EXHIBIT 1.1
▇▇▇▇▇▇▇ CARDIOLOGY SYSTEMS, INC.
4,025,000 Shares*
Common Stock
(without par value)
UNDERWRITING AGREEMENT
_______________, 2002
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇+Co
▇▇▇▇▇▇▇▇▇+▇▇▇▇▇▇▇▇▇, Inc.
As representatives of the several
Underwriters named in Schedule I hereto,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
▇▇▇▇▇▇▇ Cardiology Systems, Inc., a California corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to you and the several Underwriters named in Schedule I hereto
(collectively, the "Underwriters"), for whom you are acting as representatives
(the "Representatives"), an aggregate of 3,500,000 shares (the "Firm Shares") of
common stock of the Company, without par value (the "Common Stock") and, at the
election of the Underwriters, up to 525,000 additional shares of Common Stock
(the "Optional Shares"). The Firm Shares and the Optional Shares, which the
Underwriters elect to purchase pursuant to Section 3 hereof, are herein
collectively called the "Shares."
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-83272)
(the "Initial Registration Statement") in respect of the Shares has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement (including any
pre-effective amendments thereto) and any post-effective amendments
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto, to you for each of the other
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* Includes 525,000 shares subject to an option to purchase additional shares to
cover over-allotments.
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other document with
respect to the Initial Registration Statement has heretofore been filed
with the Commission; and no stop order suspending the effectiveness of
the Initial Registration Statement, any post-effective amendment
thereto or the Rule 462(b) Registration Statement, if any, has been
issued under the Act and no proceeding for that purpose has been
initiated or, to the Company's knowledge, threatened by the Commission
(any preliminary prospectus included in the Initial Registration
Statement and incorporated by reference in the Rule 462(b) Registration
Statement, if any, or filed with the Commission pursuant to Rule 424(a)
of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with
Section 6(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was
declared effective or the Rule 462(b) Registration Statement, if any,
at the time it became effective, each as amended at the time such part
of such registration statement became effective, are hereinafter
collectively called the "Registration Statement"; and such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus");
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or, to the Company's
or the Subsidiary's knowledge (the "Company's Knowledge"), instituted
proceedings for that purpose, and each Preliminary Prospectus, as of
its date, complied in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder, and did
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by any Underwriter through ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.
expressly for use therein;
(c) The Registration Statement complied, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will comply, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement (and on any later date on which
Optional Shares are to be purchased) and any amendment thereto and as
of the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by any Underwriter
through ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc. expressly for use therein;
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(d) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to
the Registration Statement by the Act or by the rules and regulations
thereunder which have not been accurately described or filed as
required; all material agreements, contracts or other instruments (the
"Material Contracts"), to which the Company or its sole subsidiary,
▇▇▇▇▇▇▇ Inc. (the "Subsidiary"), is a party, or by which they, or their
properties may be bound, have been duly authorized, executed and
delivered by the Company or the Subsidiary, as are party thereto,
constitute valid and binding agreements of the Company or the
Subsidiary, as are party thereto, and are enforceable in accordance
with their respective terms against the Company or the Subsidiary, as
are party thereto, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or similar laws in effect which affect the
enforcement of creditors' rights generally, (ii) general principles of
equity, whether considered in a proceeding at law or in equity and
(iii) state or federal securities laws or policies relating to the
non-enforceability of the indemnification provisions contained therein,
and, to the Company's Knowledge, such Material Contracts are
enforceable in accordance with their respective terms by the Company or
the Subsidiary, as are party thereto, against the other parties
thereto, except as such enforceability may be limited by (x) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the enforcement of
creditors' rights generally, (y) general principles of equity, whether
considered in a proceeding at law or in equity and (z) state or federal
securities laws or policies relating to the non-enforceability of the
indemnification provisions contained therein, and such Material
Contracts are in full force and effect on the date hereof; and neither
the Company nor the Subsidiary, nor, to the Company's Knowledge, any
other party is in breach of or default under any of such Material
Contracts, except for such breaches or defaults that will not result in
a material adverse change in the business, assets, management,
financial position or results of operations of the Company and the
Subsidiary taken as a whole (hereinafter, a "Material Adverse Change");
(e) Neither the Company nor the Subsidiary has sustained since
the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, except as set forth in the Prospectus or as would not
result in a Material Adverse Change; and, since such date, there has
not been any change in the capital stock (other than issuances of
Common Stock in the ordinary course of business pursuant to Company
stock option and stock purchase plans described in the Registration
Statement and Prospectus) or long-term debt of the Company or the
Subsidiary, or any Material Adverse Change, or any material transaction
or obligation of the Company or the Subsidiary outside of the ordinary
course of business;
(f) The Company and the Subsidiary have good and marketable
title to all real properties owned by them, and has good title to all
other properties owned by them, in each case free and clear of all
liens, charges, encumbrances or restrictions, except as (i) are
described in the Prospectus, or (ii) do not materially affect the value
of such property and do not interfere with the use made and proposed to
be made of such property by the Company or the Subsidiary, as
applicable; any real property and buildings held under lease by the
Company or the Subsidiary are held under valid, subsisting and
enforceable leases with such
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exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company
and the Subsidiary; and the Company or the Subsidiary own or lease all
such tangible properties as are necessary to their operations as now
conducted or as currently proposed to be conducted, except where the
failure to so own or lease would not result in a Material Adverse
Change;
(g) Each of the Company and the Subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its respective jurisdiction of organization, each
with full corporate power and authority to own its properties and
conduct its business as described in the Prospectus, and each has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in
which such qualification is required, except where the failure to be so
qualified in any such jurisdiction would not result in a Material
Adverse Change, and neither the Company nor the Subsidiary is in
violation of its Articles of Incorporation or bylaws;
(h) The Company has an authorized capitalization as set forth
in the Prospectus, and all issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued, are
fully paid and non-assessable, have been issued in compliance with all
applicable federal and state securities laws, and conform in all
material respects to the description of the Common Stock contained in
the Prospectus; all of the issued and outstanding shares of capital
stock of the Subsidiary (i) have been duly authorized and validly
issued, are fully paid and non-assessable, have been issued in
compliance with all applicable federal and state securities laws, and
(ii) except for pledges pursuant to the Loan Agreement, dated June 5,
1998, as amended, between the Subsidiary and Silicon Valley Bank and
for any liens, encumbrances or claims on the Company's assets created
in the ordinary course of business, are owned of record by the Company
free and clear of all liens, encumbrances or claims; except as
disclosed in the Prospectus, neither the Company nor the Subsidiary
controls, indirectly or directly, or has any ownership interest in any
other entity, nor has outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase any
securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations; and the
description of the Company's equity incentive plans and other stock
plans or arrangements, and the options or other rights granted and
exercised thereunder set forth in the Prospectus, accurately and fairly
presents the information required by the Act to be shown with respect
thereto;
(i) The unissued Shares to be issued and sold by the Company
