecopy or telegraph shall be promptly
confirmed by letter.
11. Persons Entitled to the Benefit of this Agreement. This
-------------------------------------------------
Agreement shall inure to the benefit of the Company and the several Underwriters
and, with respect to the provisions of Section 4 and Section 7 of this
Agreement, the several parties (in addition to the Company and the several
Underwriters) indemnified under the provisions of Section 4 and Section 7 and in
addition, as to paragraph 14, ▇▇▇ ▇▇▇▇▇▇ & Company and Cruttenden ▇▇▇▇
Incorporated, and their respect personal representatives, successors and assigns
(whether such succession or assignment is by sale, assignment, merger, reverse
merger, consolidation, operation of law or, without limitation, otherwise).
Nothing in this Agreement is intended or shall be construed to give to any other
person, firm or corporation any legal or equitable remedy or claim under or in
respect of this Agreement or any provision contained herein. The term
"successors and assigns" as herein used shall not include any purchaser, as
such, of any of the Stock from the several Underwriters.
12. General. Notwithstanding any provision of this Agreement to
-------
the contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties, covenants and
agreements in this Agreement shall remain in full force and effect regardless of
9(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof or by or on behalf of
the Company or their respective directors or officers and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of Sections
3(f), 3(g), 3(h), 3(i) and 3(j) of this Agreement shall be of no further force
or effect.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which together shall constitute
one and the same instrument.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS, AND NOT THE LAWS PERTAINING TO CHOICE OR CONFLICT OF LAWS, OF
THE STATE OF CALIFORNIA.
13. Authority of the Representatives. In connection with this
--------------------------------
Agreement, the Representatives will act for and on behalf of the several
30
Underwriters, and any action taken under this Agreement by the Representatives,
as representative of the several Underwriters, will be binding on all of the
Underwriters.
14. Stock Purchase Warrant. At the Closing Date, the Company will
----------------------
sell to you (for your own account and not as a Representatives of the several
Underwriters) for a consideration of $60.00 and upon the terms and conditions
set forth in the Stock Purchase Warrant annexed as Exhibit 4.1 to the
Registration Statement, a five-year, nontransferable (except as permitted by
applicable Blue Sky laws) Stock Purchase Warrants to purchase initially an
aggregate of 60,000 shares of the Company's Common Stock.
If the foregoing correctly sets forth your understanding, please so
indicate by signing in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among the Company and the several
Underwriters.
Very truly yours,
CERADYNE, INC.
By:
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President and Chief Executive
Officer
31
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
▇▇▇ ▇▇▇▇▇▇ & COMPANY
CRUTTENDEN ▇▇▇▇ INCORPORATED
For themselves and on behalf of each of
the several Underwiters named in Schedule I hereto
By: ▇▇▇ ▇▇▇▇▇▇ & COMPANY
By:
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
32
SCHEDULE I
UNDERWRITERS
Number of Shares
of Firm Stock
Underwriters to be Purchased
------------ ----------------
▇▇▇ ▇▇▇▇▇▇ & Company
Cruttenden ▇▇▇▇ Incorporated
---------
Total 1,200,000
=========
33
ANNEX A
Matters to be Covered in the Opinion of Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇*
(i) Each of the Company and Ceradyne Advanced Products, Inc. (the
"Subsidiary") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation;
(ii) Each of the Company and its Subsidiary has the corporate power
to own, lease and operate its properties and to conduct its business as
described in the Prospectus;
(iii) Each of the Company and its Subsidiary is duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure so to
qualify would not have a material adverse effect on the business, properties,
condition (financial or otherwise), results of operations or prospects of the
Company and its Subsidiary taken as a whole;
(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 and its Subsidiary have been duly and validly authorized and
issued, are fully paid and nonassessable and have not been issued in violation
of any preemptive right or, to the knowledge of such counsel, other rights to
subscribe for or purchase securities or, except to the extent any such
violations would not be material to the Company and its Subsidiary taken as a
whole (whether because of the magnitude of the violation, because any claims
thereof would be barred by the statute of limitations or otherwise), in
violation of any applicable federal or state securities laws, provided that in
rendering their opinion as to non-violation of federal and state securities
laws, such counsel may assume, unless counsel has knowledge of facts that may
render such assumption unreasonable, that any purchasers had, to the extent
relevant and represented by such purchasers in writing, any required investment
intent and the Company directly or indirectly owns all of the issued and
---------------
* In rendering this opinion, counsel may rely as to questions of law not
involving the laws of the United States or the States of California on
opinions of local counsel (provided that such counsel states that they
believe they and the Underwriters are justified in relying thereon) and, as
to questions of fact, upon representations or certificates of officers of the
Company and government officials, in which case their opinion is explicitly
to state that they are so relying thereon and that they have no knowledge of
any material misstatement or inaccuracy in such opinions, representations or
certificate. Copies of any opinion, representation or certificate so relied
upon shall be delivered to the Representative and counsel to the
Underwriters.
