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SCIENTIFIC LEARNING CORPORATION
(a Delaware corporation)
2,645,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: July ___, 1999
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TABLE OF CONTENTS
PAGE
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SECTION 1. Representations and Warranties. . . . . . . . . . . . . . . . . . . .2
(A) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. . . . . . . . . . . . .2
(i) Compliance with Registration Requirements. . . . . . . . . . .3
(ii) Independent Accountants. . . . . . . . . . . . . . . . . . . .3
(iii) Financial Statements . . . . . . . . . . . . . . . . . . . . .4
(iv) No Material Adverse Change in Business.. . . . . . . . . . . .4
(v) Good Standing of the Company . . . . . . . . . . . . . . . . .4
(vi) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .5
(vii) Capitalization . . . . . . . . . . . . . . . . . . . . . . . .5
(viii) Authorization of Agreement . . . . . . . . . . . . . . . . . .5
(ix) Authorization and Description of Securities. . . . . . . . . .5
(x) Absence of Defaults and Conflicts. . . . . . . . . . . . . . .5
(xi) Absence of Labor Dispute . . . . . . . . . . . . . . . . . . .6
(xii) Absence of Proceedings . . . . . . . . . . . . . . . . . . . .6
(xiii) Accuracy of Exhibits . . . . . . . . . . . . . . . . . . . . .6
(xiv) Possession of Intellectual Property. . . . . . . . . . . . . .6
(xv) Absence of Further Requirements. . . . . . . . . . . . . . . .7
(xvi) Possession of Licenses and Permits . . . . . . . . . . . . . .7
(xvii) Title to Property. . . . . . . . . . . . . . . . . . . . . . .7
(xviii) Compliance with Cuba Act . . . . . . . . . . . . . . . . . . .8
(xix) Investment Company Act . . . . . . . . . . . . . . . . . . . .8
(xx) Environmental Laws . . . . . . . . . . . . . . . . . . . . . .8
(xxi) Registration Rights. . . . . . . . . . . . . . . . . . . . . .8
(xxii) Stock Exchange Listing . . . . . . . . . . . . . . . . . . . .8
(xxiii) Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . .8
(xxiv) Tax Law Compliance . . . . . . . . . . . . . . . . . . . . . .8
(B) OFFICER'S CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 2. Sale and Delivery to Underwriters; Closing. . . . . . . . . . . . . .9
(A) INITIAL SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . .9
(B) OPTION SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . .9
(C) PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
(D) DENOMINATIONS; REGISTRATION. . . . . . . . . . . . . . . . . . . . . 10
SECTION 3. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . 10
(A) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS . . . 10
(B) FILING OF AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . 11
(C) DELIVERY OF REGISTRATION STATEMENTS. . . . . . . . . . . . . . . . . 11
(D) DELIVERY OF PROSPECTUSES . . . . . . . . . . . . . . . . . . . . . . 11
(E) CONTINUED COMPLIANCE WITH SECURITIES LAWS. . . . . . . . . . . . . . 11
(F) BLUE SKY QUALIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . 12
(G) RULE 158 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(H) USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(I) LISTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(J) RESTRICTION ON SALE OF SECURITIES. . . . . . . . . . . . . . . . . . 12
(K) REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . 13
(l) COMPLIANCE WITH NASD RULES . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4. Payment of Expenses.. . . . . . . . . . . . . . . . . . . . . . . . 13
(A) EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(B) TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5. Conditions of Underwriters' Obligations . . . . . . . . . . . . . . 14
(A) EFFECTIVENESS OF REGISTRATION STATEMENT. . . . . . . . . . . . . . . 14
(B) OPINION OF COUNSEL FOR COMPANY . . . . . . . . . . . . . . . . . . . 14
(C) OPINION OF COUNSEL FOR UNDERWRITERS. . . . . . . . . . . . . . . . . 14
(D) OFFICERS' CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . 15
(E) ACCOUNTANT'S COMFORT LETTER. . . . . . . . . . . . . . . . . . . . . 15
(F) BRING-DOWN COMFORT LETTER. . . . . . . . . . . . . . . . . . . . . . 15
(G) APPROVAL OF LISTING. . . . . . . . . . . . . . . . . . . . . . . . . 15
(h) NO OBJECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) LOCK-UP AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 15
(J) CONDITIONS TO PURCHASE OF OPTION SECURITIES. . . . . . . . . . . . . 15
(i) Officers' Certificate. . . . . . . . . . . . . . . . . . . . 16
(ii) Opinion of Counsel for Company . . . . . . . . . . . . . . . 16
(iii) Opinion of Counsel for Underwriters. . . . . . . . . . . . . 16
(iv) Bring-down Comfort Letter. . . . . . . . . . . . . . . . . . 16
(K) ADDITIONAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . 16
(L) TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6. Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . 17
(A) INDEMNIFICATION OF UNDERWRITERS. . . . . . . . . . . . . . . . . . . 17
(B) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS . . . . . . . . . 18
(C) ACTIONS AGAINST PARTIES; NOTIFICATION. . . . . . . . . . . . . . . . 18
SECTION 7. Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8. Representations, Warranties and Agreements to Survive Delivery. . . 20
SECTION 9. Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . 21
(A) TERMINATION; GENERAL . . . . . . . . . . . . . . . . . . . . . . . . 21
(B) LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 10. Default by One or More of the Underwriters . . . . . . . . . . . . 21
SECTION 11. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 12. Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 13. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 14. Effect of Headings.. . . . . . . . . . . . . . . . . . . . . . . . 22
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SCHEDULES
Schedule A - List of Underwriters . . . . . . . . . . . .Sch A-1
Schedule B - Pricing Information. . . . . . . . . . . . .Sch B-1
Schedule C - List of Persons subject to Lock-up . . . . .Sch C-1
EXHIBITS
Exhibit A--Form of Opinion of Company's Counsel . . . . . . .A-1
Exhibit B--Form of Opinion of Underwriters' Counsel . . . . .B-1
Exhibit C--Form of Lock-up Letter . . . . . . . . . . . . . .C-1
Exhibit D--Form of Accountants' Comfort Letter
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SCIENTIFIC LEARNING CORPORATION
(a Delaware corporation)
2,645,000 Shares of Common Stock
(Par Value $0.001 Per Share)
PURCHASE AGREEMENT
July ___, 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC
Pacific Growth Equities, Inc.
as Representatives of the several Underwriters
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Scientific Learning Corporation, a Delaware corporation (the
"Company"), confirms its agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch,
Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and each of the other
Underwriters named in SCHEDULE A hereto (collectively, the "Underwriters,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 10 hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
Partners LLC and Pacific Growth Equities, Inc. are acting as representatives
(in such capacity, the "Representatives"), with respect to the issue and sale
by the Company and the purchase by the Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value
$0.001 per share, of the Company ("Common Stock") set forth in said SCHEDULE A,
and with respect to the grant by the Company to the Underwriters, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of 345,000 additional shares of Common Stock to
cover over-allotments, if any. The aforesaid 2,300,000 shares of Common
Stock (the "Initial Securities") to be purchased by the Underwriters and all
or any part of the 345,000 shares of Common Stock subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities."