to the Underwriters hereunder have been duly authorized and, when
issued and delivered against payment therefor as provided herein, will
be validly issued and fully paid and non-assessable and will conform to
the description of the Common Stock contained in the Prospectus; no
preemptive rights or other rights to subscribe for or purchase exist
with respect to the issuance and sale of the Shares by the Company
pursuant to this Agreement; no shareholder of the
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Company has any right to require the Company to register the sale of
any shares of capital stock owned by such shareholder under the Act in
the 180-day period after the date of the Prospectus other than
"piggy-back" registration rights held by ▇. ▇. ▇▇▇▇▇▇▇▇▇/QIC, LLC,
Silicon Valley Bank and Greyrock Business Credit pursuant to the
Investor Rights Agreement, dated May 27, 1998 among the Company and the
parties thereto (a true and complete copy of which has been filed as
Exhibit 10.14 to the Registration Statement); and no further approval
or authority of the shareholders or the Board of Directors of the
Company will be required for the issuance and sale of the Shares to be
sold by the Company as contemplated herein;
(j) The Company has full corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby; this Agreement and the transactions contemplated
hereby have been duly authorized by the Company's Board of Directors
and shareholders, and this Agreement has been duly executed and
delivered by the Company, constitutes a legal, valid and binding
obligation of the Company and is enforceable against the Company in
accordance with its terms, except as such enforceability may be limited
by (i) applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or similar laws in effect which affect the
enforcement of creditors' rights generally, (ii) general principles of
equity, whether considered in a proceeding at law or in equity and
(iii) state or federal securities laws or policies relating to the
non-enforceability of the indemnification provisions contained herein;
(k) The issue and sale of the Shares by the Company and the
compliance by the Company with all of the provisions of this Agreement
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any material
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or the Subsidiary is a party or by
which the Company or the Subsidiary is bound or to which any of the
properties or assets of the Company or the Subsidiary is subject, nor
will such actions result in any violation of the provisions of the
Articles of Incorporation or bylaws of the Company or the Subsidiary or
any statute or any applicable order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or the
Subsidiary or any of their properties or assets; and no consent,
approval, authorization, order, filing, registration or qualification
of or with any third party, or any such court or governmental agency or
body was or is required for the issuance and sale of the Shares, the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, filings, registrations or
qualifications as have been obtained or may be required under state
securities or Blue Sky laws or the by-laws and rules of the National
Association of Securities Dealers, Inc. ("NASD") in connection with the
purchase and distribution of the Shares by the Underwriters;
(l) Except as disclosed in the Prospectus, (i) there are no
legal or governmental actions, suits or proceedings pending or, to the
best of the Company's Knowledge, threatened, to which the Company or
the Subsidiary is or may be a party or of which property owned or
leased by the Company or the Subsidiary is or may be the subject, or
which are related to environmental or discrimination matters; (ii) no
labor disturbance by the employees of the
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Company or the Subsidiary, or to the Company's Knowledge, by the
employees of the Company's principal suppliers or original equipment
manufacturers, exists or, to the Company's Knowledge is imminent which
is reasonably likely to result in a Material Adverse Change, and no
collective bargaining agreement exists with respect to the Company's or
the Subsidiary's employees, and to the Company's Knowledge, no such
agreement is imminent; and (iii) neither the Company nor the Subsidiary
is a party or subject to the provisions of any injunction, judgment,
decree or order of any court, regulatory body, administrative agency or
other governmental body; any of which is required to be disclosed in
the Prospectus and that is not so disclosed, or which could
individually or in the aggregate, result in a Material Adverse Change;
(m) The Company and the Subsidiary possess all state, local,
federal and foreign licenses, certificates, approvals, authorizations
or permits (collectively, the "Governmental Licenses") that are
necessary to enable them to own, lease and operate their respective
properties and to conduct their respective businesses as presently
conducted and which the failure to possess could reasonably be expected
to result in a Material Adverse Change, the Company and the Subsidiary
are in compliance with the terms and conditions of all Governmental
Licenses, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Change; all Government Licenses are valid and in full
force and effect, except as could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Change; and neither the Company nor the Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
Governmental License which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change;
(n) Except as otherwise previously disclosed to Underwriters,
the Company and the Subsidiary are in compliance in all material
respects with all applicable statutes, rules and regulations of U.S.
Food and Drug Administration or similar federal, state or local
governmental authority (the "FDA") and, to the knowledge of the
Company, of foreign governmental authority ("Foreign Authorities") with
respect to the design, manufacture, packaging, sale, labeling, storing,
testing, distribution, or marketing of the products being manufactured,
distributed or developed by the Company and the Subsidiary (the
"Company Products"). To the knowledge of the Company, the Company and
the Subsidiary have all requisite permits, approvals, registrations,
licenses or the like from the FDA and Foreign Authorities to conduct
the Company's and the Subsidiary's business as it is currently
conducted. The Company and the Subsidiary are in compliance in all
material respects with all applicable registration and listing
requirements set forth in the Federal Food, Drug & Cosmetic Act (the
"Act"), 21 U.S.C. 360, and 21 CFR Part 807 and all similar applicable
laws. The Company and the Subsidiary adhere in all material respects to
applicable regulations in the manufacture of the Company Products,
including applicable Quality System regulations. The Company has
previously delivered or made available to Underwriters all
applications, approvals, registrations or licenses obtained by the
Company or the Subsidiary from Foreign Authorities or the FDA or
required in connection with the conduct of the Company's or the
Subsidiary's business as it is currently conducted. The Company has
also made available to Underwriters all material written communications
and written records of the Company or the Subsidiary of oral
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communications between the Company or the Subsidiary and the FDA or
Foreign Authorities since June 1, 1998. The Company and the Subsidiary
have not made any false statements in, or material omissions from, the
applications, approvals, reports and other submissions to the FDA or
Foreign Authorities, or in or from any other records and documentation
prepared or maintained to comply with the laws, rules, and regulations
of the FDA or Foreign Authorities relating to Company Products. Except
as otherwise previously disclosed to the Underwriters, the Company and
the Subsidiary have not received from the FDA any notice of adverse
findings, FDA Form 483 inspectional observations, notices of
violations, warning letters, criminal proceeding notices under Section
305 of the Act, or other similar communication from the FDA or from
Foreign Authorities. There have been no seizures conducted or
threatened by the FDA, and no recalls, market withdrawals, field
notifications, notifications of misbranding or adulteration or safety
alerts conducted, requested or threatened by the FDA or Foreign
Authorities relating to the Company Products. The Company and the
Subsidiary have not received any notification, written or oral, that
remains unresolved, from Foreign Authorities, the FDA or other
authorities indicating that any Company Product is misbranded or
adulterated as defined in the Act and the rules and regulations
promulgated thereunder. To the knowledge of the Company, neither the
Company, the Subsidiary, nor any officer, key employee or agent of the
Company or Subsidiary has been convicted of any crime or engaged in any
conduct that would reasonably be expected to result in (i) debarment
under 21 U.S.C. Section 335a or any similar state law or regulation or
(ii) exclusion under 42 U.S.C. Section 1320a-7 or any similar state law
or regulation. Additionally, to the knowledge of the Company, neither
the Company nor the Subsidiary has committed any act, made any
statement or failed to make any statement that would reasonably be
expected to provide a basis for the FDA to invoke its policy with
respect to "Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities" set forth in 56 Fed. Reg. 46191 (September 10,
1991) and any amendments thereto.
