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EXHIBIT 1.1
DEUTSCHE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INC.
EQUITY CAPITAL MARKETS
Dated _________, 1998
MICROMUSE INC.
________ Shares
Common Stock
UNDERWRITING
AGREEMENT
-1-
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Micromuse Inc.
________ Shares
Plus an option to purchase up to ___
additional shares to cover over-allotments
Common Stock
UNDERWRITING AGREEMENT
____________, 1997
DEUTSCHE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INC.
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
▇▇▇▇▇ ▇▇▇▇▇▇ INC.
As Representatives of the several Underwriters
c/o Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Micromuse Inc., a Delaware corporation (the "Company"), and the persons
named in Schedule 2 hereto (the "Selling Stockholders") hereby confirm their
agreement with the several underwriters named in Schedule 1 hereto (the
"Underwriters"), for whom you have been duly authorized to act as
representatives (the one or more firms acting in such capacities, the
"Representatives"), as set forth below. If you are the only Underwriters, all
references herein to the Representatives shall be deemed to be references to the
Underwriters.
Section 1. Underwriting. Subject to the terms and conditions contained herein:
(a) The Company proposes to issue and sell ________ shares of common
stock, par value $0.01 per share (the "Common Stock"), of the Company, and the
Selling Stockholders propose to sell ________ shares of Common Stock (said
shares to be issued and sold by the Company and shares to be sold by the Selling
Stockholders collectively, the "Firm Shares") to the several Underwriters. The
Company also proposes to issue and sell not more than ________ additional shares
of Common Stock and the Selling Stockholders also propose to sell not more than
________ additional shares of Common Stock (collectively, the "Option Shares"
and, together with the Firm Shares, the "Shares") to the several Underwriters if
requested by the Representatives as provided in Section 2(b) hereof.
(b) Upon your authorization of the release of the Firm Shares, the
Underwriters propose to make a public offering (the "Offering") of the Firm
Shares upon the terms set forth in the Prospectus (as defined below) as soon
after the Registration Statement (as defined below) and this Agreement have
become effective as in the Representativeso sole judgment is advisable. As used
in this Agreement, the term "Original Registration Statement" means the
registration statement (File No. 333-____) initially filed with the Securities
and Exchange Commission (the "Commission") relating to the Shares, as amended at
the time when it was or is declared effective, including all financial schedules
and exhibits thereto and including any information omitted therefrom pursuant to
Rule 430A under the Securities Act of 1933, as amended (the "Securities Act"),
and included in the
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Prospectus; the term "Rule 462(b) Registration Statement" means any registration
statement filed with the Commission pursuant to Rule 462(b) under the Securities
Act (including the Registration Statement and any Preliminary Prospectus (as
defined below) or Prospectus incorporated therein at the time such Registration
Statement becomes effective); the term "Registration Statement" includes both
the Original Registration Statement and any Rule 462(b) Registration Statement;
the term "Preliminary Prospectus" means each prospectus subject to completion
filed with the Original Registration Statement or any amendment thereto
(including the prospectus subject to completion, if any, included in the
Original Registration Statement or any amendment thereto at the time it was or
is declared effective); the term "Prospectus" means:
(i) if the Company relies on Rule 434 under the Securities Act,
the Term Sheet (as defined below) relating to the Shares that is first
filed pursuant to Rule 424(b)(7) under the Securities Act, together with
the Preliminary Prospectus identified therein that such Term Sheet
supplements;
(ii) if the Company does not rely on Rule 434 under the
Securities Act, the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Securities Act;
(iii) if the Company does not rely on Rule 434 under the
Securities Act and if no prospectus is required to be filed pursuant to
Rule 424(b) under the Securities Act, the prospectus included in the
Registration Statement; or
(iv) for purposes of the representations and warranties contained
in Section 5 hereof, if the prospectus is not in existence, the most
recent Preliminary Prospectus; and the term "Term Sheet" means any term
sheet that satisfies the requirements of Rule 434 under the Securities
Act. Any reference herein to the "date" of a Prospectus that includes a
Term Sheet shall mean the date of such Term Sheet.
Section 2. Purchase and Closing.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell, and the Selling Stockholders
propose to sell, to each of the Underwriters, and each of the Underwriters,
severally and not jointly, agrees to purchase from the Company and the Selling
Stockholders, at a purchase price of $___ per Share (the "Purchase Price"), the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule 1 hereto. Firm Shares shall be registered by ________ in the name of
the nominee of the Depository Trust Company ("DTC"), Cede & Co. ("Cede & Co."),
and credited to the accounts of such of its participants as the Representatives
shall request, upon notice to the Company and the Selling Stockholders at least
48 hours prior to the First Closing Date (as defined below), with any transfer
taxes payable in connection with the transfer of the Firm Shares to the
Underwriters duly paid, against payment by or on behalf of the Underwriters to
the account of the Company and the Selling Stockholders of the aggregate
Purchase Price therefor by wire transfer in immediately available funds. The
Company and the Selling Stockholders will make the certificate or certificates
for the Firm Shares available for checking and packaging by the Representatives
at the offices in New York, New York of the Companyos transfer agent or
registrar or of the Representatives at least 24 hours prior to the First Closing
Date. Delivery or registry of and payment for the Firm Shares shall be made at
the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP,
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 9:30 A.M., New York
City time, on _________, 1998, or at such other place, time or date as the
Representatives, the Company and the Selling Stockholders may agree upon. Such
time and date of delivery against payment are herein referred to as the "First
Closing Date", and the implementation of all the actions described in this
Section 2(a) is herein referred to as the "First Closing."
(b) For the purpose of covering any over-allotments in connection with
the distribution and sale of the Firm Shares as contemplated by the Prospectus,
the Company and the Selling Stockholders hereby grant to
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the several Underwriters an option to purchase, severally and not jointly, the
Option Shares. The purchase price to be paid for any Option Shares shall be the
same as the Purchase Price for the Firm Shares set forth above in paragraph (a)
of this Section 2. The option granted hereby may be exercised as to all or any
part of the Option Shares from time to time within thirty days after the date of
the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday,
on the next business day thereafter when the New York Stock Exchange and the
Nasdaq Stock ▇▇▇▇▇▇▇▇ National Market (the "Nasdaq National Market") is open for
trading). The Underwriters shall not be under any obligation to purchase any of
the Option Shares prior to the exercise of such option. The Representatives may
from time to time exercise the option granted hereby by giving notice in writing
or by telephone (confirmed in writing) to the Company and the Selling
Stockholders setting forth the aggregate number of Option Shares as to which the
several Underwriters are then exercising the option and the date and time for
delivery or registry of and payment for such Option Shares. Any such date of
delivery or registry shall be determined by the Representatives but shall not be
earlier than two business days or later than five business days after such
exercise of the option and, in any event, shall not be earlier than the First
Closing Date. The time and date set forth in such notice, or such other time or
date as the Representatives, the Company and the Selling Stockholders may agree
upon or as the Representatives may determine pursuant to Section 2(a) hereof, is
herein called an "Option Closing Date" with respect to such Option Shares, and
the implementation of all the actions described in this Section 2(b) is herein
referred to as the "Option Closing". As used in this Agreement, the term
"Closing Date" means either the First Closing Date or any Option Closing Date,
as applicable, and the term "Closing" means either the First Closing or any
Option Closing, as applicable. If the option is exercised as to all or any
portion of the Option Shares, then either one or more certificates in definitive
form for such Option Shares shall be delivered or, if such Option Shares are to
be held through DTC, such Option Shares shall be registered and credited, on the
related Option Closing Date in the same manner, and upon the same terms and
conditions, set forth in paragraph (a) of this Section 2, except that reference
therein to the Firm Shares and the First Closing Date shall be deemed, for
purposes of this paragraph (b), to refer to such Option Shares and Option
Closing Date, respectively. Upon exercise of the option as provided herein, the
Company and the Selling Stockholders shall become obligated to sell to each of
the several Underwriters, and, on the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, each of the Underwriters (severally and not
jointly) shall become obligated to purchase from the Company and the Selling
Stockholders, the same percentage of the total number of the Option Shares as to
which the several Underwriters are then exercising the option as such
Underwriter is obligated to purchase of the aggregate number of Firm Shares, as
adjusted by the Representatives in such manner as they deem advisable to avoid
fractional shares. In the event that the option is exercised in part, the number
of Option Shares to be sold by each of the Selling Stockholders shall be, as
nearly as practicable, in the same proportion to each other as are the number of
Option Shares to be sold by each Selling Stockholder listed opposite their names
on Schedule 2 hereto.
