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EXHIBIT 1.01
1,800,000 SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
May _____, 1996
HAMBRECHT & QUIST LLC
WESSELS, ARNOLD & HENDERSON, L.L.C.
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, California 94104
Ladies and Gentlemen:
Integrated Systems, Inc., a California corporation (herein called the
Company), proposes to issue and sell 500,000 shares of its authorized but
unissued Common Stock, no par value (herein called the Common Stock), and the
shareholders of the Company named in Schedule II hereto (herein collectively
called the Selling Securityholders) propose to sell an aggregate of 1,300,000
shares of Common Stock of the Company (said 1,800,000 shares of Common Stock
being herein called the Underwritten Stock). In addition to the Underwritten
Stock, Narendra K. Gupta proposes to grant to the Underwriters (as hereinafter
defined) an option to purchase up to 270,000 additional shares of Common Stock
(herein called the Option Stock and with the Underwritten Stock herein
collectively called the Stock). The Common Stock is more fully described in the
Registration Statement and the Prospectus hereinafter mentioned.
The Company and the Selling Securityholders severally hereby confirm
the agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent and
warrant that you have been authorized by each of the other Underwriters to enter
into this Agreement on its behalf and to act for it in the manner herein
provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities
and Exchange Commission (herein called the Commission) a registration statement
on Form S-3 (No. 333-_____), including the related preliminary prospectus, for
the registration under the Securities Act of 1933, as amended (herein called the
Securities Act) of the Stock. Copies of such registration statement and of each
amendment thereto, if any, including the related preliminary prospectus (meeting
the requirements of Rule 430A of the rules and regulations of the Commission)
heretofore filed by the Company with the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean
such registration statement, including all documents incorporated by reference
therein, all exhibits and financial statements, all information omitted
therefrom in reliance upon Rule 430A and contained in the Prospectus referred to
below, in the form in which it became effective, and any registration statement
filed pursuant to Rule 462(b) of the rules and regulations of the Commission
with respect to the Stock (herein called a Rule 462(b) registration statement),
and, in the event of any amendment thereto after the effective date of such
registration statement (herein called the Effective Date), shall also mean (from
and after the effectiveness of such amendment) such registration statement as so
amended (including any Rule 462(b) registration statement). The term Prospectus
as used in this Agreement shall mean the
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(1) Plus an option to purchase from Narendra K. Gupta up to 270,000 additional
shares to cover over-allotments.
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prospectus, including all documents incorporated by reference therein, relating
to the Stock first filed with the Commission pursuant to Rule 424(b) and Rule
430A (or if no such filing is required, as included in the Registration
Statement) and, in the event of any supplement or amendment to such prospectus
after the Effective Date, shall also mean (from and after the filing with the
Commission of such supplement or the effectiveness of such amendment) such
prospectus as so supplemented or amended. The term Preliminary Prospectus as
used in this Agreement shall mean each preliminary prospectus, including all
documents incorporated by reference therein, included in such registration
statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS.
(a) Each of the Company and Narendra K. Gupta (to the best of his
knowledge after reasonable inquiry as to the representations and warranties set
forth in Section 2(a)(vii) below) hereby represents and warrants as follows:
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has full
corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement and the
Prospectus and as being conducted, and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which the
character of the property owned or leased or the nature of the business
transacted by it makes qualification necessary (except where the
failure to be so qualified would not have a material adverse effect on
the business, properties, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole).
(ii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any materially adverse change in the business, properties,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, other than as set
forth in the Registration Statement and the Prospectus, and since such
dates, except in the ordinary course of business, neither the Company
nor any of its subsidiaries has entered into any material transaction
not referred to in the Registration Statement and the Prospectus.
(iii) The Registration Statement and the Prospectus comply,
and on the Closing Date (as hereinafter defined) and any later date on
which Option Stock is to be purchased, the Prospectus will comply, in
all material respects, with the provisions of the Securities Act and
the Securities Exchange Act of 1934, as amended (herein called the
Exchange Act) and the rules and regulations of the Commission
thereunder; on the Effective Date, the Registration Statement did not
contain any untrue statement of a material fact and did not omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the
Effective Date the Prospectus did not and, on the Closing Date and any
later date on which Option Stock is to be purchased, will not contain
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, that none of the representations and warranties in this
subparagraph (iii) shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information herein or otherwise furnished in writing to
the Company by or on behalf of the Underwriters for use in the
Registration Statement or the Prospectus.