(o) The Company and the Subsidiary are in compliance with any
and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety,
including without limitation those relating to occupational safety and
health, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants, including without limitation those relating
to the storage, handling or transportation of hazardous or toxic
materials (collectively, "Environmental Laws"); except where such
noncompliance could not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Change;
(p) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have audited the consolidated
financial statements of the Company and the Subsidiary contained in the
Registration Statement, are independent public accountants within the
meaning of the Act and the rules and regulations of the Commission
thereunder;
(q) The consolidated financial statements and schedules of the
Company, and the related notes thereto, included in the Registration
Statement and the Prospectus present fairly the financial position of
the Company as of the respective dates of such financial statements and
schedules, and the results of operations and cash flows of the Company
for the respective periods covered thereby; such statements, schedules
and related notes have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved ("GAAP") as certified by the independent public
accountants named in paragraph (p) above; no other financial statements
or schedules are required to be included in the Registration Statement;
and the selected financial data set forth
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in the Prospectus under the captions "Summary Financial Data,"
"Capitalization," "Selected Financial Data," and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" present fairly in all material
respects the information set forth therein on the basis stated in the
Registration Statement and have been compiled on a basis consistent
with that of the audited financial statements included in the
Registration Statement; and the pro forma financial information
included in the Registration Statement and the Prospectus has been
prepared on a basis consistent with the historical financial statements
contained in the Prospectus (except for the pro forma adjustments
specified therein), includes all material adjustments to the historical
financial information required by Rule 11-02 of Regulation S-X under
the Act and the Exchange Act (as defined herein) to reflect the
transactions described in the Prospectus, gives effect to assumptions
made on a reasonable basis and fairly presents the historical and
proposed transactions contemplated by the Prospectus;
(r) The Company and the Subsidiary own or possess all
trademarks, trade names, patent rights, copyrights, licenses, trade
secrets, proprietary rights and other similar rights (collectively, the
"Intellectual Property") necessary to conduct their business as now
conducted; the Company and the Subsidiary have not received notice of
any infringement by the Company or the Subsidiary of any Intellectual
Property of others; to the Company's Knowledge, there is no written
claim of infringement being made against the Company or the Subsidiary
regarding Intellectual Property and no reasonable basis therefor
exists, which, if adversely decided, could result in a Material Adverse
Change; to the Company's Knowledge, the Company and the Subsidiary are
not infringing, nor in conflict with rights of others with respect to
any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest at the date hereof of the Company or the Subsidiary therein,
except in any such case as would not individually or in the aggregate
result in a Material Adverse Change; none of the Intellectual Property
employed by the Company or the Subsidiary has been obtained or is being
used by the Company or the Subsidiary in violation of any contractual
obligation binding on the Company or the Subsidiary or, to the
Company's Knowledge, any of their respective officers, directors,
employees or consultants or otherwise in violation of the rights of any
person, except for such violations that could not result in a Material
Adverse Change; neither the operation of the business of the Company
and the Subsidiary by the employees of the Company or the Subsidiary,
nor the conduct of the business of the Company and the Subsidiary as
proposed, will, to the Company's Knowledge, result in a breach or
violation of the terms, conditions or provisions of, or constitute a
default under, any material contract, covenant or instrument under
which any of such employees is now obligated which is reasonably likely
to result in a Material Adverse Change; and the Company and the
Subsidiary have taken reasonable measures to prevent the unauthorized
dissemination or publication of its confidential information or the
confidential information of third parties in its possession; and each
technical employee of the Company and the Subsidiary has executed an
agreement with the Company or the Subsidiary (as the case may be)
regarding confidential information and the assignment of proprietary
information to the Company or the Subsidiary (as the case
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may be), and no such person has excluded works or inventions made prior
to his or her employment with the Company from his or her assignment of
inventions pursuant to such agreement where such exclusion would not
result in a Material Adverse Change;
(s) The Company and the Subsidiary have filed all necessary
federal, state and foreign income and franchise tax returns and have
paid all taxes (including, without limitation, withholding taxes),
penalties and interest, assessments, fees and other charges shown as
due thereon; and, except as disclosed in the Registration Statement and
Prospectus, the Company has not received any notice of any tax
deficiency which has been or is reasonably likely to be asserted
against the Company or the Subsidiary which is reasonably likely to
result in a Material Adverse Change;
(t) The Company is not, and after giving effect to the
offering and the sale of the Shares as contemplated herein will not be,
an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(u) Each of the Company and the Subsidiary maintains insurance
of the types and in the amounts which are consistent with the customary
industry practice, including, but not limited to, insurance covering
products liability claims and real and personal property owned or
leased by the Company and the Subsidiary against theft, damage,
destruction, acts of vandalism and all other risks customarily insured
against by companies engaged in businesses substantially similar to
that of the Company (except where failure to so maintain would not
result in a Material Adverse Change), all of which insurance is in full
force and effect and during the past five years, the Company and the
Subsidiary have not had any material products recall;
(v) Since incorporation, neither the Company nor the
Subsidiary, nor any person acting on their behalf, has at any time (i)
directly or indirectly, given or agreed to give and money, gift or
similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or
agent of a customer or supplier, or other person who was, is or may be
in a position to help or hinder the business of the Company or the
Subsidiary which (x) might subject the Company, the Subsidiary or any
other individual or entity to any damages or penalties in any civil,
criminal or governmental litigation or proceeding (domestic or
foreign); (y) if not so given, could be expected to result in a
Material Adverse Change; or (z) if not continued in the future, could
be expected to result in a Material Adverse Change; (ii) made any
unlawful contribution to any candidate for foreign office, or failed to
disclose fully any contribution in violation of law, or (iii) made any
payment to any foreign, federal or state governmental officer or
official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the
United States or any jurisdiction thereof;
(w) The Company has not (i) taken and will not take, directly
or indirectly through any of its directors, officers or controlling
persons, any action which is designed to, or which has constituted or
which might reasonably be expected to, cause or result in stabilization
or
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manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares; or (ii) since the date of the
Prospectus, (A) sold, bid for, purchased or paid any person any
compensation for soliciting purchases of Common Stock; or (B) paid or
agreed to pay any person any compensation for soliciting another to
purchase any other securities of the Company;
(x) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and
to maintain asset accountability; and (iii) to the extent required by
GAAP, the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences;
(y) There are no (i) business relationships or related party
transactions involving the Company or the Subsidiary, on the one hand,
and any other person or entity, on the other hand, required by the Act
to be described in the Prospectus which have not been described as
required; or (ii) outstanding loans, advances (except for normal
business expenses in the ordinary course) or guarantees of indebtedness
by the Company or the Subsidiary to or for the benefit of any of their
officers or directors, or any of the members of their families;
(z) The Company has filed a registration statement pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to register the Common Stock, has filed an application
to list the Common Stock on the National Association of Securities
Dealers, Inc. Automated Quotation ("Nasdaq") National Market System and
has received notification that the listing has been approved, subject
to notice of issuance of the Shares;
(aa) Each officer and director of the Company, each beneficial
owner of shares of Common Stock and each holder of warrants to purchase
capital stock of the Company, other than those persons listed on
Schedule II hereto, has executed the form of lock-up agreement
restricting dispositions of the Company's securities for a period of
180 days after the date of the Prospectus (the "Lock-Up Agreements")
which was provided by the Representatives to the Company for
distribution to its shareholders and warrant holders; the Company has
provided to counsel for the Representatives a complete and accurate
list of all securityholders of the Company and the number and type of
securities held by each securityholder, and true, accurate and complete
copies of all of the agreements presently in effect or effected hereby
pursuant to which its officers, directors, shareholders and
optionholders have agreed to be bound by restrictions substantially
similar to those contained in the Lock-Up Agreements (the "Company
Lock-Up Agreements"); and each Company optionholder, other than those
persons listed on Schedule II, has executed a Company Lock-Up Agreement
in substantially the same form; and
(bb) Philips Electronics North America Corporation, a Company
shareholder ("Philips"), is restricted from selling any of its shares
of Company capital stock in accordance with Rule 144 issued under the
Act until August 1, 2002, at the earliest.