(c) The Company and the Selling Stockholders hereby acknowledge that the
payment of monies pursuant to Section 2(a) hereof (a "Payment") by or on behalf
of the Underwriters of the aggregate Purchase Price for any Shares does not
constitute closing of a purchase and sale of the Shares. Only execution and
delivery, by facsimile or otherwise, of a receipt for Shares by the Underwriters
indicates completion of the closing of a purchase of the Shares from the Company
and the Selling Stockholders. Furthermore, in the event that the Underwriters
make a Payment to the Company and the Selling Stockholders prior to the
completion of the closing of a purchase of Shares, the Company and the Selling
Stockholders hereby acknowledge that until the Underwriters execute and deliver
such receipt for the Shares, the Company and the Selling Stockholders will not
be entitled to the Payment and shall return the Payment to the Underwriters as
soon as practicable (by wire transfer of same-day funds) upon demand. In the
event that the closing of a purchase of Shares is not completed and the Payment
is not returned by the Company and the Selling Stockholders to the Underwriters
on the same day the Payment was received by the Company and the Selling
Stockholders, the Company and the Selling Stockholders agree to pay to the
Underwriters in respect of each day the Payment is not returned by them, in
same-day funds, interest on the amount of such Payment in an amount representing
the Underwriterso cost of
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financing as reasonably determined by the Representatives, pro rata in
proportion to the percentage of such Payment received by each.
It is understood that any of you, individually and not as one of the
Representatives, may (but shall not be obligated to) make Payment on behalf of
any Underwriter or Underwriters for any of the Shares to be purchased by such
Underwriter or Underwriters. No such Payment shall relieve such Underwriter or
Underwriters from any of its or their obligations hereunder.
Section 3. Covenants.
(a) The Company covenants and agrees with the several Underwriters that:
(i) The Company will:
(x) use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto to become effective as
promptly as possible. If required, the Company will file the
Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and
424(b) under the Securities Act. During any time when a
prospectus relating to the Shares is required to be delivered
under the Securities Act, the Company (I) will comply with all
requirements imposed upon it by the Securities Act and the rules
and regulations of the Commission thereunder to the extent
necessary to permit the continuance of sales of or dealings in
the Shares in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (II) will not
file with the Commission the Prospectus, Term Sheet, any
amendment or supplement to such Prospectus or Term Sheet, any
amendment to the Registration Statement (including the amendment
referred to in the second sentence of Section 5(a)(i) hereof) or
any Rule 462(b) Registration Statement unless the Representatives
previously have been advised of, and furnished with a copy within
a reasonable period of time prior to, the proposed filing and the
Representatives shall have given their consent to such filing.
The Company will prepare and file with the Commission, in
accordance with the rules and regulations of the Commission,
promptly upon request by the Representatives or counsel for the
Underwriters, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary
or advisable in connection with the distribution of the Shares by
the several Underwriters. The Company will advise the
Representatives, promptly after receiving notice thereof, of the
time when the Registration Statement or any amendment thereto has
been filed or declared effective or the Prospectus or Term Sheet
or any amendment or supplement thereto has been filed and will
provide evidence satisfactory to the Representatives of each such
filing or effectiveness.
(y) without charge, provide (I) to the Representatives and
to counsel for the Underwriters, an executed and a conformed copy
of the Original Registration Statement and each amendment thereto
or any Rule 462(b) Registration Statement (in each case including
exhibits thereto), (II) to each other Underwriter, a conformed
copy of the Original Registration Statement and each amendment
thereto or any Rule 462(b) Registration Statement (in each case
without exhibits thereto), and (III) so long as a prospectus
relating to the Shares is required to be delivered under the
Securities Act, as many copies of each Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request. Without limiting the
application of clause (III) of the preceding sentence, the
Company, not later than (A) 9:00 A.M., New York City time, on the
business day following the date of
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determination of the public offering price, if such determination
occurred at or prior to 12:00 noon, New York City time, on such
date or (B) 6:00 P.M., New York City time, on the business day
following the date of determination of the public offering price,
if such determination occurred after 12:00 noon, New York City
time, on such date, will deliver to the Underwriters, without
charge, as many copies of the Prospectus and any amendment or
supplement thereto as the Representatives may reasonably request
for purposes of confirming orders that are expected to settle on
the First Closing Date.
(z) advise the Representatives, promptly after receiving
notice or obtaining knowledge thereof, of (I) the issuance by the
Commission of any stop order suspending the effectiveness of the
Original Registration Statement or any amendment thereto or any
Rule 462(b) Registration Statement or any order preventing or
suspending the use of any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, (II) the
suspension of the qualification of the Shares for offering or
sale in any jurisdiction, (III) the institution, threatening or
contemplation of any proceeding for any purpose identified in the
preceding clause (I) or (II), or (IV) any request made by the
Commission for amending the Original Registration Statement or
any Rule 462(b) Registration Statement, for amending or
supplementing the Prospectus or for additional information. The
Company will use its best efforts to prevent the issuance of any
such stop order and, if any such stop order is issued, to obtain
the withdrawal thereof as promptly as possible.
(ii) The Company will arrange for the qualification of the Shares
for offering and sale in each jurisdiction as the Representatives shall
designate including, but not limited to, pursuant to applicable state
securities ("Blue Sky") laws of certain states of the United States of
America or other U.S. jurisdictions, and the Company shall maintain such
qualifications in effect for so long as may be necessary in order to
complete the placement of the Shares; provided, however, that the
Company shall not be obliged to file any general consent to service of
process or to qualify as a foreign corporation or as a securities dealer
in any jurisdiction or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(iii) If, at any time prior to the final date when a prospectus
relating to the Shares is required to be delivered under the Securities
Act, any event occurs as a result of which the Prospectus, as then
amended or supplemented, would include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if for any other reason it
shall be necessary at any time to amend the Registration Statement or
amend or supplement the Prospectus to comply with the Securities Act or
the rules or regulations of the Commission thereunder or applicable law,
the Company will promptly notify the Representatives thereof and will
promptly, at its own expense, but subject to the second sentence of
Section 3(a)(i)(x) hereof: (x) prepare and file with the Commission an
amendment to the Registration Statement or amendment or supplement to
the Prospectus which will correct such statement or omission or effect
such compliance; and (y) supply any amended Registration Statement or
amended or supplemented Prospectus to the Underwriters in such
quantities as the Underwriters may reasonably request.
(iv) The Company will make generally available to the Companyos
securityholders and to the Representatives as soon as practicable an
earnings statement that satisfies the provisions of Section 11(a) of the
Securities Act, including Rule 158 thereunder.
(v) The Company will apply the net proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
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(vi) The Company will not, and will not allow any subsidiary to,
publicly announce any intention to, and will not itself, and will not
allow any subsidiary to, without the prior written consent of Deutsche
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc., on behalf of the Underwriters, (x) offer, pledge,
sell, offer to sell, contract to sell, sell any option or contract to
purchase, purchase any option to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, Common Stock, or (y) enter
into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the shares of Common
Stock or securities convertible into, or exercisable or exchangeable
for, shares of Common Stock (whether any such transaction described in
clause (x) or (y) above is to be settled by delivery of shares of Common
Stock (or securities convertible into, exercisable or exchangeable for
Common Stock), in cash or otherwise), for a period beginning from the
date hereof and continuing to and including the date 180 days after the
date hereof, except pursuant to this Agreement and other than with
respect to (x) shares of Common Stock to be issued upon the exercise of
warrants to purchase shares of Common Stock, or upon conversion or
exchange of securities convertible or exchangeable into shares of Common
Stock, in each case, which are outstanding on the date hereof and
disclosed in the Prospectus, and (y) shares of Common Stock (or any
securities convertible into or exchangeable for shares of Common Stock)
issued pursuant to any employee benefit plans, qualified stock option
plans or other employee compensation plans which are disclosed in the
Prospectus.
(vii) Neither the Company nor any of its affiliates, nor any
person acting on behalf of any of them will, directly or indirectly, (x)
take any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares or (y) (I) sell,
bid for, purchase, or pay anyone any compensation for soliciting
purchases of, the Shares or (II) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.
(viii) The Company will obtain the agreements described in
Section 7(h) hereof prior to the First Closing Date.
(ix) If at any time during the 25-day period after the
Registration Statement becomes effective or during the period prior to
any Closing Date, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in the
Representativeso sole judgment the market price of the Shares has been
or is likely to be materially affected (regardless of whether such
rumor, publication or event necessitates a supplement to or amendment of
the Prospectus), the Company will, after notice from the Representatives
advising the Company to the effect set forth above, forthwith prepare,
consult with the Representatives concerning the substance of, and
disseminate a press release or other public statement reasonably
satisfactory to the Representatives, responding to or commenting on such
rumor, publication or event.
(x) If the Company elects to rely on Rule 462(b), the Company
shall both file the Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and pay the applicable fees in
accordance with Rule 111 promulgated under the Securities Act by the
earlier of (x) 10:00 P.M. New York City time on the date of this
Agreement and (y) the time confirmations are sent or given, as specified
by Rule 462(b)(2) under the Securities Act.
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(xi) The Company will cause the Shares to be duly included for
quotation on the Nasdaq National Market prior to the First Closing Date.
The Company will ensure that the Shares remain included for quotation on
the Nasdaq National Market following the First Closing Date.