(iv) The Stock is duly and validly authorized, is (or, in the
case of shares of the Stock to be sold by the Company, will be, when
issued and sold to the Underwriters as provided herein) duly and
validly
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issued, fully paid and nonassessable and conforms in all material
respects to the description thereof in the Prospectus. No further
approval or authority of the shareholders or the Board of Directors of
the Company will be required for the transfer and sale of the Stock to
be sold by the Selling Securityholders or the issuance and sale of the
Stock as contemplated herein.
(v) The Stock to be sold by the Selling Securityholders is
listed and duly admitted to trading on the Nasdaq National Market, and
prior to the Closing Date the Stock to be issued and sold by the
Company will be authorized for listing by the Nasdaq National Market
upon official notice of issuance.
(vi) The conditions for use of Form S-3, as set forth in the
General Instructions thereto, have been satisfied.
(vii) The Company owns or possess adequate licenses or other
rights to use all patents, copyrights, trademarks, service marks, trade
names, technology and know-how necessary to conduct its business in the
manner described in the Prospectus and, except as disclosed in the
Prospectus, the Company has not received any notice of infringement or
conflict with (and knows of no infringement or conflict with) asserted
rights of others with respect to any patents, copyrights, trademarks,
service marks, trade names, technology and know-how which could result
in any material adverse effect upon the Company and its subsidiaries,
taken as a whole; and, to the Company's and Mr. Gupta's knowledge,
except as disclosed in the Prospectus, the discoveries, inventions,
products or processes of the Company referred to in the Prospectus do
not infringe or conflict with any right or patent of any third party,
or any discovery, invention, product or process which is the subject of
a patent application filed by any third party, known to the Company
which could have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(viii) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(ix) Other than as set forth in the Registration Statement, no
holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the
Company.
(b) Each of the Selling Securityholders hereby represents and warrants
as follows, except Narendra K. Gupta represents and warrants only as set forth
in subsections (i) and (ii) hereof:
(i) Such Selling Securityholder has good and marketable title
to all the shares of Stock to be sold by such Selling Securityholder
hereunder, free and clear of all liens, encumbrances, equities,
security interests and claims whatsoever, with full right and authority
to deliver the same hereunder, subject, in the case of each Selling
Securityholder, to the rights of Chemical Mellon Shareholder Services,
as Custodian (herein called the Custodian), and that upon the delivery
of and payment for such shares of the Stock hereunder, the several
Underwriters will receive good and marketable title thereto, free and
clear of all liens, encumbrances, equities, security interests and
claims whatsoever.
(ii) Certificates in negotiable form for the shares of the
Stock to be sold by such Selling Securityholder have been placed in
custody under a Custody Agreement for delivery under this Agreement
with the Custodian; such Selling Securityholder specifically agrees
that the shares of the Stock represented by the certificates so held in
custody for such Selling Securityholder are subject to the interests of
the several Underwriters and the Company, that the arrangements made by
such Selling Securityholder for such custody, including the Power of
Attorney provided for in such Custody Agreement, are to that extent
irrevocable, and that the obligations of such Selling Securityholder
shall not be terminated by any act of such Selling Securityholder or by
operation of law, whether by the death or incapacity of such Selling
Securityholder or the occurrence of any other event; if any such death,
incapacity, or other such event should occur before the delivery of
such shares of the Stock hereunder, certificates for such shares of the
Stock shall be delivered by the Custodian in accordance with the terms
and conditions of this Agreement
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as if such death, incapacity, or other event had not occurred,
regardless of whether the Custodian shall have received notice of such
death, incapacity, or other event.