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outstanding equity securities of its Subsidiary and there are no outstanding
options, warrants or other rights to acquire any equity securities of such
Subsidiary;
(v) The Company has corporate power and authority to enter into the
Agreement and the Stock Purchase Warrant and to issue, sell and deliver the
Stock and the Stock Purchase Warrant (and the Common Stock issuable upon
exercise of the Stock Purchase Warrant) to the Underwriters;
(vi) The execution, delivery and performance of this Agreement and
the issuance and sale of the Stock and the Common Stock issuable upon exercise
of the Stock Purchase Warrant do not (A) conflict with, violate, result in a
breach of or constitute a default (or an event that with notice or lapse of
time, or both, would constitute a default) under the Articles of Incorporation
or By-laws of the Company or any agreement (including, without limitation, an
agreement with respect to registration rights) to which the Company is a party
or by which it or any of its properties or assets is bound and which is known to
such counsel or (B) result in violation of any material federal, Delaware or
California law, rule or regulation or, to the best knowledge of such counsel,
any writ, judgment, order, injunction or decree of any government, governmental
body, agency or court or any arbitration tribunal having jurisdiction over the
Company or any of its properties;
(vii) The Stock and the Stock Purchase Warrant are, and the Common
Stock issuable upon exercise of the Stock Purchase Warrant will be, duly
authorized and, when issued and delivered against payment in full therefor, will
be validly issued, fully paid, non-assessable, and free of preemptive rights;
(viii) The Underwriting Agreement and the Stock Purchase Warrant
have been duly authorized by all necessary corporate action on the part of the
Company and have been duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery of the Underwriting Agreement by
the Representatives, are the valid and binding agreements of the Company, except
insofar as the indemnification and contribution provisions of the Underwriting
Agreement may be limited by public policy concerns and except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by general equitable principles;
(ix) Except for the order of the Commission making the Registration
Statement effective or similar authorizations required under the securities or
"Blue Sky" laws of certain jurisdictions (as to which such counsel need express
no opinion), no consent, approval, authorization or other order of any federal,
Delaware or California governmental body or, to the knowledge of such counsel,
other person is required in connection with the authorization, issuance, sale
and delivery of the Stock and the execution, delivery and performance by the
Company of the Underwriting Agreement or the Stock Purchase Warrant or the
issuance and delivery of the Common Stock issuable upon exercise of the Stock
Purchase Warrant;
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(x) The Registration Statement has become effective under the
Securities Act and, to the best knowledge of such counsel, 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 Securities Act;
(xi) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements, financial
data and supporting schedules included therein, 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
Securities Act and the applicable Rules and Regulations;
(xii) The terms and provisions of the capital stock of the Company
conform in all material respects to the description thereof contained in the
Registration Statement and Prospectus, and the information in the Prospectus
under the caption "Description of Capital Stock," to the extent they constitute
matters of law or legal conclusions, has been reviewed by such counsel and is
correct and the form of certificate for the Stock complies with California and
Delaware law, as applicable;
(xiii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes and
contracts are accurate in all material respects and fairly present in all
material respects the information required to be presented by the Securities Act
and the Rules and Regulations;
(xiv) To the best knowledge of such counsel, there are no
agreements, contracts, licenses, leases or documents 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 that are not described or
referred to therein and filed as required;
(xv) To the best knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or any of its
subsidiaries of a character which are required to be disclosed in the
Registration Statement or the Prospectus by the Securities Act or the applicable
Rules and Regulations, other than those described therein;
(xvi) To the best knowledge of such counsel, neither the Company
nor any of its subsidiaries is presently in breach of, or in default under, any
bond, debenture, note or other evidence of indebtedness or any contract,
indenture, mortgage, deed of trust, loan agreement, lease, license or, without
limitation, other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of their properties are bound that,
individually or in the aggregate, is material to the business, properties,
condition (financial or otherwise), prospects or results of operations or
prospects of the Company and its Subsidiary taken as a whole; and
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(xvii) To the best knowledge of such counsel, 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 any
securities of the Company.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives, but
expresses no such opinion thereon, of the Company, the independent public
accountants of the Company, the Representatives and counsel to the Underwriters,
at which conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although they have not
independently verified the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel that caused them to believe that, at the time the
Registration Statement became effective, the Registration Statement (except as
to financial statement, financial data and supporting schedules contained
therein, as to which such counsel need express no comment or opinion) 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, in
light of the circumstances under which they were made, not misleading, or at the
Closing Date or any later date on which the Option Stock is to be purchased, as
the case may be, the Prospectus 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, in light of the circumstances under
which they were made, not misleading.
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