The Company understands that the Underwriters propose to make a
public offering of the Securities as soon as the Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the Underwriters agree that up to five percent (5%)
shares of the Securities to be purchased by the Underwriters (the "Reserved
Securities") shall be reserved for sale by the Underwriters to certain
individuals associated with the Company or the Company's directors, officers
or employees, as part of the distribution of the Securities by the
Underwriters, subject to
the terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers, Inc. (the
"NASD") and all other applicable laws, rules and regulations. To the extent
that such Reserved Securities are not orally confirmed for purchase by such
persons having relationships with the Company by the end of the first
business day after the date of this Agreement, such Reserved Securities may
be offered to the public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1 (No. 333-77133)
covering the registration of the Securities under the Securities Act of 1933,
as amended (the "1933 Act"), including the related preliminary prospectus or
prospectuses. Promptly after execution and delivery of this Agreement, the
Company will either (i) prepare and file a prospectus in accordance with the
provisions of Rule 430A ("Rule 430A") of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b)
of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the
Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act
Regulations, prepare and file a term sheet (a "Term Sheet") in accordance
with the provisions of Rule 434 and Rule 424(b). The information included in
such prospectus or in such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to
as "Rule 434 Information." Each prospectus used before such registration
statement became effective, and any prospectus that omitted, as applicable,
the Rule 430A Information or the Rule 434 Information, that was used after
such effectiveness and prior to the execution and delivery of this Agreement,
is herein called a "preliminary prospectus." Such registration statement,
including the exhibits thereto and schedules thereto at the time it became
effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement."
Any registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The final prospectus in the
form first furnished to the Underwriters for use in connection with the
offering of the Securities is herein called the "Prospectus." If Rule 434 is
relied on, the term "Prospectus" shall refer to the preliminary prospectus
dated June 22, 1999 together with the Term Sheet and all references in this
Agreement to the date of the Prospectus shall mean the date of the Term
Sheet. For purposes of this Agreement, all references to the Registration
Statement, any preliminary prospectus, the Prospectus or any Term Sheet or
any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("▇▇▇▇▇").
SECTION 1. Representations and Warranties.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
Underwriter, as follows:
2
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each of
the Registration Statement and any Rule 462(b) Registration Statement
has become effective under the 1933 Act and no stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or,
to the knowledge of the Company, are contemplated by the Commission,
and any request on the part of the Commission for additional
information has been complied with.
At the respective times the Registration Statement, any
Rule 462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments
and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and the Prospectus, any preliminary prospectus and any supplement
thereto or prospectus wrapper prepared in connection therewith, at
their respective times of issuance and at the Closing Time, complied
and will comply in all material respects with any applicable laws or
regulations of foreign jurisdictions in which the Prospectus and such
preliminary prospectus, as amended or supplemented, if applicable,
are distributed in connection with the offer and sale of Reserved
Securities. Neither the Prospectus nor any amendments or supplements
thereto (including any prospectus wrapper), at the time the
Prospectus or any such amendment or supplement was issued and at the
Closing Time (and, if any Option Securities are purchased, at the
Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. If
Rule 434 is used, the Company will comply with the requirements of
Rule 434 and the Prospectus shall not be "materially different," as
such term is used in Rule 434, from the prospectus included in the
Registration Statement at the time it became effective. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through
▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in the Registration Statement or
Prospectus.
Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the
extent permitted by Regulation S-T.
(ii) INDEPENDENT ACCOUNTANTS. The accountants who
certified the financial statements and supporting schedules included
in the Registration Statement are
3
independent public accountants as required by the 1933 Act and the
1933 Act Regulations.
(iii) FINANCIAL STATEMENTS. The financial statements
included in the Registration Statement and the Prospectus, together
with the related schedules and notes, present fairly the financial
position of the Company at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Company for
the periods specified; said financial statements and related
schedules and notes have been prepared in conformity with generally
accepted accounting principles ("GAAP") as applied in the United
States, applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the notes thereto.
The supporting schedules included in the Registration Statement
present fairly in accordance with GAAP the information required to be
stated therein. The selected financial data and the summary
financial information included in the Prospectus present fairly the
information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in
the Registration Statement. No other financial statements or
supporting schedule are required to be included in the Registration
Statement. The financial data set forth in the Prospectus under the
captions "Prospectus Summary--Summary Financial Data," "Selected
Financial Data" and "Capitalization" fairly present the information
set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement.
(iv) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company, whether or not arising in the ordinary
course of business (a "Material Adverse Effect") or any development
that could reasonably be expected to have a Material Adverse Effect;
(B) the Company has not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (C) there has
been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock.
(v) GOOD STANDING OF THE COMPANY. The Company has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and to enter into
and perform its obligations under this Agreement. The Company is
duly qualified as a foreign corporation to transact business and is
in good standing in the State of California and each other
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except for such jurisdictions (other than California) where
the failure so to qualify or to be in good standing would not,
individually or in the aggregate, result in a Material Adverse Effect.
4
(vi) SUBSIDIARIES. The Company does not own or control,
directly or indirectly, any corporation, association or other entity.
(vii) CAPITALIZATION. The authorized, issued and
outstanding capital stock of the Company is as set forth in the
Prospectus in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant
to this Agreement, pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the
exercise of convertible securities or options referred to in the
Prospectus) and conforms to the description thereof set forth in the
Prospectus under the caption "Description of Capital Stock." The
shares of issued and outstanding capital stock of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other
similar rights of any securityholder of the Company. There are no
authorized or outstanding options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or
debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company other than those accurately
described in the Prospectus. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the
options or other rights which may be granted thereunder, set forth in
the Prospectus under the caption "Employee Benefit Plans" accurately
and fairly summarize the information required to be shown with respect
to such plans, arrangements, options and rights to the extent
required under the 1933 Act and the 1933 Regulations.