(xii) Prior to issuing any press release regarding the operating
results or financial condition with respect to any of the Company's
first three fiscal quarters in any of fiscal years 1998, 1999 or 2000,
and prior to filing a Quarterly Report on Form 10-Q relating to any of
such fiscal quarters, to retain KPMG Peat Marwick LLP or other
independent public accountants of recognized national standing who shall
review, in accordance with AICPA Statement on Auditing Standards No. 71,
the Company's unaudited consolidated financial statements at the end of
each such fiscal quarter; provided, however, that the Company's
obligations under this covenant may terminate after the second quarter
of fiscal year 1999 at the discretion of the Company's Board of
Directors if the Company's Board of Directors determines in good faith
that adequate financial controls are in place.
(b) Each Selling Stockholder agrees that:
(i) It will not, and no person acting on behalf of such Selling
Stockholder will, directly or indirectly, (x) take any action designed
to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Shares or (y) (I) sell, bid for, purchase, or pay anyone
any compensation for soliciting purchases of, the Shares or (II) pay or
agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of
Shares by the Selling Stockholders under this Agreement).
(ii) It will not, and will not allow any subsidiary to, publicly
announce any intention to, and will not itself, and will not allow any
subsidiary to, without the prior written consent of Deutsche ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Inc. on behalf of the Underwriters, (x) offer, pledge, sell,
offer to sell, contract to sell, sell any option or contract to
purchase, purchase any option to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any of the shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock, or
(y) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences of ownership of the shares of
Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock (whether any such transaction
described in clause (x) or (y) above is to be settled by delivery of
shares of Common Stock (or other securities convertible into,
exercisable or exchangeable for Common Stock), in cash or otherwise), in
each case, beneficially owned (within the meaning of Rule 13d-3 under
the Exchange Act) or otherwise controlled by such person on the date
hereof or hereafter acquired, for a period beginning from the date
hereof and continuing to and including the date 180 days after the date
hereof; provided, however, that such Selling Stockholder may, without
the prior written consent of Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc. on behalf of
the Underwriters, transfer shares of Common Stock or such other
securities to members of such Selling Stockholderos immediate family or
to trusts for the benefit of members of such Selling Stockholderos
immediate family or in connection with bona fide gifts, provided that
any transferee agrees to the transfer restrictions described above.
Section 4. Expenses.
(a) The Company shall bear and pay all costs and expenses incurred
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 9 hereof, including: (i) fees and expenses of
preparation, issuance and delivery of this Agreement to the Underwriters; (ii)
the fees and expenses of its counsel, accountants
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and any other experts or advisors retained by the Company; (iii) the costs of
delivering and distributing the Powers of Attorney (as defined below) and the
Custody Agreements (as defined below) and the fees and expenses of the Custodian
(as defined below) (and any other Attorney-in-Fact (as defined below)); (iv)
fees and expenses incurred in connection with the registration of the Shares
under the Securities Act and the preparation and filing of the Registration
Statement, the Prospectus and all amendments and supplements thereto; (v) the
printing and distribution of the Prospectus and any Preliminary Prospectus and
the printing and production of all other documents connected with the Offering
(including this Agreement and any other related agreements); (vi) expenses
related to the qualification of the Shares under the state securities or Blue
Sky laws, including filing fees and the fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of any Blue Sky memoranda; (vii) the filing fees and expenses, if any, incurred
with respect to any filing with the National Association of Securities Dealers,
Inc., including the fees and disbursements of counsel for the Underwriters in
connection therewith; (viii) fees and expenses of any independent underwriter
required in connection with the Offering; (ix) all expenses arising from the
quoting of the Shares on the Nasdaq National Market; (x) all arrangements
relating to the preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Shares, including transfer agentos and registraros
fees; (xi) the costs and expenses of the "roadshow" and any other meetings with
prospective investors in the Shares (other than as shall have been specifically
approved by the Representatives to be paid for by the Underwriters); and (xii)
the costs and expenses of advertising relating to the Offering (other than as
shall have been specifically approved by the Representatives to be paid for by
the Underwriters).
(b) The Selling Stockholders shall bear and pay all costs and expenses
incurred incident to the performance of their respective obligations under this
Agreement, whether or not the transactions contemplated herein are consummated
or this Agreement is terminated pursuant to Section 9 hereof, including: (i) any
stamp duties, capital duties and stock transfer taxes, if any, payable upon the
sale of the Shares of such Selling Stockholders to the Underwriters and (ii) the
fees and disbursements of their respective counsel, accountants and other
advisors.
Section 5. Representations and Warranties.
(a) As a condition of the obligation of the Underwriters to underwrite
and pay for the Shares, the Company and the Selling Stockholders jointly and
severally represent and warrant to, and agree with, each of the several
Underwriters as follows:
Registration Statement and Prospectus
(i) The Original Registration Statement, including the
Preliminary Prospectus, has been filed by the Company with the
Commission under the Securities Act, and one or more amendments to such
Registration Statement may have been so filed. After the execution of
this Agreement, the Company will file with the Commission either (x) if
such Registration Statement, as it may have been amended, has been
declared by the Commission to be effective under the Securities Act,
either (I) if the Company relies on Rule 434 under the Securities Act, a
Term Sheet relating to the Shares that shall identify the Preliminary
Prospectus that it supplements containing such information as is
required or permitted by Rules 434, 430A and 424(b) under the Securities
Act or (II) if the Company does not rely on Rule 434 under the
Securities Act, a prospectus in the form most recently included in an
amendment to such Registration Statement (or, if no such amendment shall
have been filed, in such Registration Statement), with such changes or
insertions as are required by Rule 430A under the Securities Act or
permitted by Rule 424(b) under the Securities Act, and in the case of
either clause (I) or (II) of this sentence, as have been provided to and
approved by the Representatives prior to the execution of this
Agreement, or (y) if such Registration Statement, as it may have been
amended, has not been declared by the Commission to be effective under
the Securities Act, an amendment to such Registration
10
Statement, including a form of prospectus, a copy of which amendment has
been furnished to and approved by the Representatives prior to the
execution of this Agreement. The Company may also file a Rule 462(b)
Registration Statement with the Commission for the purpose of
registering certain additional Shares, which registration shall be
effective upon filing with the Commission.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When any Preliminary
Prospectus was filed with the Commission, it (x) contained all
statements required to be stated therein in accordance with, and
complied in all material respects with the requirements of, the
Securities Act and the rules and regulations of the Commission
thereunder and (y) did not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. When the Registration Statement or any
amendment thereto was or is declared effective, it (I) contained or will
contain all statements required to be stated therein in accordance with,
and complied or will comply in all material respects with the
requirements of, the Securities Act and the rules and regulations of the
Commission thereunder and (II) did not or will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. When the Prospectus or any Term Sheet that is a part thereof
or any amendment or supplement to the Prospectus is filed with the
Commission pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing the
Prospectus or such amendment or supplement to the Prospectus was or is
declared effective) and on the Closing Date, the Prospectus, as amended
or supplemented at any such time, (A) contained or will contain all
statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Securities Act and the rules and regulations of the Commission
thereunder and (B) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. The foregoing provisions of this
paragraph (ii) do not apply to statements or omissions made in any
Preliminary Prospectus, the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to
the Company by any Underwriter through the Representatives specifically
for use therein.
(iii) If the Company has elected to rely on Rule 462(b) and the
Rule 462(b) Registration Statement is not effective, (x) the Company
will file a Rule 462(b) Registration Statement in compliance with, and
that is effective upon filing pursuant to, Rule 462(b) and (y) the
Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 under the Securities
Act, or the Commission has received payment of such filing fee.
(iv) If the Company has elected to rely on Rule 434 under the
Securities Act, the Prospectus is not "materially different", as such
term is used in Rule 434, from the prospectus included in the
Registration Statement at the time of its effectiveness or an effective
post-effective amendment thereto (including such information that is
permitted to be omitted pursuant to Rule 430A under the Securities Act);
(v) The Company and the Selling Stockholders have not distributed
and, prior to the later of (x) any Closing Date and (y) the completion
of the distribution of the Shares, will not distribute any offering
material in connection with the Offering other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto.
11
(vi) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (x) the
Company and its subsidiaries, taken as a whole, have not incurred any
material liability or obligation, direct or contingent, nor entered into
any material transaction not in the ordinary course of business; (y) the
Company has not purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock; and (z) there has not been any material
change in the capital stock, short-term or long-term debt of the Company
and its subsidiaries, taken as a whole, except in each case as described
in or contemplated by the Prospectus.
The Shares
(vii) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus. All of the issued shares
of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, have been issued in
compliance with all applicable federal and state securities laws and
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase such securities. The Shares
have been duly authorized by all necessary corporate action of the
Company and, after payment therefor in accordance herewith, will be
validly issued, fully paid and nonassessable at the Closing Date. No
holders of outstanding shares of capital stock of the Company are
entitled as such to any preemptive or other rights to subscribe for any
of the Shares, and no holder of securities of the Company has any right
which has not been fully exercised or waived to require the Company to
register the offer or sale of any securities owned by such holder under
the Securities Act in the Offering contemplated by this Agreement.