(iii) Such Selling Securityholder has reviewed the
Registration Statement and Prospectus and, although such Selling
Securityholder has not independently verified the accuracy or
completeness of all the information contained therein, nothing has come
to the attention of such Selling Securityholder that would lead such
Selling Securityholder to believe that on the Effective Date, the
Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date the Prospectus contained and, on
the Closing Date and any later date on which Option Stock is to be
purchased, contains any untrue statement of a material fact or omitted
or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
500,000 shares of the Underwritten Stock to the several Underwriters, each
Selling Securityholder agrees to sell to the several Underwriters the number of
shares of the Underwritten Stock set forth in Schedule II opposite the name of
such Selling Securityholder, and each of the Underwriters agrees to purchase
from the Company and the Selling Securityholders the respective aggregate number
of shares of Underwritten Stock set forth opposite its name in Schedule I. The
price at which such shares of Underwritten Stock shall be sold by the Company
and the Selling Securityholders and purchased by the several Underwriters shall
be $___ per share. The obligation of each Underwriter to the Company and each of
the Selling Securityholders shall be to purchase from the Company and the
Selling Securityholders that number of shares of the Underwritten Stock which
represents the same proportion of the total number of shares of the Underwritten
Stock to be sold by each of the Company and the Selling Securityholders pursuant
to this Agreement as the number of shares of the Underwritten Stock set forth
opposite the name of such Underwriter in Schedule I hereto represents of the
total number of shares of the Underwritten Stock to be purchased by all
Underwriters pursuant to this Agreement, as adjusted by you in such manner as
you deem advisable to avoid fractional shares. In making this Agreement, each
Underwriter is contracting severally and not jointly; except as provided in
paragraphs (b) and (c) of this Section 3, the agreement of each Underwriter is
to purchase only the respective number of shares of the Underwritten Stock
specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company or the Selling Securityholders shall
immediately give notice thereof to you, and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by you of such notice to
purchase, or procure one or more other Underwriters to purchase, in such
proportions as may be agreed upon between you and such purchasing Underwriter or
Underwriters and upon the terms herein set forth, all or any part of the shares
of the Stock which such defaulting Underwriter or Underwriters agreed to
purchase. If the non-defaulting Underwriters fail so to make such arrangements
with respect to all such shares, the number of shares of the Stock which each
non-defaulting Underwriter is otherwise obligated to purchase under this
Agreement shall be automatically increased on a pro rata basis to absorb the
remaining shares which the defaulting Underwriter or Underwriters agreed to
purchase; provided, however, that the non-defaulting Underwriters shall not be
obligated to purchase the shares which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company and the Selling Securityholders shall have the right, within 24 hours
next succeeding the 24-hour period above referred to, to make arrangements with
other underwriters or purchasers satisfactory to you for purchase of such shares
on the terms herein set forth. In any such case, either you or the Company and
the Selling
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Securityholders shall have the right to postpone the Closing Date determined as
provided in Section 5 hereof for not more than seven business days after the
date originally fixed as the Closing Date pursuant to said Section 5 in order
that any necessary changes in the Registration Statement, the Prospectus or any
other documents or arrangements may be made. If neither the non-defaulting
Underwriters nor the Company and the Selling Securityholders shall make
arrangements within the 24-hour periods stated above for the purchase of all the
shares of the Stock which the defaulting Underwriter or Underwriters agreed to
purchase hereunder, this Agreement shall be terminated without further act or
deed and without any liability on the part of the Company or the Selling
Securityholders to any non-defaulting Underwriter and without any liability on
the part of any non-defaulting Underwriter to the Company or the Selling
Securityholders. Nothing in this paragraph (b), and no action taken hereunder,
shall relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth,
Narendra K. Gupta grants an option to the several Underwriters to purchase,
severally and not jointly, up to 270,000 shares in the aggregate of the Option
Stock from Narendra K. Gupta at the same price per share as the Underwriters
shall pay for the Underwritten Stock. Said option may be exercised only to cover
over-allotments in the sale of the Underwritten Stock by the Underwriters and
may be exercised in whole or in part at any time (but not more than once) on or
before the thirtieth day after the date of this Agreement upon written or
telegraphic notice by you to the Company setting forth the aggregate number of
shares of the Option Stock as to which the several Underwriters are exercising
the option. Delivery of certificates for the shares of Option Stock, and payment
therefor, shall be made as provided in Section 5 hereof. The number of shares of
the Option Stock to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Stock to be purchased by
the several Underwriters as such Underwriter is purchasing of the Underwritten
Stock, as adjusted by you in such manner as you deem advisable to avoid
fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the public offering by the Underwriters of the Stock
to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the public offering and increase or decrease the concessions and
discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the front cover
page and under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed by the Company
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriters to the Company for inclusion in the
Registration Statement, any Preliminary Prospectus, and the Prospectus, and you