(viii) AUTHORIZATION OF AGREEMENT. This Agreement has been
duly authorized, executed and delivered by the Company.
(ix) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The
Securities have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement against payment
of the consideration set forth herein, will be validly issued, fully
paid and non-assessable; the Common Stock conforms to all statements
relating thereto contained in the Prospectus and such description
conforms to the rights set forth in the instruments defining the
same; no holder of the Securities will be subject to personal
liability for debts of the Company solely by reason of being such a
holder; and the issuance of the Securities is not subject to the
preemptive or other similar rights of any securityholder of the
Company.
(x) ABSENCE OF DEFAULTS AND CONFLICTS. The Company is
not in violation of its charter or bylaws or in default (or with the
giving of notice or lapse of time would be in default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company is a party or by which it may be
bound, or to which any of the property or assets of the Company is
subject (collectively, "Agreements and Instruments") except for such
defaults that would not result in a Material Adverse Effect. The
Company's execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein and in the
Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus
5
under the caption "How We Intend to Use the Proceeds of This
Offering") and compliance by the Company with its obligations
hereunder have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice
or passage of time or both, conflict with or constitute a breach of,
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, the Agreements and
Instruments (except for such conflicts, breaches, defaults, liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the
provisions of the charter or bylaws of the Company or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of
any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its assets,
properties or operations. As used herein, a "Repayment Event" means
any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company.
(xi) ABSENCE OF LABOR DISPUTE. No labor dispute with the
employees of the Company exists or, to the knowledge of the Company,
is imminent, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its principal suppliers,
manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.
(xii) ABSENCE OF PROCEEDINGS. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court
or governmental agency or body, domestic or foreign, now pending, or,
to the best of the Company's knowledge, threatened, against or
affecting the Company that is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely
affect the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder. The aggregate of all pending
legal or governmental proceedings to which the Company is a party or
of which any of its property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.
(xiii) ACCURACY OF EXHIBITS. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) POSSESSION OF INTELLECTUAL PROPERTY. The Company
owns or possesses, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names, trade secrets, approvals or
other intellectual property (collectively, "Intellectual Property")
necessary to carry on its business. The Company has not received any
notice or is not otherwise aware of any infringement of or conflict
with
6
asserted rights of others with respect to any Intellectual Property
or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company
therein, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xv) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance
or sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except (i) such as have
been already obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws and (ii) such as have
been obtained under the laws and regulations of jurisdictions outside
the United States in which the Reserved Securities are offered.
(xvi) POSSESSION OF LICENSES AND PERMITS. The Company
possesses such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct its business, and the Company is in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to possess or comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of
the Governmental Licenses are valid and in full force and effect,
except when the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect
would not have a Material Adverse Effect; and the Company has not
received any written or, to its knowledge, oral notice of proceedings
relating to the revocation or modification of any such Governmental
Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xvii) TITLE TO PROPERTY. The Company has good and
marketable title to all real property owned by it and good title to
all other properties owned by it, in each case, free and clear of all
mortgages, pledges, liens, security interests, claims, restrictions
or encumbrances of any kind except such as (a) are described in the
Prospectus or (b) do not, singly or in the aggregate, materially
affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company. All of
the leases and subleases material to the business of the Company and
under which the Company holds properties described in the Prospectus,
are in full force and effect (except where the failure to be in full
force and effect would not, singly or in the aggregate, result in a
Material Adverse Effect), and the Company does not have any notice of
any material claim of any sort that has been asserted by anyone
adverse to the Company's rights under any of the leases or subleases
mentioned above, or affecting or questioning the Company's rights to
the continued possession of the leased or subleased premises under
any such lease or sublease, that (if the subject of any unfavorable
decision, ruling or finding) would result in a Material Adverse
Effect).
7
(xviii) COMPLIANCE WITH CUBA ACT. The Company has complied
with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with
Cuba, codified as Section 517.075 of the Florida statutes, and the
rules and regulations thereunder (collectively, the "Cuba Act") or is
exempt therefrom.
(xix) INVESTMENT COMPANY ACT. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated and
the application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940
Act").
(xx) ENVIRONMENTAL LAWS. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) the Company is
not in violation of any federal, state, local or foreign statute,
law, rule, regulation, ordinance, code, policy or rule of common law
or any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent, decree or judgment,
relating to pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company has all permits,
authorizations and approvals required under any applicable
Environmental Laws and is in compliance with their requirements, (C)
there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company and (D) there
are no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action,
suit or proceeding by any private party or governmental body or
agency, against or affecting the Company relating to Hazardous
Materials or any Environmental Laws.
(xxi) REGISTRATION RIGHTS. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or included in the
Offering that have not been duly waived.
(xxii) STOCK EXCHANGE LISTING. The Securities have been
approved for listing on the Nasdaq National Market, subject only to
official notice of issuance.
(xxiii) USE OF PROCEEDS. The Company currently plans to
apply the net proceeds from the sale of the Securities sold by it in
the manner described under the caption "How We Intend to Use the
Proceeds of this Offering" in the Prospectus.
(xxiv) TAX LAW COMPLIANCE. The Company has filed all
necessary federal, state and foreign income and franchise tax returns
or has properly requested extensions thereof
8
and has paid all taxes required to be paid by it and, if due and
payable, any related or similar assessment, fine or penalty levied
against it except as may be being contested in good faith and by
appropriate proceedings. The Company has made adequate charges,
accruals and reserves in the applicable financial statements referred
to in Section 1(a)(iii) above in respect of all federal, state and
foreign income and franchise taxes for all periods covered by such
financial statements as to which the tax liability of the Company has
not been finally determined.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any
officer of the Company delivered to the Representatives or to counsel for the
Underwriters pursuant to this Agreement shall be deemed a representation and
warranty by the Company to each Underwriter as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(a) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in SCHEDULE B, the number
of Initial Securities set forth in SCHEDULE A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) OPTION SECURITIES. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional
345,000 shares of Common Stock at the price per share set forth in SCHEDULE
B, less an amount per share equal to any dividends or distributions declared
by the Company and payable on the Initial Securities but not payable on the
Option Securities. The option hereby granted will expire 30 days after the
date hereof and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial Securities upon notice by
the Representatives to the Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall
be determined by the Representatives, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to
all or any portion of the Option Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number
of Option Securities then being purchased which the number of Initial
Securities set forth in SCHEDULE A opposite the name of such Underwriter
bears to the total number of Initial Securities, subject in each case to such
adjustments as the Representatives in their discretion shall make to
eliminate any sales or purchases of fractional shares.