-10-
2. SHARES SUBJECT TO SALE.
(a) On the basis of the representations, warranties and
agreements of the Company contained herein, and subject to the terms
and conditions of this Agreement, (i) the Company agrees to issue and
sell to each Underwriter, severally and not jointly, and (ii) each of
the Underwriters agrees, severally and not jointly, to purchase from
the Company, at a purchase price per share of $______, the respective
number of Firm Shares set forth opposite the name of each respective
Underwriter in Schedule I hereto; and (b) in the event and to the
extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, (i) the Company agrees to issue and
sell the Optional Shares to each Underwriter, severally and not
jointly, and (ii) each of the Underwriters agrees, severally and not
jointly, to purchase from the Company at the purchase price per share
set forth above, that portion of the number of Optional Shares as to
which such election shall have been exercised (to be adjusted by you so
as to eliminate fractional shares) determined by multiplying such
number of Optional Shares by a fraction, the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in Schedule
I hereto and the denominator of which is the maximum number of the
Optional Shares which all of the Underwriters are entitled to purchase
hereunder.
(b) The Company as and to the extent indicated in Schedule III
hereto, hereby grants, severally and not jointly, to the Underwriters
the right to purchase at their election up to an aggregate of 525,000
Optional Shares at the purchase price per share set forth in the
paragraph above, for the sole purpose of covering over-allotments in
the sale of the Firm Shares. Any such election to purchase Optional
Shares shall be made in proportion to the maximum number of Optional
Shares to be sold by the Company. Any such election to purchase
Optional Shares may be exercised in whole or in part only for the
purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Firm Shares by written notice
from any Representative to the Company, given within a period of 30
calendar days after the date of this Agreement and setting forth the
aggregate number of Optional Shares to be purchased and the date on
which such Optional Shares will be purchased and are to be delivered,
as determined by you but in no event earlier than the First Time of
Delivery (as defined below in Section 4) or, unless ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
Hill, Inc. and the Company otherwise agree in writing, earlier than two
or later than three business days after the date of such notice.
3. OFFERING. Upon the authorization by any Representative of
the release of the Firm Shares, the several Underwriters propose to
offer the Firm Shares for sale upon the terms and conditions set forth
in the Prospectus.
4. CLOSING. Certificates in definitive form for the Shares to
be purchased by each Underwriter hereunder, and in such denominations
and registered in such names as ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc. may
request upon at least forty-eight hours' prior notice to the Company
shall be delivered by or on behalf of the Company to you for the
account of such Underwriter, against payment by such Underwriter or on
its behalf of the purchase price therefor by wire transfer of same day
funds, to the account specified by the Company to ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
Hill, Inc., all at the office of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc., ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The time and date
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of such delivery and payment shall be, with respect to the Firm Shares,
9:30 a.m., Boston time, on _______________, 2002 or such other time and
date as you and the Company may agree upon in writing (the "Closing
Date"), and, with respect to the Optional Shares, 9:30 a.m., Boston
time, on the date specified by you in the written notice given by you
of the Underwriters' election to purchase such Optional Shares, or at
such other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein
called the "First Time of Delivery," such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein
called the "Second Time of Delivery," and each such time and date for
delivery is herein called a "Time of Delivery." Such certificates will
be made available for checking and packaging at least twenty-four hours
prior to each Time of Delivery at such location as you may specify. The
Representatives confirm that each Underwriter has authorized the
Representatives, for its account, to accept delivery of, and receipt
for, and make payment of the purchase price for, the Firm Shares and
the Optional Shares, if any, which such Underwriter has agreed to
purchase.
5. COVENANTS OF THE COMPANY. The Company agrees with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus of which you shall not have been
previously advised and furnished with a copy or to which you shall have
objected promptly after reasonable notice thereof; to advise you
promptly after it receives notice of the time when the Registration
Statement, or any amendment thereto, has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus
has been filed and to furnish you copies thereof; to advise you,
promptly after it receives notice of the issuance by the Commission of
any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or Prospectus or suspending any such
qualification, to use reasonable efforts to obtain the withdrawal of
such order;
(b) To use reasonable efforts, in cooperation with the
Underwriters, to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may reasonably request and
to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or as a dealer in securities or to file a general consent
to service of process in any jurisdiction or to subject itself to
taxation in respect of doing business in any jurisdiction in which it
is not otherwise subject;
(c) To furnish the Underwriters with written and electronic
copies of the Prospectus in such quantities as you may from time to
time reasonably request, and, if the delivery of a prospectus is
required by law at any time prior to the expiration of nine months
after the time of issuance of the Prospectus in connection with the
offering or sale of the
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Shares and if at such time any events shall have occurred as a result
of which, in the reasonable opinion of the Company, the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made when such Prospectus is delivered, not misleading, or,
if for any other reason it shall be necessary during such same period
to amend or supplement the Prospectus in order to comply with the Act,
to notify you and upon your request to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many
written and electronic copies as you may from time to time reasonably
request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required by law to deliver a
prospectus in connection with sales of any of the Shares at any time
nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many written and electronic copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than the forty-fifth (45th)
day following the end of the full fiscal quarter first occurring after
the first anniversary of the effective date of the Registration
Statement (as defined in Rule 158(c) of the Act), an earnings statement
of the Company and the Subsidiary (which need not be audited) complying
with Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule
158 of the Act);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, without the prior written consent of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇,
Inc., not to offer, sell, contract to sell or otherwise dispose of any
securities of the Company which are substantially similar to the
Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Common Stock or any such substantially similar securities
(other than (i) the sale of the Shares to be sold by the Company
hereunder; (ii) the Company's issuance in the ordinary course of
business of shares upon exercise of outstanding Stock options or
warrants or the conversion of any security outstanding on the date
hereof and referred to in the section of the Prospectus entitled
"Capitalization" awarded under the Company's 1998 Amended and Restated
Equity Incentive Plan and 2002 Equity Incentive Plan (including the
Stock Option Grant Program for Nonemployee Directors under the 2002
Stock Incentive Plan); (iii) the Company's issuance of shares under the
2002 Employee Stock Purchase Plan; and (iv) the Company's issuance of
shares constituting in the aggregate up to 25% of the issued and
outstanding shares of capital stock of the Company as consideration or
partial consideration for business acquisitions or in connection with
the formation of joint ventures or strategic partnerships; provided,
that in each case specified in subparagraphs (i) through (iv) of this
paragraph (e), the recipients of such securities agree to be bound by
this Section 6(e) for the duration of the 180-day period after the date
of the Prospectus to the extent they are not otherwise contractually
bound by similar restrictions to similar restrictions, and shall
execute an agreement to that effect, without your prior written
consent;
(f) Subject to the requirements of the Securities Exchange Act
of 1934 and the rules and regulations thereunder, during a period of
five years from the effective date of the Registration Statement, to
furnish to its shareholders after the end of each fiscal year an annual
report (including a balance sheet and statements of income,
shareholders' equity and
-13-
cash flows of the Company and its consolidated subsidiaries certified
by independent public accountants) and, after the end of each of the
first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the effective date of the Registration Statement),
to make available to its shareholders consolidated summary financial
information of the Company and the Subsidiary for such quarter in
reasonable detail; and to timely file with the Commission such
information on Form 10-Q or Form 10-K as may be required under Rule 463