(viii) Except as disclosed in the Prospectus, there are no
outstanding (x) securities or obligations of the Company or any of its
subsidiaries convertible into or exchangeable for any capital stock of
the Company or any such subsidiary, (y) warrants, rights or options to
subscribe for or purchase from the Company or any such subsidiary any
such capital stock or any such convertible or exchangeable securities or
obligations, or (z) obligations of the Company or any such subsidiary to
issue any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
(ix) Except for the shares of capital stock of each of the
subsidiaries owned by the Company and such subsidiaries, neither the
Company nor any such subsidiary owns any shares of stock or any other
equity securities of any corporation or has any equity interest in any
firm, partnership, association or other entity, except as described in
or contemplated by the Prospectus.
Listing
(x) All of the Shares have been duly authorized and accepted for
quotation on the Nasdaq National Market, subject to official notice of
issuance.
Market Manipulation
(xi) Neither the Company nor any of its affiliates, nor any
person acting on behalf of any of them has, directly or indirectly, (x)
taken any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares, or (y) since the
filing of the Original Registration Statement (I) sold, bid for,
purchased, or paid anyone any compensation for
12
soliciting purchases of, the Shares or (II) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other
securities of the Company.
Corporate Power and Authority
(xii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the law of its
jurisdiction of incorporation with full power and authority to own,
lease and operate its properties and assets and conduct its business as
described in the Prospectus, is duly qualified to transact business and
is in good standing in each jurisdiction in which its ownership, leasing
or operation of its properties or assets or the conduct of its business
requires such qualification, except where the failure to be so qualified
does not amount to a material liability or disability to the Company and
its subsidiaries, taken as a whole, and has full power and authority to
execute and perform its obligations under this Agreement; each
subsidiary of the Company is a corporation duly incorporated and validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to transact business
and is in good standing in each jurisdiction in which its ownership,
leasing or operation of its properties or assets or the conduct of its
business requires such qualification, except where the failure to be so
qualified does not amount to a material liability or disability to the
Company and its subsidiaries, taken as a whole, and each has full power
and authority to own, lease and operate its properties and assets and
conduct its business as described in the Registration Statement and the
Prospectus; all of the issued and outstanding shares of capital stock of
each of the Companyos subsidiaries have been duly authorized and are
fully paid and nonassessable and are owned beneficially by the Company
free and clear of any security interests, liens, encumbrances, equities
or claims.
(xiii) The execution and delivery of this Agreement and the
issuance and sale of the Shares have been duly authorized by all
necessary corporate action of the Company, and this Agreement has been
duly executed and delivered by the Company and is the valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms.
(xiv) The issuance, offering and sale of the Shares to the
Underwriters by the Company pursuant to this Agreement, the compliance
by the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (x)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have
been obtained or made or such as may be required by the state securities
or Blue Sky laws of the various states of the United States of America
or other U.S. jurisdictions in connection with the offer and sale of the
Shares by the Underwriters, or (y) conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or any of
their respective properties are bound, or the charter documents or
by-laws of the Company or any of its subsidiaries, or any statute or any
judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Company or
any of its subsidiaries.
(xv) The Company is not, and will conduct its operations in a
manner so that it continues not to be, an "investment company" and,
after giving effect to the Offering and the application of the proceeds
therefrom, will not be an "investment company", as such term is defined
in the Investment Company Act of 1940, as amended (the "1940 Act").
Title, Licenses and Consents
13
(xvi) The Company and each of its subsidiaries have good and
marketable title in fee simple to all items of real property and
marketable title to all personal property owned by each of them, in each
case free and clear of any security interests, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not interfere with
the use made or proposed to be made of such property by the Company or
such subsidiary, and any real property and buildings held under lease by
the Company or any such subsidiary are held under valid, subsisting and
enforceable leases, with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property and
buildings by the Company or such subsidiary, in each case except as
described in or contemplated by the Prospectus.
(xvii) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent applications,
trademarks, service marks, trade names, licenses, know-how, copyrights,
trade secrets and proprietary or other confidential information
necessary to operate the business now operated by them, and neither the
Company nor any such subsidiary has received any notice of infringement
of or conflict with asserted rights of any third party with respect to
any of the foregoing which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a materially
adverse effect on or constitute a materially adverse change in, or
constitute a development involving a prospective materially adverse
effect on or change in, the condition (financial or otherwise),
earnings, properties, business affairs or business prospects,
stockholderso equity, net worth or results of operations of the Company
or any of its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus.
(xviii)The Company and its subsidiaries possess all consents,
licenses, certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, and neither the Company nor any
such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a materially adverse
effect on or constitute a materially adverse change in, or constitute a
development involving a prospective materially adverse effect on or
change in, the condition (financial or otherwise), earnings, properties,
business affairs or business prospects, net worth or results of
operations of the Company or any of its subsidiaries, taken as a whole,
except as described in or contemplated by the Prospectus.
Financial statements
(xix) KPMG Peat Marwick LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries and
delivered their report with respect to the audited consolidated
financial statements and schedules included in the Registration
Statement and the Prospectus, are independent public accountants as
required by the Securities Act and the applicable rules and regulations
thereunder.
(xx) The consolidated financial statements and schedules of the
Company and its consolidated subsidiaries included in the Registration
Statement and the Prospectus were prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied throughout
the periods involved (except as otherwise noted therein) and they
present fairly the financial condition of the Company as at the dates at
which they were prepared and the results of operations of the Company in
respect of the periods for which they were prepared.
Internal Accounting Controls
14
(xxi) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (w) transactions are executed in accordance with
managementos general or specific authorizations; (x) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability; (y) access to
assets is permitted only in accordance with managementos general or
specific authorization; and (z) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
Litigation
(xxii) No legal or governmental proceedings are pending or
threatened to which the Company or any of its subsidiaries is a party or
to which the property of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement
or the Prospectus and are not described therein; and no statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not described therein
or filed as required.
Dividends and Distributions
(xxiii)No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, making
any other distribution on such subsidiaryos capital stock, repaying to
the Company any loans or advances to such subsidiary from the Company or
transferring any of such subsidiaryos property or assets to the Company
or any other subsidiary of the Company, and the Company is not currently
prohibited, directly or indirectly, from paying any dividends or making
any other distribution on its capital stock, in each case except as
described in or contemplated by the Prospectus.
Taxes
(xxiv) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a materially adverse effect on the Company and its
subsidiaries, taken as a whole) and has paid all taxes required to be
paid by it and any other assessment, fine or penalty levied against it,
to the extent that any of the foregoing is due and payable, except for
any such assessment, fine or penalty that is currently being contested
in good faith or as described in or contemplated by the Prospectus.
Insurance
(xxv) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which they are engaged; neither the Company nor any such subsidiary
has been refused any insurance coverage sought or applied for; and
neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition (financial or
otherwise), earnings, properties, business affairs or business
prospects, net worth or results of operations of the Company or any of
its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus.
Pension and Labor
15
(xxvi) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (x) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (y) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension
plan" for which the Company would have any liability that is intended to
be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.
(xxvii)No labor dispute with the employees of the Company or any
of its subsidiaries exists or is threatened or imminent that could have
a materially adverse effect on or constitute a materially adverse change
in, or constitute a development involving a prospective materially
adverse effect on or change in, the condition (financial or otherwise),
properties, management, earnings, business affairs or business
prospects, net worth or results of operations of the Company or any of
its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus.
Environmental
(xxviii) Neither the Company nor any of its subsidiaries is in
violation of any federal or state law or regulation relating to
occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials and the Company and its
subsidiaries have received all permits, licenses or other approvals
required of them under applicable federal and state occupational safety
and health and environmental laws and regulations to conduct their
respective businesses, and the Company and each such subsidiary is in
compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to
receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals which would not, singly or in the aggregate, have a materially
adverse effect on or constitute a materially adverse change in, or
constitute a development involving a prospective materially adverse
effect on or change in, the condition (financial or otherwise),
earnings, properties, business affairs or business prospects, net worth
or results of operations of the Company or any of its subsidiaries,
taken as a whole, except as described in or contemplated by the
Prospectus.
Other Agreements
(xxix) No default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or any of their
respective properties is bound.
Absence of Materially Adverse Change
(xxx) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, neither the
Company nor any of its subsidiaries has sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or
16
governmental proceeding, and there has been no materially adverse change
(including, without limitation, a change in management or control), or
development involving a prospective materially adverse change, in the
condition (financial or otherwise), management, earnings, property,
business affairs or business prospects, stockholderso equity, net worth
or results of operations of the Company or any of its subsidiaries,
taken as a whole, other than as described in or contemplated by the
Prospectus (exclusive of any amendments or supplements thereto).