on behalf of the respective Underwriters represent and warrant to the Company
that the statements made therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock
and the Option Stock (if the option granted by Section 3(c) hereof shall have
been exercised not later than 7:00 A.M., San Francisco time, on the date two
business days preceding the Closing Date), and payment therefor, shall be made
at the office of Fenwick & West LLP, Two Palo Alto Square, Palo Alto,
California, at 7:00 a.m., San Francisco time, on the [fourth] business day after
the date of this Agreement, or at such time on such other day, not later than
seven full business days after such [fourth] business day, as shall be agreed
upon in writing by the Company, the Selling Securityholders and you. The date
and hour of such delivery and payment (which may be postponed as provided in
Section 3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised
after 7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option
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Stock, and payment therefor, shall be made at the office of Fenwick & West LLP,
Two Palo Alto Square, Palo Alto, California, at 7:00 a.m., San Francisco time,
on the third business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to
the Company or its order, and payment for the Stock purchased from the Selling
Securityholders shall be made to the Custodian, for the account of the Selling
Securityholders, in each case by wire transfer in federal Funds. Such payment
shall be made upon delivery of certificates for the Stock to you for the
respective accounts of the several Underwriters against receipt therefor signed
by you. Certificates for the Stock to be delivered to you shall be registered
in such name or names and shall be in such denominations as you may request at
least one business day before the Closing Date, in the case of Underwritten
Stock, and at least one business day prior to the purchase thereof, in the case
of the Option Stock. Such certificates will be made available to the
Underwriters for inspection, checking and packaging at the offices of Lewco
Securities Corporation, 2 Broadway, New York, New York 10004 on the business
day prior to the Closing Date or, in the case of the Option Stock, by 3:00
p.m., New York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any later
date on which Option Stock is purchased for the account of such Underwriter. Any
such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING SECURITYHOLDERS.
Each of the Company and the Selling Securityholders respectively covenants and
agrees as follows:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A and (ii) not file any amendment to
the Registration Statement or supplement to the Prospectus of which you
shall not previously have been advised and furnished with a copy or to
which you shall have reasonably objected in writing or which is not in
compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the
event of (i) the request by the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, (iii)
the institution or notice of intended institution of any action or
proceeding for that purpose, (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice
of the initiation or threatening of any proceeding for such purpose.
The Company and the Selling Securityholders will make every reasonable
effort to prevent the issuance of such a stop order and, if such an
order shall at any time be issued, to obtain the withdrawal thereof at
the earliest possible moment.
(c) The Company will (i) on or before the Closing Date,
deliver to you a signed copy of the Registration Statement as
originally filed and of each amendment thereto filed prior to the time
the Registration Statement becomes effective and, promptly upon the
filing thereof, a signed copy of each post-effective amendment, if any,
to the Registration Statement (together with, in each case, all
exhibits thereto unless previously furnished to you) and will also
deliver to you, for distribution to the Underwriters, a sufficient
number of additional conformed copies of each of the foregoing (but
without exhibits) so that one copy of each may be distributed to each
Underwriter, (ii) as promptly as possible deliver to you and send to
the several Underwriters, at such office or offices as you may
designate, as many copies of the Prospectus as you may reasonably
request, and (iii) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an Underwriter
or dealer, likewise send to the Underwriters as many additional copies
of the Prospectus and as many copies of any
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supplement to the Prospectus and of any amended prospectus, filed by
the Company with the Commission, as you may reasonably request for the
purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event
relating to or affecting the Company, or of which the Company shall be
advised in writing by you, shall occur as a result of which it is
necessary, in the opinion of counsel for the Company or of counsel for
the Underwriters, to supplement or amend the Prospectus in order to
make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser of the Stock, the
Company will forthwith prepare and file with the Commission a
supplement to the Prospectus or an amended prospectus so that the
Prospectus as so supplemented or amended will not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading. If, after the public offering of the Stock
by the Underwriters and during such period, the Underwriters shall
propose to vary the terms of offering thereof by reason of changes in
general market conditions or otherwise, you will advise the Company in
writing of the proposed variation, and, if in the opinion either of
counsel for the Company or of counsel for the Underwriters such
proposed variation requires that the Prospectus be supplemented or
amended, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus or an amended prospectus
setting forth such variation. The Company authorizes the Underwriters
and all dealers to whom any of the Stock may be sold by the several
Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance
with the applicable provisions of the Securities Act and the applicable
rules and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the
Company will submit to you, for your information, a copy of any
post-effective amendment to the Registration Statement and any
supplement to the Prospectus or any amended prospectus proposed to be
filed.