of the Act;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to shareholders of
the Company generally, and deliver to you (i) as soon as they are
available, copies of any reports and financial statements furnished to
or filed with the Commission, the Nasdaq National Market or any
national securities exchange on which any class of securities of the
Company is listed (such financial statements to be on a combined or
consolidated basis to the extent the accounts of the Company and the
Subsidiary are combined or consolidated in reports furnished to its
shareholders generally or to the Commission); and (ii) such additional
publicly available information concerning the business and financial
condition of the Company as you may from time to time reasonably
request, provided that if the Company so requests, you will agree to
keep all such information confidential in accordance with Regulation
FD;
(h) To use its best efforts to list, subject to notice of
issuance, the Shares on the Nasdaq National Market;
(i) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 p.m., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act;
(j) To maintain a transfer agent, and if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be
the same entity as the transfer agent) for its Common Stock;
(k) To use the net proceeds received by it from the sale of
the Shares in the manner specified in the Prospectus under the caption
"Use of Proceeds" and in a manner such that the Company will not become
an "investment company" as that term is defined in the Investment
Company Act;
(l) To take such necessary actions to enforce, and not waive
compliance with, nor release any of its officers, directors,
shareholders, warrant holders or optionholders from complying with, any
Lock-Up Agreements or any Company Lock-Up Agreements, including,
without limitation, issuing stop transfer instructions with the
Company's transfer agent to enforce such agreements, if necessary;
-14-
(m) To issue stop transfer instructions with the Company's
transfer agent covering the 180-day period immediately following the
date of the Prospectus to enforce the provisions contained in that
certain Shareholders Agreement, dated as of May 27, 1998, and as
amended as of August 1, 2001, by and among ▇. ▇. ▇▇▇▇▇▇▇▇▇/QIC, LLC,
Philips and ▇. ▇. ▇▇▇▇▇▇▇▇▇/QIC Management, LLC;
(n) Not to file with the Commission any registration statement
on Form S-8 relating to shares of its Common Stock prior to 180 days
after the effective date of the Registration Statement (other than with
respect to the Company's 1998 Amended and Restated Equity Incentive
Plans, 2002 Stock Incentive Plan and 2002 Employee Stock Purchase Plan
which may be filed at any time);
(o) Without the prior written consent of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
Hill, Inc., not to accelerate the vesting of any option issued under
any stock option plan such that any such option may be exercised within
180 days from the date of the Prospectus (other than in connection with
a sale of the Company); and
(p) To appoint new members to the audit committee of the
Company's board of directors within 90-days after the date of
effectiveness of the Registration Statement, to satisfy the
independence and financial literacy requirements of the Nasdaq National
Market.
6. EXPENSES. The Company covenants and agrees with the several
Underwriters that the Company will pay or cause to be paid the following: (i)
the fees, disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters; (ii) the cost of printing, producing and
reproducing any Agreement among Underwriters, this Agreement, the Blue Sky
Memorandum and any other documents in connection with the offering, purchase,
sale and delivery of the Shares; (iii) all expenses and filing fees in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof and the filing fees
incident to securing any required review by the NASD of the terms of the sale of
the Shares; (iv) the reasonable fees and disbursements of counsel for the
Underwriters in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 5(b) hereof and in
connection with the Blue Sky survey and the reasonable fees and expenses of
counsel to the Underwriters incident to securing any required review by the NASD
of the terms of the sale of the Shares; (v) the cost of preparing stock
certificates; (vi) the cost and charges of any transfer agent or registrar; and
(vii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that, except as provided in this Section,
Section 8 and Section 11 hereof, the Underwriters will pay all of their own
costs and expenses, including the fees and expenses of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the condition that all
representations and warranties and other
-15-
statements of the Company herein are, at and as of each Time of Delivery, true
and correct, the condition that the Company shall have performed all of its
obligations hereunder and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 p.m., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional
Corporation, counsel to the Underwriters, shall have furnished to you
such opinion or opinions, dated such Time of Delivery, with respect to
this Agreement, the Registration Statement, the Prospectus and other
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass along such matters;
(c) ▇▇▇▇▇▇▇ Coie LLP, counsel to the Company, shall have
furnished to you their written opinion, dated such Time of Delivery, in
form and substance reasonably satisfactory to you, with respect to the
matters set forth in Annex I hereto;
(d) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP, special counsel to the
Company, shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance reasonably satisfactory to you,
with respect to the Intellectual Property matters set forth in Annex II
hereto
(e) On the effective date of the Registration Statement at a
time prior to execution of this Agreement, at 9:30 a.m., Boston time,
on the effective date of the most recently filed post-effective
amendment to the Registration Statement filed subsequent to the date of
this Agreement, and at each Time of Delivery, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP shall
have furnished to you a letter or letters, dated the respective date of
delivery thereof, in form and substance satisfactory to you, to the
effect set forth in Annex III hereto;
(f) (i) Neither the Company nor the Subsidiary shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth in the Prospectus,
or as would not result in a Material Adverse Change, and (ii) since the
respective dates as of which information is given in the Prospectus,
there shall not have been any Material Adverse Change or any change in
the capital stock (other than issuances in the ordinary course of
business of Common Stock pursuant to the Company's benefit plans
described in the Prospectus or any material increase in the long-term
debt of the Company or the Subsidiary
-16-
or any change, or any development involving a prospective change, in or
affecting the business, assets, general affairs, management, financial
position or results of operations of the Company and the Subsidiary,
individually or taken as a whole, otherwise than as set forth in the
Prospectus, the effect of which, in any such case described above is in
the judgment of the Representatives so material and adverse as to make
it impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares being delivered at such Time of Delivery on
the terms and in the manner contemplated in the Prospectus;
(g) Between the date hereof and as of such Time of Delivery,
none of the following shall have occurring and be continuing: (i)
additional material governmental limitations or restrictions, not in
force and effect on the date hereof, shall have been imposed upon
trading in securities generally or minimum or maximum prices shall have
been generally established on the New York Stock Exchange, the American
Stock Exchange or in the Nasdaq National Market, or trading in
securities generally or in the Shares shall have been suspended or
materially limited on the Nasdaq National Market, or a general banking
moratorium shall have been declared by federal, New York or
Massachusetts authorities, or (ii) an outbreak or escalation of
hostilities involving the United States, including, without limitation,
acts of terrorism against the United States or its overseas interests,
or the declaration by the United States of a national emergency or war,
or the occurrence of any other national or international calamity or
any substantial change in political, financial or economic conditions
shall have occurred or shall have accelerated or escalated to such an
extent, as, in the judgment of the Representatives, is so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares on the terms and in the
manner contemplated in the Prospectus;
(h) The Shares to be sold by the Company at such Time of
Delivery shall have been accepted for quotation, subject to notice of
issuance, on the Nasdaq National Market System;
(i) Each shareholder and warrant holder of the Company, other
than the persons listed on Schedule II, shall have executed and
delivered to you a lock-up agreement in form and substance reasonably
satisfactory to you and you shall have received copies of Company
Lock-Up Agreements executed by every Company optionholder, other than
those persons listed on Schedule II;
(j) The Company shall have complied with Section 5(c) of this
Agreement to the extent applicable as of such Time of Delivery; and
(k) The Company shall have furnished or caused to be furnished
to you at such Time of Delivery certificates signed by the Chief
Executive Officer and Chief Operating Officer of the Company
respectively, in their capacities as such, satisfactory to you, (i) as
to the accuracy of the representations and warranties of the Company
and the Subsidiary respectively, herein at and as of such Time of
Delivery, (ii) as to the satisfaction of all conditions and performance
by the Company of all of its obligations hereunder to be performed at
or prior to such Time of Delivery, (iii) as to such other matters as
you may reasonably request and (iv) to the matters set forth in
subsections (a), (f), and (h) of this Section 7.