(xxxi) No receiver or liquidator (or similar person) has been
appointed in respect of the Company or any subsidiary of the Company or
in respect of any part of the assets of the Company or any subsidiary of
the Company; no resolution, order of any court, regulatory body,
governmental body or otherwise, or petition or application for an order,
has been passed, made or presented for the winding up of the Company or
any subsidiary of the Company or for the protection of the Company or
any such subsidiary from its creditors; and the Company has not, and no
subsidiary of the Company has, stopped or suspended payments of its
debts, become unable to pay its debts or otherwise become insolvent.
Reorganization
(xxxii) The execution and delivery of each of the Exchange
Agreement and the Option Exchange Agreement (the "Reorganization
Documents") was duly authorized by all necessary corporate action on the
part of each of the parties thereto. Each of the parties to the
Reorganization Documents had all corporate power and authority to
execute and deliver the Reorganization Documents and to consummate the
transactions contemplated therein and the Reorganization Documents
constituted valid and binding obligations of each of the parties
thereto.
(b) As a further condition of the obligation of the Underwriters to
underwrite and pay for the Shares, each Selling Stockholder represents and
warrants to, and agrees with, each of the several Underwriters that:
(i) Such Selling Stockholder has full power (corporate and other)
to enter into this Agreement and to sell, assign, transfer and deliver
to the Underwriters the Shares to be sold by such Selling Stockholder
hereunder in accordance with the terms of this Agreement; the execution
and delivery of this Agreement have been duly authorized by all
necessary corporate action of such Selling Stockholder; and this
Agreement has been duly executed and delivered by such Selling
Stockholder.
(ii) Such Selling Stockholder has duly executed and delivered a
power of attorney and custody agreement (with respect to such Selling
Stockholder, the "Power-of-Attorney" and the "Custody Agreement",
respectively), each in the form heretofore delivered to the
Representatives, appointing certain individuals as such Selling
Stockholderos attorney-in-fact (the "Attorney-in-Fact") with authority
to execute, deliver and perform this Agreement on behalf of such Selling
Stockholder and appointing ________, as custodian thereunder (the
"Custodian"). Certificates in negotiable form, endorsed in blank or
accompanied by blank stock powers duly executed, with signatures
appropriately guaranteed, representing the Shares to be sold by such
Selling Stockholder hereunder have been deposited with the Custodian
pursuant to the Custody Agreement for the purpose of delivery pursuant
to this Agreement. Such Selling Stockholder has full power (corporate
and other) to enter into the Custody Agreement and the Power-of-Attorney
and to perform its obligations under the Custody Agreement. The
execution and delivery of the Custody Agreement and the
Power-of-Attorney have been duly authorized by all necessary corporate
action of such Selling Stockholder; the Custody Agreement and the
Power-of-Attorney have been duly executed and delivered by such Selling
Stockholder and, assuming due authorization, execution and delivery by
the Custodian, are the legal, valid, binding and enforceable instruments
of such Selling Stockholder. Such Selling Stockholder agrees that each
of the Shares represented by the certificates on deposit with the
Custodian is subject to the interests of the
17
Underwriters hereunder, that the arrangements made for such custody, the
appointment of the Attorney-in-Fact and the right, power and authority
of the Attorney-in-Fact to execute and deliver this Agreement, to agree
on the price at which the Shares (including such Selling Stockholder's
Shares) are to be sold to the Underwriters, and to carry out the terms
of this Agreement, are to that extent irrevocable and that the
obligations of such Selling Stockholder hereunder shall not be
terminated, except as provided in this Agreement or the Custody
Agreement, by any act of such Selling Stockholder, by operation of law
or otherwise, whether in the case of any individual Selling Stockholder
by the death or incapacity of such Selling Stockholder, in the case of a
trust or estate by the death of the trustee or trustees or the executor
or executors or the termination of such trust or estate, or in the case
of a corporate or partnership Selling Stockholder by its liquidation or
dissolution or by the occurrence of any other event. If any individual
Selling Stockholder, trustee or executor should die or become
incapacitated or any such trust should be terminated, or if any
corporate or partnership Selling Stockholder shall liquidate or
dissolve, or if any other event should occur, before the delivery of
such Shares hereunder, the certificates for such Shares deposited with
the Custodian shall be delivered by the Custodian in accordance with the
respective terms and conditions of this Agreement as if such death,
incapacity, termination, liquidation or dissolution or other event had
not occurred, regardless of whether or not the Custodian or the
Attorney-in-Fact shall have received notice thereof.
(iii) Such Selling Stockholder is the lawful owner of the Shares
to be sold by such Selling Stockholder hereunder and upon sale and
delivery of, and payment for, such Shares, as provided herein, such
Selling Stockholder will convey good and marketable title to such
Shares, free and clear of any security interests, liens, encumbrances,
equities, claims or other defects.
(iv) Neither such Selling Stockholder nor any person acting on
behalf of it has, directly or indirectly, (x) taken any action designed
to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Shares or (y) since the filing of the Original
Registration Statement (I) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Shares or (II) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of
Shares by the Selling Stockholders under this Agreement).
(v) Such Selling Stockholder has reviewed the Prospectus and the
Registration Statement, and the information regarding such Selling
Stockholder set forth therein is complete and accurate.
(vi) The sale by such Selling Stockholder of Shares pursuant
hereto is not prompted by any adverse information concerning the Company
or its subsidiaries that is not set forth in the Registration Statement
or the Prospectus.
(vii) The sale of the Shares to the Underwriters by such Selling
Stockholder pursuant to this Agreement, the compliance by such Selling
Stockholder with the other provisions of this Agreement, the Custody
Agreement and the consummation of the other transactions herein
contemplated do not (i) require the consent, approval, authorization,
registration or qualification of or with any governmental authority,
except such as have been obtained, such as may be required under state
securities or blue sky laws and, if the registration statement filed
with respect to the Shares (as amended) is not effective under the
Securities Act as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this Agreement) under the
Securities Act, or (ii) conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which such Selling Stockholder or any of its subsidiaries
is a party or by which such Selling Stockholder or any of its
subsidiaries or any of their
18
respective properties are bound, or the charter documents or by-laws of
such Selling Stockholder or any of its subsidiaries or any statute or
any judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to such Selling
Stockholder or any of its subsidiaries.
(c) The above representations and warranties shall be deemed to be
repeated at each Closing, and all references therein to the Shares and the
Closing Date shall be deemed to refer to the Firm Shares or the Option Shares
and the First Closing Date or the applicable Option Closing Date, each as
applicable.
Section 6. Indemnity.
(a) The Company and each Selling Stockholder jointly and severally agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), against any and all losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company or such Selling Stockholder in Section 5 hereof,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse, as incurred, each
Underwriter and each such controlling person for any legal or other
costs or expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss,
claim, damage, liability or action; provided, however, that the Company
and such Selling Stockholder will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement or any
amendment thereto, any Preliminary Prospectus, 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
the Representatives specifically for use therein. The indemnity provided
for in this Section 6 shall be in addition to any liability which the
Company and such Selling Stockholder may otherwise have. Neither the
Company nor any Selling Stockholder will, without the prior written
consent of the Representatives, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought
hereunder (whether or not any such Representatives or any person who
controls any such Representatives is a party to such claim, action, suit
or proceeding), unless such settlement, compromise or consent includes
an unconditional release of all of the Underwriters and such controlling
persons from all liability arising out of such claim, action, suit or
proceeding.
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement, each Selling Stockholder and each person, if any, who
controls the Company or such Selling Stockholder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which
19
the Company or any such director or officer of the Company, such Selling
Stockholder or any such controlling person of the Company or such Selling
Stockholder may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto or (ii) the omission or the alleged omission to state in
the Registration Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein, and, subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person or
such Selling Stockholder or controlling person of such Selling Stockholder in
connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or any action
in respect thereof. The remedies provided for in this Section 6 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) of this Section 6, such person (for
purposes of this paragraph (c), the "indemnified party") shall, promptly after
receipt by such party of notice of the commencement of such action, notify the
person against whom such indemnity may be sought (for purposes of this paragraph
(c), the "indemnifying party"), but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 6. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense of any such action and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 6 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated in writing by the Representatives in
the case of paragraph (a) of this Section 6, representing the indemnified
parties under such paragraph (a) who are parties to such action or actions), or
(ii) the indemnifying party does not promptly retain counsel satisfactory to the
indemnified party, or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
All fees and expenses reimbursed pursuant to this paragraph (c) shall be
reimbursed as they are incurred. After such notice from the indemnifying party
to such indemnified party, the indemnifying party will not be liable for the
costs and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party.