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
▇▇▇▇▇▇ Godward LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
or at such other place as shall be agreed upon by the
9
Representatives and the Company, at 7:00 A.M. (California time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given
day) business day after the date hereof (unless postponed in accordance with
the provisions of Section 10), or such other time not later than ten business
days after such date as shall be agreed upon by the Representatives and the
Company (such time and date of payment and delivery being herein called
"Closing Time").
In addition, in the event that any or all of the Option Securities
are purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by
the Representatives and the Company, on each Date of Delivery as specified in
the notice from the Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery
to the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood
that each Underwriter has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for,
the Initial Securities and the Option Securities, if any, which it has agreed
to purchase. ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial Securities or the Option Securities, if any,
to be purchased by any Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations
and registered in such names as the Representatives may request in writing at
least one full business day before the Closing Time or the relevant Date of
Delivery, as the case may be. The certificates for the Initial Securities
and the Option Securities, if any, will be made available for examination and
packaging by the Representatives in The City of New York not later than 10:00
A.M. (Eastern time) on the business day prior to the Closing Time or the
relevant Date of Delivery, as the case may be.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with
each Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION
REQUESTS. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Representatives immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become
effective, or any supplement to the Prospectus or any amended Prospectus
shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus, or
of the suspension of the qualification of the Securities for offering or sale
in any jurisdiction, or of the initiation or threatening of any proceedings
for any of such purposes. The Company will promptly effect the filings
necessary
10
pursuant to Rule 424(b) and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing
under Rule 424(b) was received for filing by the Commission and, in the event
that it was not, it will promptly file such prospectus. The Company will
make every reasonable effort to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting thereof at the earliest
possible moment.
(b) FILING OF AMENDMENTS. The Company will give the
Representatives notice of its intention to file or prepare any amendment to
the Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or to
the Prospectus will furnish the Representatives with copies of any such
documents a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file or use any such document to which the
Representatives or counsel for the Underwriters shall reasonably object.
(c) DELIVERY OF REGISTRATION STATEMENTS. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representatives, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the Underwriters. The copies of the Registration
Statement and each amendment thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
(d) DELIVERY OF PROSPECTUSES. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished
to the Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the
extent permitted by Regulation S-T.
(e) CONTINUED COMPLIANCE WITH SECURITIES LAWS The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a Prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the reasonable opinion of counsel for the
Underwriters or for the Company, to amend the Registration Statement or amend
or supplement the Prospectus in order that the Prospectus will not include
any untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser, or
if it shall be necessary, in the reasonable opinion of
11
such counsel, at any such time to amend the Registration Statement or amend
or supplement the Prospectus in order to comply with the requirements of the
1933 Act or the 1933 Act Regulations, the Company will promptly prepare and
file with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or to
make the Registration Statement or the Prospectus comply with such
requirements, and the Company will furnish to the Underwriters such number of
copies of such amendment or supplement as the Underwriters may reasonably
request.
(f) BLUE SKY QUALIFICATIONS. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and
other jurisdictions (domestic or foreign) as the Representatives may
designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however, that
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. In each jurisdiction in which the Securities have been
so qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.
(g) RULE 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.
(h) USE OF PROCEEDS. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectus under "How We Intend to Use the Proceeds of this Offering."
(i) LISTING. The Company will use its best efforts to effect the
listing of the Common Stock (including the Securities) on the Nasdaq National
Market. The Company will use its best efforts to effect and maintain the
quotation of the Securities on the Nasdaq National Market and will file with
the Nasdaq National Market all documents and notices required by the Nasdaq
National Market of companies that have securities that are traded in the
over-the-counter market and quotations for which are reported by the Nasdaq
National Market.
(j) RESTRICTION ON SALE OF SECURITIES. During a period of 180
days from the date of the Prospectus, the Company will not, without the prior
written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, (i) directly or indirectly, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or file any
registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap
or transaction described in clause (i) or
12
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to
(A) the Securities to be sold hereunder, (B) any shares of Common Stock
issued by the Company upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof and referred to in
the Prospectus, (C) any shares of Common Stock issued or options to purchase
Common Stock granted pursuant to existing employee benefit plans of the
Company referred to in the Prospectus (including the filing of one or more
registration statements on Form S-8 with respect thereto) or (D) any shares
of Common Stock issued pursuant to any non-employee director stock plan or
dividend reinvestment plan.
(k) REPORTING REQUIREMENTS. The Company, during the period when
the Prospectus is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act and
the rules and regulations of the Commission thereunder.
(l) COMPLIANCE WITH NASD RULES. The Company hereby agrees that
it will ensure that the Reserved Securities will be restricted as required by
the NASD or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of this
Agreement. The Underwriters will notify the Company as to which persons will
need to be so restricted. At the request of the Underwriters, the Company
will direct the transfer agent to place a stop transfer restriction upon such
securities for such period of time. Should the Company release, or seek to
release, from such restrictions any of the Reserved Securities, the Company
agrees to reimburse the Underwriters for any reasonable expenses (including,
without limitation, legal expenses) they incur in connection with such
release.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of
this Agreement, any Agreement among Underwriters and such other documents as
may be required in connection with the offering, purchase, sale, issuance or
delivery of the Securities, (iii) the preparation, issuance and delivery of
the certificates for the Securities to the Underwriters, including any stock
or other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v)
the qualification of the Securities under securities laws in accordance with
the provisions of Section 3(f) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and
the Prospectus and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters of copies of the Blue
Sky Survey and any supplement thereto, (viii) the fees and expenses of any
transfer agent or registrar for the Securities and (ix) the filing fees
incident to, and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, the review by the NASD of the terms of the
sale of the Securities, (x) the fees and expenses incurred in connection with
the inclusion of the
13
Securities in the Nasdaq National Market and (xi) all costs and expenses of
the Underwriters, including the reasonable fees and disbursements of counsel
for the Underwriters, in connection with matters related to the Reserved
Securities which are designated by the Company for sale to employees and
others having a business relationship with the Company.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by
the Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations
of the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof
or in certificates of any officer of the Company delivered pursuant to the
provisions hereof, to the performance by the Company of its covenants and
other obligations hereunder, and to the following further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 424(b) (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Company has elected to rely upon Rule 434, a Term Sheet shall have been
filed with the Commission in accordance with Rule 424(b).