-17-
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (each, a "Company Indemnified Party") against any losses,
claims, damages, liabilities, or expenses joint or several (a "Loss"),
to which any Company Indemnified Party may become subject, under the
Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, with
respect to any Preliminary Prospectus and the Prospectus, in the light
of the circumstances under which they were made, not misleading, and
will reimburse each Company Indemnified Party for any legal or other
expenses reasonably incurred by such Company Indemnified Party in
connection with investigating or defending any such action or claim as
such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such Loss arises
out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through any Representative
expressly for use therein.
(b) Each Underwriter will, severally and not jointly,
indemnify and hold harmless the Company, each of the directors of the
Company, each of the officers of the Company who shall have signed the
Registration Statement, and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act (each, an "Underwriter Indemnified Party") against any
Loss to which any Underwriter Indemnified Party may become subject,
under the Act or otherwise, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus,
or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein, with respect to
any Preliminary Prospectus or the Prospectus, in the light of the
circumstances under which they were made, a material fact required to
be stated therein or necessary to make the statements therein not
misleading, but only with respect to such untrue statement or alleged
untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Underwriter
through any Representative expressly for use therein; and will
reimburse any Underwriter Indemnified Party for any legal or other
expenses reasonably incurred by it or them in connection with
investigating or defending any such action or claim as such expenses
are incurred.
(c) Promptly as reasonably practicable after receipt by an
indemnified party under subsection (a) or (b) above of notice of the
commencement of any action, such indemnified
-18-
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party
in writing of the commencement thereof; no indemnification shall be
available hereunder to any party who shall fail to give notice as
provided in the preceding sentence if, but only to the extent that, the
party to whom such notice was not given was unaware of the action,
suit, investigation, inquiry or proceeding to which the notice would
have related and was materially prejudiced by the failure to give such
notice; provided, however, that the omission so to notify the
indemnifying party shall not relieve it from any liability which it may
have to any indemnified party otherwise than under such subsection. In
case any such action shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel (who
shall not, except with the consent of the indemnified party, be counsel
to the indemnifying party) reasonably satisfactory to such indemnified
party, and, if such indemnifying party assumes the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party,
in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the prior written
consent of the indemnified party (which shall not be unreasonably
withheld or delayed), effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such action or claim) unless
such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such
action or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party. In the event the indemnifying party does not
assume the defense of any action brought against an indemnified party,
the indemnifying party shall not, in connection with any one such
action or proceeding or separate but substantially similar actions or
proceedings arising out of the same general allegations, be liable for
the fees and expenses of more than one separate firm of attorneys at
any time for all indemnified persons, except to the extent that local
counsel, in addition to regular counsel, is required in order to
effectively defend against such action or proceeding, unless (1) the
indemnifying party has agreed in writing to pay such fees and expenses
or (2) an indemnified party reasonably determines that there may be
conflicting interests between such indemnified party and other
indemnified parties in conducting the defense of such action, including
situations in which there are one or more legal defenses available to
such indemnified party that are different from or in addition to those
available to other indemnified parties.
(d) Without limitation and in addition to its obligations
under the other subsections of this Section 8, the Company agrees to
indemnify and hold harmless ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc. (the "QIU"),
and each person, if any, who controls the QIU within the meaning of the
Securities Act or the Exchange Act from and against any Loss, as
incurred, arising out of or based upon the QIU's acting as a "qualified
independent underwriter" (within the meaning of Rule 2720 to the NASD's
Conduct Rules) in connection with the offering contemplated by this
Agreement, and agrees to reimburse each such indemnified
-19-
person for any legal or other expense reasonably incurred by them in
connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action;
provided, however, that the Company shall not be liable in any such
case to the extent that any such Loss results from the gross negligence
or willful misconduct of the QIU.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any Losses (or actions
in respect thereof) referred to therein, then each indemnifying party
shall contribute to the aggregate amount of such Losses (or actions in
respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand, and the
Underwriters on the other, from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence
is not permitted by applicable law, then each indemnifying party shall
contribute to such aggregate amount of the Losses paid or payable by
such indemnified party in such proportion as is appropriate to reflect
not only such relative benefits, but also the relative fault of the
Company on the one hand, and the Underwriters on the other, in
connection with the statements or omissions which resulted in such
Losses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company respectively, bear
to the total underwriting discounts and commissions received by the
Underwriters, in each case, as set forth in the table on the cover page
of the Prospectus. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one
hand, or the Underwriters on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, and the Underwriters
agree that it would not be just and equitable if contributions pursuant
to this subsection (e) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (e). The aggregate
amount paid or payable by an indemnified party as a result of the
Losses (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this subsection (e), no Underwriter shall be required
to contribute any amount in excess of the amount by which the
Underwriting discount applicable to the Shares purchased by such
Underwriter exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in
proportion to their respective underwriting obligations and not joint.