20
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 6 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the Offering or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law, not
only such relative benefits but also the relative fault of the indemnifying
party or parties on the one hand and the indemnified party on the other in
connection with the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the Offering (before deducting expenses)
received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Selling Stockholders or the Underwriters, the
partieso relative intents, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company, the Selling
Stockholders and the Underwriters agree that it would not be equitable if the
amount of such contribution were determined by pro rata or per capita allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (d). Notwithstanding any
other provision of this paragraph (d), no Underwriter shall be obligated to make
contributions hereunder that in the aggregate exceed the total public offering
price of the Shares purchased by such Underwriter under this Agreement, less the
aggregate amount of any damages that such Underwriter has otherwise been
required to pay in respect of the same or any substantially similar claim, and
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriterso
obligations to contribute hereunder are several in proportion to their
respective underwriting obligations and not joint, and contributions among
Underwriters shall be governed by the provisions of the Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Inc. Master Agreement Among Underwriters. For purposes of this paragraph (d),
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange 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 or any Selling Stockholder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company or such Selling
Stockholder, as the case may be.
Section 7. Conditions Precedent.
The obligations of the several Underwriters to purchase and pay for the
Shares shall be subject, in the Representativeso sole discretion, to the
accuracy of the representations and warranties of the Company and the Selling
Stockholders contained herein as of the date hereof and as of each Closing Date,
as if made on and as of each Closing Date, to the accuracy of the statements of
the Companyos officers and the Selling Stockholders made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective covenants and agreements hereunder and to the
following additional conditions:
(a) (i) If the Original Registration Statement or any amendment thereto
filed prior to the First Closing Date has not been declared effective as of the
time of execution hereof, the Original Registration
21
Statement or such amendment shall have been declared effective not later than
6:00 P.M. New York City time on the date of determination of the public offering
price, if such determination occurred at or prior to 4:30 P.M. New York City
time on such date, or 12:00 Noon New York City time on the business day
following the day on which the public offering price was determined, if such
determination occurred after 4:30 P.M. New York City time on such date, and (ii)
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have been declared effective not later than the
time confirmations are sent or given as specified by Rule 462(b)(2), or such
later time and date as shall have been consented to by the Representatives; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under the
Securities Act; no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no proceedings
for that purpose shall have been instituted or threatened or, to the knowledge
of the Company or the Representatives, shall be contemplated by the Commission;
and the Company shall have complied with any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise).
(b) The Representatives shall have received a legal opinion from
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Registration Statement is effective under the Securities
Act; any required filing of the Prospectus, or any Term Sheet that
constitutes a part thereof, pursuant to Rules 434 and 424(b) has been
made in the manner and within the time period required by Rules 434 and
424(b); and no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued and, to
the best knowledge of such counsel, no proceedings for that purpose are
pending or threatened by the Commission;
(ii) the Original Registration Statement and each amendment
thereto, any Rule 462(b) Registration Statement and the Prospectus (in
each case, other than the financial statements and other financial
information contained therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission thereunder;
(iii) such counsel has no reason to believe that (in each case,
other than the financial statements and other financial information
contained therein, as to which such counsel need express no opinion) (x)
the Registration Statement, as of its effective date, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or (y) the Prospectus, as of its date or the date
of such opinion, included or includes any untrue statement of a material
fact or omitted or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(iv) if the Company elects to rely on Rule 434 under the
Securities Act, the Prospectus is not "materially different", as such
term is used in Rule 434, from the prospectus included in the
Registration Statement at the time of its effectiveness or an effective
post-effective amendment thereto (including such information that is
permitted to be omitted pursuant to Rule 430A under the Securities Act);
(v) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued shares
of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, have been issued in
compliance with all applicable federal and state securities laws and
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities; the Shares have
been duly authorized by all
22
necessary corporate action of the Company and, when issued and delivered
to and paid for by the Underwriters pursuant to this Agreement, will be
validly issued, fully paid and nonassessable;
(vi) no holders of outstanding shares of capital stock of the
Company are entitled as such to any preemptive or other rights to
subscribe for any of the Shares; and no holder of securities of the
Company has any right which has not been fully exercised or waived to
require the Company to register the offer or sale of any securities
owned by such holder under the Securities Act in the Offering
contemplated by this Agreement;
(vii) all of the Shares have been duly authorized and accepted
for quotation on the Nasdaq National Market, subject to official notice
of issuance;
(viii) the Company and each of its consolidated subsidiaries have
been duly organized and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation and are duly qualified to transact business as foreign
corporations and are in good standing under the laws of all other
jurisdictions where the ownership, leasing or operation of their
respective properties or assets or the conduct of their respective
businesses requires such qualification, except where the failure to be
so qualified does not amount to a material liability or disability to
the Company and its subsidiaries, taken as a whole; the Company and each
of its subsidiaries have full power and authority to own, lease and
operate their respective properties and assets and conduct their
respective businesses as described in the Registration Statement and the
Prospectus, and the Company has corporate power to enter into this
Agreement and to carry out all the terms and provisions hereof to be
carried out by it; all of the issued and outstanding shares of capital
stock of each of the Companyos subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable and are owned
beneficially by the Company free and clear of any perfected security
interests or, to the best knowledge of such counsel, any other security
interests, liens, encumbrances, equities or claims;
(ix) the statements set forth (x) in the Prospectus under the
headings "Management--Director Compensation," "Management--Employee
Benefit Plans," "Management--Change of Control Arrangements," "Certain
Transactions," "Description of Capital Stock," and "Shares Eligible for
Future Sale" and (y) in the Registration Statement in Items 14 and 15,
in each case, insofar as such statements constitute a summary of
documents or matters of law or proceedings referred to therein, have
been reviewed by such counsel and fairly present the information called
for with respect to such documents and matters in all material respects
as required by the Securities Act and the rules and regulations
thereunder;
(x) the execution and delivery of this Agreement have been duly
authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company; the
issuance, offering and sale of the Shares to the Underwriters by the
Company pursuant to this Agreement, the compliance by the Company with
the other provisions of this Agreement and the consummation of the other
transactions herein contemplated do not (x) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained or made (and
specified in such opinion) or such as may be required by the securities
or Blue Sky laws of the various states of the United States of America
and other U.S. jurisdictions in connection with the offer and sale of
the Shares by the Underwriters, or (y) conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument, known to such counsel, to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective properties are bound, or the
charter documents or by-laws of the Company or any of its subsidiaries,
or any statute or any judgment, decree, order, rule or regulation of any
court or other
23
governmental authority or any arbitrator known to such counsel and
applicable to the Company or its subsidiaries;
(xi) the Company is not an "investment company" and, after giving
effect to the Offering and the application of the proceeds therefrom,
will not be an "investment company", as such term is defined in the 1940
Act;
(xii) there are no persons with registration or other similar
rights to have any securities registered by the Company under the
Securities Act, except as disclosed in the Registration Statement and
the Prospectus;
(xiii) the execution and delivery of the Reorganization Documents
effecting the reorganization of the Company under the laws of the State
of Delaware, was duly authorized by all necessary corporate (or other)
action on the part of each of the parties thereto;
(xiv) each of the parties to the Reorganization Documents had all
corporate power and authority to execute and deliver the Reorganization
Documents, to consummate the transactions contemplated therein and the
Reorganization Documents constituted a valid and binding obligation of
each of the parties thereto; and
(xv) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or to which the property of the Company or any
of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein
or any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement that are not
described therein or filed as required.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and public officials
and, as to matters involving the application of laws of any jurisdiction
other than the States of California and Delaware or the United States,
to the extent satisfactory in form and scope to counsel for the
Underwriters, upon the opinion(s) of other counsel. The foregoing
opinion shall also state that the Underwriters are justified in relying
upon such opinion(s) of other counsel, and copies of such opinion(s)
shall be delivered to the Representatives and counsel for the
Underwriters.
References to the Registration Statement and the Prospectus in
this paragraph (b) shall include any amendment or supplement thereto at
the date of such opinion. The opinions of issueros counsel described
herein shall be rendered to the Underwriters at the request of the
Company and shall so state therein.
(c) The Representatives shall have received a legal opinion from
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel for the
Selling Stockholders, dated the Closing Date, to the effect that:
(i) each such Selling Stockholder has full power (corporate and
other) to enter into this Agreement, the Custody Agreement and the
Power-of-Attorney and to sell, assign, transfer and deliver the Shares
being sold by such Selling Stockholder hereunder in the manner provided
in this Agreement and to perform its obligations under the Custody
Agreement; this Agreement, the Custody Agreement and the
24
Power-of-Attorney have been duly executed and delivered by each Selling
Stockholder; assuming due authorization, execution and delivery by the
Custodian, the Custody Agreement and the Power-of-Attorney are the
legal, valid, binding and enforceable instruments of such Selling
Stockholder, subject to applicable bankruptcy, insolvency and similar
laws affecting creditorso rights generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
(ii) the delivery by each Selling Stockholder to the several
Underwriters of certificates for the Shares being sold hereunder by such
Selling Stockholder against payment therefor as provided herein, will
convey good and marketable title to such Shares to the several
Underwriters, free and clear of all security interests, liens,
encumbrances, equities, claims or other defects;
(iii) the sale of the Shares to the Underwriters by such Selling
Stockholder pursuant to this Agreement, the compliance by such Selling
Stockholder with the other provisions of this Agreement and the Custody
Agreement and the consummation of the other transactions herein
contemplated do not (x) require the consent, approval, authorization,
registration or qualification of or with any governmental authority,
except such as have been obtained and such as may be required under
state securities or blue sky laws, or (y) conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute
a default under any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which such Selling Stockholder or any of its
subsidiaries is a party or by which such Selling Stockholder or any of
its subsidiaries or any of their respective properties are bound, or the
charter documents or by-laws of such Selling Stockholder or any of its
subsidiaries or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator applicable to such Selling Stockholder or any of its
subsidiaries.