(b) OPINION OF COUNSEL FOR COMPANY At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of ▇▇▇▇▇▇ Godward LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, together with signed
or reproduced copies of such letter for each of the other Underwriters to the
effect set forth in EXHIBIT A hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(c) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, counsel for the
Underwriters, together with signed or reproduced copies of such letter for
each of the other Underwriters to the effect set forth in EXHIBIT B hereto.
In giving such opinion such counsel may rely, as to all matters governed by
the laws of jurisdictions other than the law of the States of California and
New York, the federal law of the United States and the General Corporation
Law of the State of Delaware, upon the opinions of counsel satisfactory to
the Representatives. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and certificates of
public officials.
14
(d) OFFICERS' CERTIFICATE. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company, whether or not arising in the ordinary
course of business, and the Representatives shall have received a certificate
of the President or a Vice President of the Company and of the Chief
Financial Officer of the Company, dated as of Closing Time, to the effect
that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of Closing
Time, (iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) 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 contemplated by the Commission.
(e) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of
this Agreement, the Representatives shall have received from Ernst & Young
LLP a letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectus.
(f) BRING-DOWN COMFORT LETTER. At Closing Time, the
Representatives shall have received from Ernst & Young LLP a letter, dated as
of Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (e) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to Closing Time.
(g) APPROVAL OF LISTING. At Closing Time, the Securities shall
have been approved for inclusion in the Nasdaq National Market, subject only
to official notice of issuance.
(h) NO OBJECTION. The NASD shall have confirmed that it has not
raised any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
(i) LOCK-UP AGREEMENTS. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
EXHIBIT C hereto signed by the persons listed on SCHEDULE C hereto.
(j) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the event
that the Underwriters exercise their option provided in Section 2(b) hereof
to purchase all or any portion of the Option Securities, the representations
and warranties of the Company contained herein and the statements in any
certificates furnished by the Company hereunder shall be true and correct as
of each Date of Delivery and, at the relevant Date of Delivery, the
Representatives shall have received:
15
(i) OFFICERS' CERTIFICATE. A certificate, dated such
Date of Delivery, of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time
pursuant to Section 5(d) hereof remains true and correct as of such
Date of Delivery.
(ii) OPINION OF COUNSEL FOR COMPANY. The favorable
opinion of ▇▇▇▇▇▇ Godward LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(b) hereof.
(iii) OPINION OF COUNSEL FOR UNDERWRITERS. The favorable
opinion of ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(c) hereof.
(iv) BRING-DOWN COMFORT LETTER. A letter from Ernst &
Young LLP, in form and substance satisfactory to the Representatives
and dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the Representatives pursuant to
Section 5(f) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than
five days prior to such Date of Delivery.
(k) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them
to pass upon the issuance and sale of the Securities as herein contemplated,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance and
sale of the Securities as herein contemplated shall be satisfactory in form
and substance to the Representatives and counsel for the Underwriters.
(l) TERMINATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Company
at any time at or prior to Closing Time or such Date of Delivery, as the case
may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7
and 8 shall survive any such termination and remain in full force and effect.
16
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF UNDERWRITERS. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of
a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of (A) the violation
of any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered and (B) any untrue statement or
alleged untrue statement of a material fact included in the
supplement or prospectus wrapper material distributed in Ontario,
Canada in connection with the reservation and sale of the Reserved
Securities to certain individuals associated with the Company or the
Company's directors, officers or employees or the omission or alleged
omission therefrom of a material fact necessary to make the
statements therein, when considered in conjunction with the
Prospectus or preliminary prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission or in connection with any violation of the nature referred
to in Section 6(a)(ii)(A) hereof; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent
of the Company; and
(iv) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇
▇▇▇▇▇), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission or in connection with any
violation of the nature referred to in Section 6(a)(ii)(A) hereof, to
the extent that any such expense is not paid under (i), (ii) or (iii)
above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to
any loss, liability, claim, damage or expense to the extent arising out of
any untrue statement or omission
17
or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) and PROVIDED FURTHER,
that the Company will not be liable to any Underwriter with respect to any
Prospectus to the extent that the Company shall sustain the burden of proving
that any such loss, liability, claim, damage or expense resulted from the
fact that such Underwriter, in contravention of a requirement of this
Agreement or applicable law, sold Securities to a person to whom such
Underwriter failed to send or give, at or prior to the Closing Time, a copy
of the Final Prospectus, as then amended or supplemented if: (i) the Company
has previously furnished copies thereof (sufficiently in advance of the
Closing Time to allow for distribution by the Closing Time) to the
Underwriter and the loss, liability, claim, damage or expense of such
Underwriter resulted from an untrue statement or omission of a material fact
contained in or omitted from the Preliminary Prospectus which was corrected
in the Final Prospectus as, if applicable, amended or supplemented prior to
the Closing Time and such Final Prospectus was required by law to be
delivered at or prior to the written confirmation of sale to such person and
(ii) such failure to give or send such Final Prospectus by the Closing Time
to the party or parties asserting such loss, liability, claim, damage or
expense would have constituted the sole defense to the claim asserted by such
person.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in
the Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly
for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder
to the extent it is not materially prejudiced as a result thereof and in any
event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In the case of parties
indemnified pursuant to Section 6(a) above, counsel to the indemnified
parties shall be selected by ▇▇▇▇▇▇▇ ▇▇▇▇▇, and, in the case of parties
indemnified pursuant to Section 6(b) above, counsel to the indemnified
parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the
18
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent
to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7 hereof
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising
out of suc litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) and Section 6(a)(iii) effected
without its written consent if (i) such settlement is entered into more than
45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior to the date of such settlement.