-20-
(f) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (d) above in respect of any Losses (or actions in
respect thereof) referred to therein, then each indemnifying party
shall contribute to the aggregate amount paid or payable by such
indemnified party as a result of such Losses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand, and the QIU on the
other, from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such
aggregate amount of the Losses paid or payable by such indemnified
party in such proportion as is appropriate to reflect not only such
relative benefits, but also the relative fault of the Company on the
one hand, and the QIU on the other, in connection with the statements
or omissions which resulted in such Losses (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the QIU
on the other shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by
the Company respectively, bear to any fee paid to the QIU for acting in
the capacity of a "qualified independent underwriter" (within the
meaning of Rule 2720 to the NASD's Conduct Rules). The relative fault
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company on the one hand, or the QIU on the other, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company, and the QIU agree that it would not be just and equitable if
contributions pursuant to this subsection (f) were determined by pro
rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (f). The aggregate amount paid or payable by an indemnified
party as a result of the Losses (or actions in respect thereof)
referred to above in this subsection (f) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time
of Delivery, you may in your discretion arrange for you or another
party or other parties to purchase such Shares on the terms contained
herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Shares, then
the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to
you to purchase such Shares on such terms. In the event that, within
the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies
you that it has so arranged for the purchase of such Shares, you or the
Company shall have the right to postpone such Time of Delivery for a
period of not more than seven days, in order to effect whatever changes
may thereby be made
-21-
necessary in the Registration Statement or the Prospectus, or in any
other documents or arrangements, and the Company agrees to file
promptly any amendments or supplements to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The
term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by
you and the Company as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed
one-tenth of the aggregate number of all the Shares to be purchased at
such Time of Delivery, then the Company shall have the right to require
each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery
and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such
defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by
you and the Company as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-tenth of
the aggregate number of all the Shares to be purchased at such Time of
Delivery, or if the Company shall not exercise the right described in
subsection (b) above to require non-defaulting Underwriters to purchase
Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of
the Underwriters to purchase and of the Company to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to
be borne by the Company, and the Underwriters as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company, each and the several
Underwriters, as 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 any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or any, or any officer or director or controlling
person of the Company or any and shall survive delivery of and payment for the
Shares.
11. EXPENSES OF TERMINATION. If this Agreement shall be terminated
pursuant to Section 9 hereof, the Company shall not then have any liability to
any Underwriter except as provided in Section 8 hereof; but, if this Agreement
is terminated due to any of the conditions set forth in Section 7 hereof not
having been met, or the Shares are not delivered by or on half of the Company as
provided herein, the Company will reimburse the Underwriters through you for all
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
-22-
delivery of the Shares not so delivered, but the Company shall not have any
further liability to any Underwriter in respect of the Shares not so delivered
except as provided in Section 8 hereof.
12. NOTICE. 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 you jointly or by ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc. on behalf of you
as the Representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the Representatives in care of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
& ▇▇▇▇, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention:
____________________; if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: President, with a copy to ▇▇▇▇▇▇▇ Coie LLP,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Any such statements,
requests, notices or agreements shall take effect upon receipt thereof;
provided, however, that any notice to an Underwriter pursuant to Section 8(d)
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriter's Questionnaire or
telex constituting such Questionnaire, which address will be supplied to the
Company by you on request. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof.
13. MISCELLANEOUS.
(a) This Agreement shall be binding upon, and inure solely to
the benefit of, the Underwriters and the Company and, to the extent
provided in Sections 8 and 11 hereof, the officers and directors of the
Company and each person who controls the Company or any Underwriter,
and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or
by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of
such purchase.
(b) Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
(d) This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
-23-
If the foregoing is in accordance with your understanding, please sign
and return to us six 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 a form of
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 signors thereof.
Very truly yours,
▇▇▇▇▇▇▇ CARDIOLOGY SYSTEMS, INC.
By:
----------------------------
Chief Executive Officer
Accepted as of the date
hereof at Boston, Massachusetts
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, INC.
▇▇ ▇▇▇▇▇▇▇▇▇+CO
▇▇▇▇▇▇▇▇▇+▇▇▇▇▇▇▇▇▇, INC.
By:
--------------------------------------
(▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.
On behalf of each of the Underwriters)
-24-
SCHEDULE I
UNDERWRITERS
Number of Optional Shares
Total Number of to be Purchased if
Firm Shares to be Purchased Maximum Option Exercised
--------------------------- ------------------------
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇+Co
Delafield+▇▇▇▇▇▇▇▇▇, Inc.
TOTAL
SCHEDULE II
PERSONS WHO HAVE NOT EXECUTED
A LOCK-UP AGREEMENT
SCHEDULE III
Total Number of Total Number of
Firm Shares to be Sold Optional Shares to be Sold
---------------------- --------------------------
The Company 3,571,428 535,714
--
TOTAL 3,571,428 535,714
ANNEX I
MATTERS TO BE COVERED IN THE OPINION OF ▇▇▇▇▇▇▇ COIE LLP
1. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of California, with the
requisite corporate power to own its properties and conduct its business as
described in the Registration Statement and Prospectus. The Subsidiary has been
duly incorporated and is validly existing under the laws of the State of
Washington, with the requisite corporate power to own its properties and conduct
its business as described in the Registration Statement and Prospectus. Each of
the Company and the Subsidiary is duly qualified to do business and is in good
standing in each jurisdiction listed on Schedule A to this opinion. To our
knowledge, the Company does not own or control, directly or indirectly, any
interest in any business entity, other than the Subsidiary.
2. The Company has an authorized capitalization as set forth in the
Prospectus in the Section entitled "Capitalization," and all of the issued and
outstanding shares of capital stock of the Company (other than the Shares) have
been duly authorized, validly issued, and are fully paid and non-assessable. The
Shares have been duly authorized and when issued and paid for as contemplated by
the Underwriting Agreement will be validly issued, fully paid and
non-assessable; to our knowledge, will not have been issued in violation of or
subject to any pre-emptive right, co-sale right, registration right, right of
first refusal or similar rights that have not been duly waived.
3. All of the issued and outstanding shares of capital stock of the
Subsidiary have been duly authorized, validly issued, are fully paid and
non-assessable, and are owned of record by the Company free and clear of all
liens, encumbrances or claims, except for pledges pursuant to the Loan
Agreement, dated June 5, 1998, as amended, between the Subsidiary and Silicon
Valley Bank.
4. The Company has full corporate power and authority to enter into the
Underwriting Agreement, to issue the Shares, and to perform its obligations
pursuant to the Underwriting Agreement. All necessary board of directors and
shareholder action has been duly and validly taken by the Company and its
shareholders to authorize the execution, delivery and performance of this
Agreement and for the issuance and sale of the Shares. The Underwriting
Agreement has been duly authorized, executed and delivered by the Company, and
is a valid and binding agreement of the Company, enforceable in accordance with
its terms, except insofar as indemnification provisions may be limited by
applicable law and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws, or by general equitable
principles.
5. The issuance and sale by the Company of the Shares and the
performance by the Company of its obligations under, and the consummation of all
transactions contemplated in, the Underwriting Agreement, including, without
limitation, the issuance of the Shares, do not and will not (i) result in any
violation of the provisions of the articles of incorporation or by-laws of the
Company, (ii) result in a breach, violation or default on the part of the
Company under any leases, contracts, indentures, mortgages, loan agreements or
any other agreements or instruments known to
us, to which the Company or the Subsidiary is a party or by which the Company or
the Subsidiary is bound, or to which any of their respective properties or
assets are subject (except for such breaches, violations, defaults or
encumbrances that would not result in a Material Adverse Change), or (iii)
violate any existing state or federal statute or any order, rule or regulation
known to us to be customarily applicable to transactions of the nature
contemplated in the Underwriting Agreement, or any decree known to us of any
court or any governmental agency or body having jurisdiction over the Company or
the Subsidiary or any of their respective properties or assets.