In rendering such opinion, such counsel may rely, as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Selling Stockholders and public officials
and, as to matters involving the application of laws of any jurisdiction
other than the States of California and Delaware or the United States,
to the extent satisfactory in form and scope to counsel for the
Underwriters, upon the opinion(s) of other counsel. The foregoing
opinion shall also state that the Underwriters are justified in relying
upon such opinion(s) of other counsel, and copies of such opinion(s)
shall be delivered to the Representatives and counsel for the
Underwriters.
References to the Registration Statement and the Prospectus in
this paragraph (c) shall include any amendment or supplement thereto at
the date of such opinion.
(d) The Representatives shall have received a legal opinion from ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Underwriters, dated the Closing Date,
covering the issuance and sale of the Shares, the Registration Statement and the
Prospectus, and such other related matters as the Representatives may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(e) The Representatives shall have received from KPMG Peat Marwick LLP,
a letter or letters dated, respectively, the date hereof and the Closing Date,
in form and substance satisfactory to the Representatives, to the effect that:
(i) they are independent accountants with respect to the Company
and its consolidated subsidiaries within the meaning of the Securities
Act and the applicable rules and regulations thereunder;
(ii) in their opinion, the audited consolidated financial
statements and schedules and pro forma financial statements examined by
them and included in the Registration Statement and the Prospectus
comply in form in all material respects with the applicable accounting
requirements of the
25
Securities Act and the related published rules and regulations and Staff
Accounting Bulletins with respect to registration statements on Form
S-1;
(iii) on the basis of a reading of the latest available interim
unaudited consolidated condensed financial statements of the Company and
its consolidated subsidiaries, carrying out certain specified procedures
(which do not constitute an examination made in accordance with
generally accepted auditing standards) that would not necessarily reveal
matters of significance with respect to the comments set forth in this
paragraph (iii), a reading of the minute books of the shareholders, the
board of directors and any committees thereof of the Company and each of
its consolidated subsidiaries, and inquiries of certain officials of the
Company and its consolidated subsidiaries who have responsibility for
financial and accounting matters, nothing came to their attention that
caused them to believe that:
(x) the unaudited consolidated condensed financial
statements of the Company and its consolidated subsidiaries
included in the Registration Statement and the Prospectus do not
comply in form in all material respects with the applicable
accounting requirements of the Securities Act and the related
published rules and regulations thereunder or are not in
conformity with GAAP applied on a basis substantially consistent
with that of the audited consolidated financial statements
included in the Registration Statement and the Prospectus;
(y) the unaudited amounts for sales, net revenues and
total and per share amounts of net income included in the
Registration Statement and the Prospectus do not agree with the
amounts set forth in any unaudited consolidated financial
statements for those same periods or are not in conformity with
GAAP accounting principles applied; and
(z) at a specific date not more than three business days
prior to the date of such letter, there were any changes in the
capital stock or long-term debt of the Company and its
consolidated subsidiaries or any decreases in net current assets
or stockholderso equity of the Company and its consolidated
subsidiaries, in each case compared with amounts shown on the
December 31, 1998 unaudited consolidated balance sheet included
in the Registration Statement and the Prospectus, or for the
period from January 1, 1998 to ________ __, 1998 there were any
decreases, as compared with January 1, 1997 to ________ __, 1997,
and as compared with October 1, 1997 to December 31, 1997, in
sales, net revenues, net income before income taxes or total or
per share amounts of net income of the Company and its
consolidated subsidiaries, except in all instances for changes,
decreases or increases set forth in such letter.
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting
records of the Company and its consolidated subsidiaries and are
included in the Registration Statement and the Prospectus and in Exhibit
11 to the Registration Statement, and have compared such amounts,
percentages and financial information with such records of the Company
and its consolidated subsidiaries and with information derived from such
records and have found them to be in agreement, excluding any questions
of legal interpretation; and
(v) on the basis of a reading of the unaudited pro forma
consolidated condensed financial statements included in the Registration
Statement and the Prospectus, carrying out certain specified procedures
that would not necessarily reveal matters of significance with respect
to the comments set forth in this paragraph (v), inquiries of certain
officials of the Company and its consolidated subsidiaries who have
responsibility for financial and accounting matters and proving the
arithmetic accuracy of the application of the pro forma adjustments to
the historical amounts in the unaudited pro forma consolidated condensed
financial statements, nothing came to their attention that caused them
to believe
26
that the unaudited pro forma consolidated condensed financial statements
do not comply in form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
In the event that the letters referred to above set forth any
such changes, decreases or increases, it shall be a further condition to
the obligations of the Underwriters that (I) such letters shall be
accompanied by a written explanation of the Company as to the
significance thereof, unless the Representatives deem such explanation
unnecessary, and (II) such changes, decreases or increases do not, in
the sole judgment of the Representatives, make it impractical or
inadvisable to proceed with the purchase and delivery of the Shares as
contemplated by the Registration Statement, as amended as of the date
hereof. References to the Registration Statement and the Prospectus in
this paragraph (e) with respect to either letter referred to above shall
include any amendment or supplement thereto at the date of such letter.
(f) The Company shall have furnished or caused to be furnished to the
Underwriters at the Closing a certificate of its Chairman of the Board, its
President or its Chief Executive Officer and its Chief Financial Officer
satisfactory to the Underwriters to the effect that:
(vi) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Closing Date;
the Registration Statement, as amended as of the Closing Date, does not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Closing Date,
does not include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and the Company has performed all covenants and
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Date;
(vii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to
the best of the Companyos knowledge, are contemplated by the Commission;
and
(viii) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, neither the
Company nor any of its subsidiaries has sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding, and there has not been any materially adverse change
(including, without limitation, a change in management or control), or
development involving a prospective materially adverse change, in the
condition (financial or otherwise), management, earnings, properties,
business affairs or business prospects, stockholderso equity, net worth
or results of operations of the Company or any of its subsidiaries,
except in each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto).
(g) The Representatives shall have received from each Selling
Stockholder a certificate, signed by such Selling Stockholder, dated the Closing
Date, to the effect that:
(ix) the representations and warranties of such Selling
Stockholder in this Agreement are true and correct as if made on and as
of the Closing Date;
27
(x) the Registration Statement, as amended as of the Closing
Date, does not include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading, and the Prospectus, as amended or supplemented as of the
Closing Date, does not include any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and
(xi) such Selling Stockholder has performed all covenants and
agreements on its part to be performed or satisfied at or prior to the
Closing Date.
(h) The Representatives shall have received from each person who is a
director or officer of the Company and substantially all holders of the
outstanding shares of Common Stock an agreement dated on or before the date of
this Agreement to the effect that such person will not publicly announce any
intention to and will not, without the prior written consent of Deutsche ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Inc. on behalf of the Underwriters, (i) offer, pledge, sell, offer to
sell, contract to sell, sell any option or contract to purchase, purchase any
option to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any of the shares of Common
Stock or any securities convertible into, or exercisable or exchangeable for,
Common Stock, or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the shares of
Common Stock or any securities convertible into, or exercisable or exchangeable
for, shares of Common Stock (whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of shares of Common Stock (or
securities convertible into, exercisable or exchangeable for Common Stock), in
cash or otherwise), in each case, beneficially owned (within the meaning of Rule
13d-3 under the Exchange Act) or otherwise controlled by such person on the date
hereof or hereafter acquired, for a period beginning from the date hereof and
continuing to and including the date 180 days after the date hereof; provided,
however, that such person may, without the prior written consent of Deutsche
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc. on behalf of the Underwriters, transfer shares of Common
Stock or such other securities to members of such personos immediate family or
to trusts for the benefit of members of such personos immediate family or in
connection with bona fide gifts, provided that any transferee agrees to the
transfer restrictions described above.
(i) Prior to the commencement of the Offering, the Company shall have
made an application for the quotation of the Shares on the Nasdaq National
Market and the Shares shall have been included for trading on the Nasdaq
National Market, subject to official notice of issuance.
(j) Subsequent to the execution and delivery of this Agreement and prior
to the Closing Date, there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Companyos securities by any
"nationally recognized statistical rating organization", as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act.
(k) On or before the Closing Date, the Representatives and counsel for
the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company and the
Selling Stockholders.
(l) All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
satisfactory in all material respects to the Representatives and counsel for the
Underwriters. The Company and the Selling Stockholders shall furnish to the
Representatives such conformed copies of such opinions, certificates, letters
and documents in such quantities as the Representatives and counsel for the
Underwriters shall reasonably request.