(e) INDEMNIFICATION FOR RESERVED SECURITIES. In connection with
the offer and sale of the Reserved Securities, the Company agrees, promptly
upon a request in writing, to indemnify and hold harmless the Underwriters
from and against any and all losses, liabilities, claims, damages and
expenses incurred by them as a result of the failure of certain individuals
associated with the Company or the Company's directors, officers or employees
to pay for and accept delivery of Reserved Securities which, by the end of
the first business day following the date of this Agreement, were subject to
a properly confirmed agreement to purchase.
SECTION 7. CONTRIBUTION. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) 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 the Company on
the one hand and of the Underwriters on the other hand in connection with the
statements or omissions, or in connection with any violation of the nature
referred to in Section 6(a)(ii)(A) hereof, which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
19
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
in each case as set forth on the cover of the Prospectus, or, if Rule 434 is
used, the corresponding location on the Term Sheet, bear to the aggregate
initial public offering price of the Securities as set forth on such cover.
The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission or any violation of the nature
referred to in Section 6(a)(ii)(A) hereof.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934
Act shall have the same rights to contribution as the Company. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth
opposite their respective names in SCHEDULE A hereto and not joint.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of
20
officers of the Company submitted pursuant hereto shall remain operative and
in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or controlling person, or by or on behalf of the
Company, and shall survive delivery of the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company, whether or
not arising in the ordinary course of business, or (ii) if there has occurred
any material adverse change in the United States or international financial
markets, any outbreak of hostilities or escalation thereof or other calamity
or crisis or any change or development involving a prospective change in
national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the Nasdaq National Market, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq
National Market has been suspended or materially limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority, or (iv) if a banking moratorium has been declared by
Federal, New York or California authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full
force and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or
more of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such
24-hour period, then:
(a) if the number of Defaulted Securities does not exceed
10% of the number of Securities to be purchased on such date, each of
the non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
21
(b) if the number of Defaulted Securities exceeds 10% of
the number of Securities to be purchased on such date, this Agreement
or, with respect to any Date of Delivery which occurs after the
Closing Time, the obligation of the Underwriters to purchase and of
the Company to sell the Option Securities to be purchased and sold on
such Date of Delivery shall terminate without liability on the part
of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the Underwriters to purchase and the Company to sell the
relevant Option Securities, as the case may be, either the Representatives or
the Company shall have the right to postpone Closing Time or the relevant
Date of Delivery, as the case may be, for a period not exceeding seven days
in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the
term "Underwriter" includes any person substituted for an Underwriter under
this Section 10.
SECTION 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of Chief Financial Officer, and notices to
the Company shall be directed to it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive
Officer.
SECTION 12. PARTIES. This Agreement shall each inure to the benefit
of and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and
7 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriters and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of
such purchase.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 14. EFFECT OF HEADINGS. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all
22
counterparts, will become a binding agreement between the Underwriters and
the Company in accordance with its terms.
Very truly yours,
SCIENTIFIC LEARNING CORPORATION
By __________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LLC
PACIFIC GROWTH EQUITIES, INC.
BY: ▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By ____________________________
Authorized Signatory
For themselves and as Representatives of the other
Underwriters named in SCHEDULE A hereto.
23
SCHEDULE A
NUMBER OF
NAME OF UNDERWRITER INITIAL SECURITIES
------------------- ------------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated . . . . . . . . . . . . . . . . . . . . . . .
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC. . . . . . . . . . . . . . . . . .
Pacific Growth Equities, Inc. . . . . . . . . . . . . . . . .
------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300,000
------------------
------------------
Sch A-1
SCHEDULE B
SCIENTIFIC LEARNING CORPORATION
2,300,000 Shares of Common Stock
(Par Value $0.001 Per Share)
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $[______].
2. The purchase price per share for the Securities to be paid by
the several Underwriters shall be $[______], being an amount equal to the
initial public offering price set forth above less $[_______] per share;
provided that the purchase price per share for any Option Securities
purchased upon the exercise of the over-allotment option described in Section
2(b) shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial Securities
but not payable on the Option Securities.
Sch B-1
SCHEDULE C
LIST OF PERSONS AND ENTITIES SUBJECT TO LOCK-UP
[Company will provide list of persons subject to lock-up]
Sch C-1
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under the Purchase Agreement.
(iii) The Company is duly qualified as a foreign
corporation to transact business and is in good standing in
California and, to the best of our knowledge, each other jurisdiction
in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to the Purchase Agreement or
pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus) and
conforms to the description thereof set forth in the Prospectus under
the caption "Description of Capital Stock." The shares of issued and
outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in
violation of the preemptive or, to the best of our knowledge, other
similar rights of any securityholder of the Company. To the best of
our knowledge, there are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights
to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of the Company
other than those accurately described in the Prospectus. The
description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights which
may be granted thereunder, set forth in the Prospectus under the
caption "Employee Benefit Plans" accurately summarizes the
information required to be shown with respect to such plans,
arrangements, options and rights to the extent required under the
1933 Act and the 1933 Regulations.
(v) The Initial Securities have been duly authorized for
issuance and sale to the Underwriters pursuant to the Purchase
Agreement and, when issued and delivered by the Company pursuant to
the Purchase Agreement against payment of the consideration set forth
in the Purchase Agreement, will be validly issued and fully paid and
non-assessable and no holder of the Securities is or will be subject
to personal liability for the debts of the Company by reason of being
such a holder.
(vi) The issuance of the Securities is not subject to
preemptive or other similar rights of any securityholder of the
Company arising (a) by operation of the charter or bylaws of the
A-1
Company or the General Corporation Law of the State of Delaware or
(b) to the best of our knowledge, under any agreement to which the
Company is a party.
(vii) To the best of our knowledge, the Company does not
own or control, directly or indirectly, any corporation, association
or other entity.
(viii) The Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933
Act; any required filing of the Prospectus pursuant to Rule 424(b)
has been made in the manner and within the time period required by
Rule 424(b); and, to the best of our knowledge, no stop order
suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement has been issued under the 1933 Act
and no proceedings for that purpose have been instituted or are
pending or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectus and each amendment or
supplement to the Registration Statement and Prospectus as of their
respective effective or issue dates (other than the financial
statements and supporting schedules and other financial information
included therein, as to which we express no opinion) comply as to
form in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectus was
not "materially different," as such term is used in Rule 434, from
the prospectus included in the Registration Statement at the time it
became effective.