6. No consent, approval, authorization, order, registration or
qualification of, or with any federal or state governmental agency or body, or
to our knowledge, court, was or is required to be obtained by the Company for
the issuance and sale of the Shares by the Company or the consummation by the
Company of the transactions contemplated by the Underwriting Agreement, other
than the registration of the Shares under the Act and the rules and regulations
thereunder, except (i) as may be required under state securities or Blue Sky
laws; and (ii) as may be required by the National Association of Securities
Dealers, both as to which we express no opinion.
7. The Company is not an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for, an "investment company" as
defined in the Investment Company Act.
8. The statements set forth in the Prospectus under the caption
"Description of Capital Stock," insofar as they purport to constitute a summary
of the terms of the Common Stock, and under the captions "Shares Eligible for
Future Sale" and "Plan of Distribution," insofar as they purport to describe the
provisions of the laws and documents referred to therein have been reviewed by
us and are accurate and fairly present in all material respects the information
called for with respect to such laws and documents and fairly summarize the
matters referred to therein in all material respects.
9. To our knowledge, there are no contracts or other documents to which
the Company or the Subsidiary is a party of a character required to be filed as
an exhibit to the Registration Statement, or required to be described in the
Registration Statement or the Prospectus which are not filed or described as
required.
10. We do not know of any legal or any governmental proceeding
instituted, contemplated or threatened against the Company or the Subsidiary
that would be required to be disclosed in the Prospectus that is not so
disclosed.
11. To our knowledge, neither the Company nor the Subsidiary is (i) in
material violation of its respective articles of incorporation or bylaws, or
(ii) in breach of any material obligation or agreement that is described or
referred to in the Registration Statement or Prospectus.
-2-
12. The Registration Statement has become effective under the Act. To
the best of our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued by the Commission nor, to the best of our
knowledge, has any proceeding been instituted or threatened for that purpose
under the Act. The Prospectus has been filed with the Commission pursuant to
Rule 424(b) of the rules and regulations under the Act within the time period
required thereby.
13. We have participated in conferences with officials and other
representatives of the Company, the Representatives, underwriters' counsel and
the independent certified public accountants of the Company, at which such
conferences the contents of the Registration Statement and Prospectus and
related matters were discussed. Without undertaking to determine independently,
or assuming any responsibility for the accuracy or completeness of the
statements contained in the Registration Statement or the Prospectus, we have no
reason to believe that, at the time the Registration Statement became effective
and on the Closing Date, the Registration Statement and any amendment or
supplement thereto (other than the financial statements including supporting
schedules and other financial and statistical information derived therefrom, as
to which we express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or, with respect to the
Prospectus, the date of the Prospectus, at the Closing Date or any later date on
which the Optional Shares are to be purchased, as the case may be, the
Registration Statement, the Prospectus and any amendment or supplement thereto
(except as aforesaid) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, with
respect to the Prospectus, in the light of the circumstances under which they
were made, not misleading (except that we express no opinion or belief with
respect to any financial statements, financial schedules, or data derived
therefrom, contained in the Registration Statement or in the Prospectus).
The limitations inherent in the independent verification of factual
matters and the character of determinations involved in the registration process
are such, however, that we do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus except for those made under the captions
"Description of Capital Stock" or "Shares Eligible for Future Sale" in the
Prospectus, insofar as they accurately summarize in all material respects the
provisions of the laws and documents referred to therein. Also, we do not
express any opinion or belief as to the financial statements and related
schedules or any other financial and accounting information contained in the
Registration Statement or the Prospectus.
-3-
ANNEX II
MATTERS TO BE COVERED IN THE OPINION OF ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
1. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP ("IP Counsel") is familiar with the
technology used by the Company and Subsidiary in their business and the manner
of its use and have read the Registration Statement and the Prospectus,
including particularly the portions of the Registration Statement and the
Prospectus referring to patents, trade secrets, trademarks, service marks or
other proprietary information or materials.
2. Nothing has come to the attention of such IP counsel which leads
them to believe that the statements in the Prospectus under the captions "Risk
Factors - Failure to adequately protect our intellectual property rights will
cause our business to suffer," "Risk Factors - If third parties claim that our
products infringe their intellectual property rights, we may be forced to expend
significant financial resources and management time and our operating results
would suffer," or "Business - Intellectual Property" contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. In addition,
nothing has come to the attention of such IP counsel which leads them to believe
that the following statement in the Prospectus contains an untrue statement of a
material fact or omits to state a material fact required to be stated or
necessary to make such statement not misleading: "we also manufacture and sell
patented electrodes."
3. To such counsel's knowledge, the Company and Subsidiary own or
possess sufficient patent rights (the "Patent Rights") reasonably necessary to
conduct their business as now conducted and the expected expiration of any such
Patent Rights would not result in a Material Adverse Change. To such counsel's
knowledge, there is not pending or threatened in writing any action, suit,
proceeding or claim by others (A) challenging the validity or scope of any of
the patent rights held by or licensed to the Company or Subsidiary, or (B)
asserting that any third party patent is infringed by the activities of the
Company or Subsidiary described in the Prospectus whether by the manufacture,
use or sale of any of the Company's or Subsidiary's products or any third
parties' products sold by the Company or Subsidiary. To such IP counsel's
knowledge, the Company's and Subsidiary's discoveries, inventions, products, or
processes referred to in the Registration Statement or Prospectus do not
infringe or conflict with any right or patent of a third party.
4. To such counsel's knowledge, there is not pending or threatened in
writing any action, suit, proceeding or claim by the Company or Subsidiary
asserting infringement on the part of any third party of any material patent(s)
or patent applications held by or licensed to the Company or Subsidiary.
5. Each of the Company and Subsidiary are listed in the records of
the United States Patent and Trademark Office and relevant foreign industrial
property offices as the owner of record of the patents and applications listed
on a schedule to this opinion (the "Inventions"). Such IP counsel is not aware
of any material defect in form regarding the preparation or filing, prosecution
and/or maintenance of the applications and patents on behalf of the Company or
Subsidiary. To such counsel's knowledge, the Inventions are being pursued by
each of the Company and Subsidiary. To such counsel's knowledge, each of the
Company and Subsidiary owns as its sole property the Inventions.
6. The Company and Subsidiary rely on the trademarks, tradenames and
associated good will set forth on a schedule to this opinion (the "Marks"). Each
of the Company and Subsidiary is listed in the records of the United States
Patent and Trademark Office and relevant foreign industrial property offices as
the owner of record of the respective
registrations and applications therefor listed in the Marks. The status of each
registration and applications therefor in the Marks is set forth on such
schedule. To such IP counsel's knowledge, there are no claims or assertions made
by any third party that use of any Marks infringes upon the rights of that third
party.
-2-
ANNEX II
[Attach comfort letter]