28
The respective obligations of the several Underwriters to purchase and
pay for any Shares shall be subject, in their discretion, to each of the
foregoing conditions to purchase the Shares, except that all references therein
to the Shares and the Closing Date shall be deemed to refer to the Firm Shares
or the Option Shares and the First Closing Date or the related Option Closing
Date, each as applicable.
Section 8. Default of Underwriters.
If, at the First Closing, any one or more of the Underwriters shall fail
or refuse to purchase Shares that it has or they have agreed to purchase
hereunder on such date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is ten
percent or less of the aggregate number of the Shares to be purchased on such
date, the other Underwriters may make arrangements satisfactory to the
Representatives for the purchase of such Shares by other persons (who may
include one or more of the non-defaulting Underwriters, including the
Representatives), but if no such arrangements are made by the First Closing
Date, the other Underwriters shall be obligated severally in the proportions
that the number of Firm Shares set forth opposite their respective names in
Schedule 1 hereto bears to the aggregate number of Firm Shares set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as the Representatives may specify, to purchase the Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date. If, at the First Closing, any Underwriter or Underwriters
shall fail or refuse to purchase Firm Shares and the aggregate number of Firm
Shares with respect to which such default occurs is more than ten per cent of
the aggregate number of Firm Shares to be purchased, and arrangements
satisfactory to the Representatives, the Company and the Selling Stockholders
for the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or any Selling Stockholder. In any such
case either the Representatives or the Company shall have the right to postpone
the Closing, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. If, at any Option
Closing, any Underwriter or Underwriters shall fail or refuse to purchase Option
Shares, the non-defaulting Underwriters shall have the option to (i) terminate
their obligation hereunder to purchase Option Shares or (ii) purchase not less
than the number of Option Shares that such non-defaulting Underwriters would
have been obligated to purchase in the absence of such default. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 8. Any action taken under this Section 8 shall
not relieve any defaulting Underwriter from liability in respect of any default
of such Underwriter under this Agreement.
Section 9. Termination.
This Agreement shall be subject to termination in the sole discretion of
the Representatives by notice to the Company and the Selling Stockholders given
prior to any Closing Date in the event that the Company or any Selling
Stockholder shall have failed, refused or been unable to perform all obligations
and satisfy all conditions on its part to be performed or satisfied hereunder at
or prior thereto or, if at or prior to any Closing Date, (a) trading in
securities generally on the New York Stock Exchange or the Nasdaq National
Market shall have been suspended or materially limited or minimum or maximum
prices shall have been established by or on, as the case may be, the Commission
or the New York Stock Exchange or the Nasdaq National Market; (b) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market; (c) a general moratorium on commercial banking
activities shall have been declared by either Federal or New York State
authorities; (d) there shall have occurred (i) an outbreak or escalation of
hostilities between the United States and any foreign power, (ii) an outbreak or
escalation of any other insurrection or armed conflict involving the United
States, or (iii) any other calamity or crisis or materially adverse change in
general economic, political or financial conditions having an effect on the U.S.
financial markets that, in the sole judgment of the Representatives, makes it
impractical or inadvisable to proceed with the public offering or the delivery
of the Shares as contemplated by the Registration Statement, as amended as of
the date hereof; or (e) the
29
Company or any of its subsidiaries shall have, in the sole judgment of the
Representatives, sustained any material loss or interference with their
respective businesses or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding, or there shall have been any materially
adverse change (including, without limitation, a change in management or
control), or constitute a development involving a prospective materially adverse
change, in the condition (financial or otherwise), management, earnings,
properties, business affairs or business prospects, stockholderso equity, net
worth or results of operations of the Company or any of its subsidiaries, except
in each case as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto). Termination of this Agreement pursuant to this
Section 9 shall be without liability of any party to any other party except for
the liability of the Company in relation to expenses as provided in Sections 4
and 10 hereof, the liability of the Selling Stockholders in relation to expenses
as provided in Sections 4 and 10 hereof, the indemnity provided in Section 6
hereof and any liability arising before or in relation to such termination.
Section 10. Reimbursement of Expenses.
If the sale of the Shares provided for herein is not consummated because
any condition to the obligations of the Underwriters set forth in Section 7
hereof is not satisfied or because of any termination pursuant to Section 9
hereof (other than by reason of a default by any of the Underwriters), the
Company shall reimburse the Underwriters, severally upon demand, for all
out-of-pocket expenses (including fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Shares. If the Company is required to make any payments to the Underwriters
under this Section 10 because of any Selling Stockholderos refusal, inability or
failure to satisfy any condition to the obligations of the Underwriters set
forth in Section 7 hereof, such defaulting Selling Stockholder, pro rata in
proportion to the percentage of Shares to be sold by each, shall reimburse the
Company on demand for all amounts so paid.
Section 11. Information Supplied by Underwriters.
The statements set forth under the heading "Underwriting" in any
Preliminary Prospectus or the Prospectus (to the extent such statements relate
to the Underwriters) constitute the only information furnished by any
Underwriter through the Representatives to the Company for the purposes of
Section 5(a)(ii) and Section 6 hereof. The Underwriters confirm that such
statements (to such extent) are correct.
Section 12. Notices.
In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by the Representatives. Any notice or notification in any form to be given
under this Agreement may be delivered in person or sent by telex, facsimile or
telephone (subject in the case of a communication by telephone to confirmation
by telex or facsimile) addressed to:
in the case of the Company:
Micromuse Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: 415/▇▇▇-▇▇▇▇
Telephone: 415/▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
in the case of the Underwriters:
30
Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: 650/▇▇▇-▇▇▇▇
Telephone: 650/▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
In the case of the Selling Stockholders, any such notice shall be addressed to
the Selling Stockholders at the addresses set forth in Schedule 2 hereto. Any
notice under this Section 12 shall take effect, in the case of delivery, at the
time of delivery and, in the case of facsimile, at the time of dispatch.
Section 13. Miscellaneous.
(a) Time shall be of the essence of this Agreement.
(b) The headings herein are inserted for convenience of reference only
and are not intended to be part of, or to affect, the meaning or interpretation
of this Agreement.
(c) For purposes of this Agreement, (a) "business day" means any day on
which the New York Stock Exchange is open for trading, and (b) "subsidiary" has
the meaning set forth in Rule 405 under the Securities Act.
(d) This Agreement may be executed in any number of counterparts, all of
which, taken together, shall constitute one and the same Agreement and any party
may enter into this Agreement by executing a counterpart.
(e) This Agreement shall inure to the benefit of and shall be binding
upon the several Underwriters, the Company, the Selling Stockholders and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person, except that (i)
the indemnities of the Company and the Selling Stockholders contained in Section
6 hereof shall also be for the benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and (ii) the indemnities of the Underwriters contained in
Section 6 hereof shall also be for the benefit of the directors of the Company,
the officers of the Company who have signed the Registration Statement, each
Selling Stockholder and any person or persons who control the Company or such
Selling Stockholder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act. No purchaser of Shares from any Underwriter
shall be deemed a successor because of such purchase.
(f) The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Company, its officers, the Selling
Stockholders and the several Underwriters set forth in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall remain in
full force and effect, regardless of (i) any investigation made by or on behalf
of the Company, any of its officers or directors, the Selling Stockholders, any
Underwriter or any controlling person referred to in Section 6 hereof and (ii)
delivery of and payment for the Shares. The respective agreements, covenants,
indemnities and other statements set forth in Sections 4, 6 and 10 hereof shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
Section 14. Severability.
31
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 15. Governing Law.
The validity and interpretation of this Agreement, and the terms and
conditions set forth herein, shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to any provisions
relating to conflicts of laws. If the foregoing is in accordance with your
understanding, please sign and return to us eight (8) counterparts hereof, and
upon the acceptance hereof by you, on behalf of each of the Underwriters, this
letter and such acceptance hereof shall constitute a binding agreement among
each of the Underwriters and the Company. It is understood that your acceptance
of this letter on behalf of each of the Underwriters is pursuant to the
authority set forth in the Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc. Master Agreement Among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
32
Very truly yours,
MICROMUSE INC.
By:
--------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
The Selling Stockholders named in Schedule 2 hereto,
acting severally
By:
--------------------------------------------
Name:
------------------------------------------
Attorney-in-Fact
The foregoing Agreement is hereby confirmed and
accepted as of the date first above written.
DEUTSCHE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INC.
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
▇▇▇▇▇ ▇▇▇▇▇▇ INC.
Acting severally on behalf of themselves and the several Underwriters named in
Schedule 1 hereto.
By: DEUTSCHE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INC.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
33
SIGNATURE PAGE TO UNDERWRITING AGREEMENT
SCHEDULE 1
Underwriters
Underwriter Number of Firm Shares
To Be Purchased
Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
Total
------------------------
34
SCHEDULE 1
35
SCHEDULE 2
Selling Stockholders
Name and Address of Number of Firm Shares Number of Option Shares
Selling Stockholders To Be Sold To Be Sold
Total
------------------ ------------------------
SCHEDULE 2