(xii) The form of certificate used to evidence the Common
Stock, in the form filed as an exhibit to the Registration Statement,
complies in all material respects with all applicable statutory
requirements, and any applicable requirements of the charter and
by-laws of the Company.
(xiii) To the best of our knowledge, there is not pending or
overtly threatened any action, suit, proceeding, inquiry or
investigation, to which the Company is a party, or to which the property
of the Company is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which might reasonably
be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties
or assets thereof or the consummation of the transactions contemplated
in the Purchase Agreement or the performance by the Company of its
obligations thereunder.
(xiv) The information in the Prospectus under "Risk
Factors--We rely on our intellectual property rights and may be unable
to protect these rights" (except as it relates to matters of patent
law), "Risk Factors--Business--Intellectual Property" (except as it
relates to matters of patent law),
A-2
"Business--Properties," "Management--Employee Benefit Plans,"
"Management--Consulting Agreements," "Management--Limitation of
Liability and Indemnification Matters," "Transactions and
Relationships with Related Parties" and "Description of Capital
Stock," and in the Registration Statement under Item 14 and Item 15,
to the extent that it constitutes matters of law, summaries of legal
matters, the Company's charter and by-laws or legal proceedings, or
legal conclusions, has been reviewed by us and is correct in all
material respects.
(xv) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectus that are
not described as required.
(xvi) All descriptions in the Registration Statement of
contracts and other documents to which the Company is a party are
accurate in all material respects; to the best of our knowledge, there
are no franchises, contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be described or referred
to in the Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed as exhibits
thereto, and the descriptions thereof or references thereto are correct
in all material respects.
(xvii) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court
or governmental authority or agency, domestic or foreign (other than
under the 1933 Act and the 1933 Act Regulations, which have been
obtained, or as may be required under the securities or blue sky laws
of the various states or by the NASD) is necessary or required in
connection with the due authorization, execution and delivery of the
Purchase Agreement or for the offering, issuance or sale of the
Securities.
(xviii) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the
Purchase Agreement and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption
"How We Intend to Use the Proceeds of this Offering") and compliance by
the Company with its obligations under the Purchase Agreement do not and
will not, whether with or without the giving of notice or lapse of time
or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(x) of the Purchase
Agreement) under or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument filed
as an exhibit to the Registration Statement (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
have a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or bylaws of the Company, or
any applicable law, statute, rule, regulation (other than state
securities or blue sky laws as to which we express no opinion), or any
judgment, order, writ or decree entered against the Company, known to
us, of any government, government
A-3
instrumentality or court, having jurisdiction over the Company or any
of its properties, assets or operations.
(xix) To the best of our knowledge, other than as set forth in
the Prospectus under the caption "Description of Capital
Stock--Registration Rights," there are no persons with registration
rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act which have not been waived.
(xx) The Company is not an "investment company" as such term
is defined in the 1940 Act.
In rendering such opinions, such counsel may rely as to
matters of fact (but not as to legal conclusions), to the extent they
deem proper, on certificates of responsible officers of the Company
and public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of
the ABA Section of Business Law (1991).
Such counsel's opinion letter shall also include
substantially the following statement (which shall not constitute
part of such counsel's legal opinion:
We have participated in conferences with officials of the
Company, the Representatives, counsel for the Underwriters and the
Company's independent accountants, at which conferences the contents
of the Registration Statement and Prospectus and related matters were
discussed, and although we have not verified and are not passing upon
the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, on the basis of the
foregoing no facts have come to our attention that would lead us to
believe that the Registration Statement or any amendment thereto,
including the Rule 430A Information and Rule 434 Information (if
applicable), (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which we
make no statement), at the time such Registration Statement or any
such amendment became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any amendment or supplement
thereto (except for financial statements and other financial data
included therein or omitted therefrom, as to which we make no
statement), at the time this Prospectus was issued, at the time any
such amended or supplemented prospectus was issued or at the Closing
Time, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
A-4
Exhibit B
FORM OF OPINION OF UNDERWRITERS' COUNSEL
Exhibit C
-, 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated,
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS
PACIFIC GROWTH EQUITIES, INC.
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: PROPOSED PUBLIC OFFERING BY SCIENTIFIC LEARNING CORPORATION
Dear Sirs:
The undersigned, a stockholder, officer or director of Scientific
Learning Corporation, a Delaware corporation (the "Company"), understands
that ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
("▇▇▇▇▇▇▇ ▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners and Pacific Growth Equities, Inc.
propose to enter into a Purchase Agreement (the "Purchase Agreement") with
the Company providing for the public offering of shares (the "Securities") of
the Company's common stock, par value $0.001 per share (the "Common Stock").
In recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder, officer or director of the Company, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned agrees with each underwriter to be
named in the Purchase Agreement that, during a period of 180 days from the
date of the Purchase Agreement, the undersigned will not, without the prior
written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, directly or indirectly, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale
of, or otherwise dispose of or transfer any shares of the Company's Common
Stock or any securities convertible into or exchangeable or exercisable for
Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise.
Very truly yours,
Signature: ________________________
Print Name: _______________________
C-1
Exhibit D
FORM OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(e)
We have audited the balance sheets of the Company as of December 31, 1997 and
1998 and the statements of operations, redeemable convertible preferred stock
and stockholders' equity (deficit), and cash flows for three years in the period
ended December 31, 1998, and the related financial statement schedule, all
included in the Registration Statement on Form S-1, filed by the Company under
the Securities Act of 1933, as amended (the "Act"); our reports with respect
thereto also are included in such Registration Statement as amended, including
the information contained in the Prospectus filed pursuant to Rule 424(b) under
the Act, herein referred to as the "Registration Statement".
In connection with the Registration Statement:
1. We are independent auditors with respect to the Company within the meaning
of the Act and the applicable published rules and regulations thereunder
adopted by the Securities and Exchange Commission ("SEC").
2. In our opinion, the financial statements audited by us and included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations adopted by the SEC.
3. We have not audited any financial statements of the Company as of any date
or for any period subsequent to December 31, 1998. The purpose (and
therefore the scope) of our audit for the year ended December 31, 1998 was
to enable us to express our opinion on the financial statements at
December 31, 1998 and for the year then ended, but not on the financial
statements for any interim period within such year. Therefore, we are
unable to express and do not express an opinion on: the unaudited
condensed balance sheet at March 31, 1999; the unaudited condensed
statements of operations, redeemable convertible preferred stock and
stockholders' equity (deficit), and cash flows for the three-month periods
ended March 31, 1998 and 1999 included in the Registration Statement; or
the financial position, results of operations, or cash flows as of any
date or for any period subsequent to December 31, 1998.
4. For purposes of this letter, we have read the minutes of meetings of the
stockholders and the Board of Directors and other committees of the Company
as set forth in the minute books from January 1, 1998 through the specified
date not more than five days prior to the date of this Agreement, officials
of the Company having advised us that the minutes of all such meetings
through that date were set forth therein, and have carried out other
procedures to the specified date not more than five days prior to the date
of this Agreement as follows:
a) With respect to the three-month periods ended March 31, 1998 and 1999,
we have:
D-1
(1) performed the procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial
information as described in SAS 71, INTERIM FINANCIAL INFORMATION,
on the unaudited condensed balance sheet at March 31, 1999 and the
unaudited condensed statements of operations and cash flows for
the three-month periods ended March 31, 1998 and 1999, and the
redeemable convertible preferred stock and stockholders' equity
(deficit) for the three-month period ended March 31, 1999,
included in the Registration Statement; and
(2) inquired of certain officials of the Company who have
responsibility for financial and accounting matters as to whether
the unaudited condensed financial statements referred to under
4.a)(1) above comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations adopted by the SEC.
b) With respect to the period from April 1, 1999 to May 31, 1999, we have:
(1) read the unaudited financial statements for April and May of both
1998 and 1999 (the financial information for April and May is
incomplete in that it omits the statements of cash flows and other
disclosures) furnished to us by the Company, officials of the
Company having advised us that no such financial statements as of
any date or for any period subsequent to May 31, 1999 were
available; and
(2) inquired of certain officials of the Company who have
responsibility for financial and accounting matters as to whether
the unaudited financial statements referred to under 4.b)(1) are
stated on a basis substantially consistent with that of the
audited financial statements included in the Registration
Statement.
The foregoing procedures do not constitute an audit conducted in accordance
with generally accepted auditing standards. Also, they would not
necessarily reveal matters of significance with respect to the comments in
the following paragraph. Accordingly, we make no representations as to the
sufficiency of the foregoing procedures for your purposes.
5. Nothing came to our attention as a result of the foregoing procedures that
caused us to believe that:
a) any material modifications should be made to the unaudited condensed
financial statements described in 4.a)(1) above, included in the
Registration Statement, for them to be in conformity with generally
accepted accounting principles, except as follows _____________;
D-2
b) the unaudited condensed financial statements described in 4.a)(1) above
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations adopted by the SEC, except as follows _____________;
c) the unaudited quarterly financial data referred to in 4.b)(1) does not
agree with the amounts set forth in the unaudited condensed financial
statements for those same periods, except as follows _____________;
d) the unaudited amounts referred to in 4.b)(1) were not determined on a
basis consistent with that of the corresponding amounts in the audited
statement of operations, except as follows _____________;
e) (i) at May 31, 1999, there was any change in the capital stock (other
than issuances of common stock upon exercise of options), increase in
long-term debt or decrease in net current assets or stockholders'
equity (deficit) (except as a result of continuing net losses) of the
Company as compared with the amounts shown in the March 31, 1999
unaudited condensed balance sheet included in the Registration
Statement; or (ii) for the period from April 1, 1999 to May 31, 1999,
there was any decrease, as compared with the corresponding period in
the preceding year, in net revenue or increase in the total or
per-share amounts of net loss, except in all instances for changes,
increases, or decreases that the Registration Statement discloses
have occurred or may occur, except as follows ____________ .
6. Company officials have advised us that no financial statements as of any
date or for any period subsequent to May 31, 1999 are available;
accordingly, the procedures carried out by us with respect to changes in
financial statement items after May 31, 1999 have, of necessity, been even
more limited than those with respect to the periods referred to in 4.
above. We have inquired of certain officials of the Company who have
responsibility for financial and accounting matters as to whether there
was any change at the specified date not more than five days prior to the
date of this Agreement in the capital stock (other than issuances of
common stock upon exercise of options), long-term debt or stockholders'
equity (deficit) (except as a result of continuing net losses) of the
Company as compared with the amounts shown on the March 31, 1999 unaudited
condensed balance sheet included in the Registration Statement. On the
basis of these inquiries and our reading of the minutes as described in 4.
above, nothing came to our attention that caused us to believe that there
was any such change, decrease, or increase, except in all instances for
changes, decreases, or increases which the Registration Statement
discloses have occurred or may occur, except as follows _____________.
7. At your request, we have also read the items identified by you on certain
pages of the Registration Statement (prospectus), and have performed the
procedures indicated by reference letter.
D-3
8. Our audits of the financial statements for the periods referred to in the
introductory paragraph of this letter were comprised of audit tests and
procedures deemed necessary for the purpose of expressing an opinion on
such financial statements taken as a whole. For neither the periods
referred to therein nor any other period did we perform audit tests for
the purpose of expressing an opinion on individual balances of accounts or
summaries of selected transactions such as those enumerated above and,
accordingly, we do not express an opinion thereon.
9. It should be understood that we make no representations as to questions of
legal interpretation or as to the sufficiency for your purposes of the
procedures enumerated in paragraph 7; also, such procedures would not
necessarily reveal any material misstatement of the information identified
in paragraph 7. Further, we have addressed ourselves solely to the
foregoing data as set forth in the Registration Statement and make no
representations as to the adequacy of disclosure or as to whether any
material facts have been omitted.
10. This letter is solely for the information of the addressees and to assist
the underwriters in conducting and documenting their investigation of the
affairs of the Company in connection with the offering of the securities
covered by the Registration Statement, and is not to be used, circulated,
quoted or otherwise referred to within or without the underwriting group
for any other purpose, including, but not limited to, the registration,
purchase, or sale of securities, nor is it to be filed with or referred to
in whole or in part in the Registration Statement or any other document,
except that reference may be made to it in the underwriting agreement or
in any list of closing documents pertaining to the offering of the
securities covered by the Registration Statement.
D-5