(f) The Company will cooperate, when and as requested by you,
in the qualification of the Stock for offer and sale under the
securities or blue sky laws of such jurisdictions as you may designate
and, during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, in keeping such qualifications
in good standing under said securities or blue sky laws; provided,
however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will,
from time to time, prepare and file such statements, reports, and other
documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for
distribution of the Stock.
(g) During a period of five years commencing with the date
hereof, the Company will furnish to you, and to each Underwriter who
may so request in writing, copies of all periodic and special reports
furnished to shareholders of the Company and of all information,
documents and reports filed with the Commission.
(h) Not later than the 45th day following the end of the
fiscal quarter first occurring after the first anniversary of the
Effective Date, the Company will make generally available to its
security holders an earnings statement in accordance with Section 11(a)
of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident
to the performance of its and the Selling Securityholders' obligations
under this Agreement, including all costs and expenses incident to (i)
the preparation, printing and filing with the Commission and the
National Association of Securities Dealers, Inc. ("NASD") of the
Registration Statement, any Preliminary Prospectus and the Prospectus,
(ii) the furnishing to the Underwriters of copies of any Preliminary
Prospectus and of the several documents required by paragraph (c) of
this Section 6 to be so furnished, (iii) the printing of this
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Agreement and related documents delivered to the Underwriters, (iv) the
preparation, printing and filing of all supplements and amendments to
the Prospectus referred to in paragraph (d) of this Section 6, (v) the
furnishing to you and the Underwriters of the reports and information
referred to in paragraph (g) of this Section 6 and (vi) the printing
and issuance of stock certificates, including the transfer agent's
fees. The Selling Securityholders will pay any transfer taxes incident
to the transfer to the Underwriters of the shares the Stock being sold
by the Selling Securityholders. The Company will pay any fees for
listing any Stock on the Nasdaq National Market not already listed
thereon.
(j) The Company agrees to reimburse you, for the account of
the several Underwriters, for blue sky fees and related disbursements
(including counsel fees and disbursements and cost of printing
memoranda for the Underwriters) paid by or for the account of the
Underwriters or their counsel in qualifying the Stock under state
securities or blue sky laws and in the review of the offering by the
NASD.
(k) The provisions of paragraphs (i) and (j) of this Section
are intended to relieve the Underwriters from the payment of the
expenses and costs which the Company and the Selling Securityholders
hereby agree to pay and shall not affect any agreement which the
Company and the Selling Securityholders may make, or may have made, for
the sharing of any such expenses and costs.
(l) The Company and each of the Selling Securityholders hereby
agrees that, without the prior written consent of Hambrecht & Quist LLC
acting alone or each of Hambrecht & Quist LLC and Wessels, Arnold &
Henderson, L.L.C. acting jointly, the Company or such Selling
Securityholder, as the case may be, will not, for a period of 90 days
following the Effective Date, directly or indirectly, (i) sell, offer,
contract to sell, make any short sale, pledge, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for or any rights to purchase or
acquire Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences
or ownership of Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock
or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to the Stock to be sold to the Underwriters pursuant to
this Agreement or to any stock issued and sold pursuant to any employee
benefit plan of the Company described in the Prospectus or in any
merger or acquisition; provided, however, that the total number of
shares of Common Stock or securities convertible, exchangeable or
exercisable for Common Stock issued in such merger or acquisition shall
not exceed 5% of the total number of shares of Common Stock then
outstanding unless the persons to whom such shares or securities are
issued agree to restrictions on the disposition of such shares or
securities substantially similar in form and duration to those set
forth in this paragraph.
(o) The Company is familiar with the Investment Company Act of
1940, as amended, and has in the past conducted its affairs, and will
in the future conduct its affairs, in such a manner to ensure that the
Company was not and will not be an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section 7, the
Company and the Selling Securityholders jointly and severally agree to indemnify
and hold harmless each Underwriter and each person (including each partner or
officer thereof) who controls any Underwriter within the meaning of Section 15
of the Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Securities Exchange Act of
1934, as amended (herein called the Exchange Act), or the common law or
otherwise, and the Company and the Selling Securityholders jointly and severally
agree to reimburse each such Underwriter and controlling person for any legal or
other expenses (including, except as otherwise hereinafter provided, reasonable
fees and disbursements
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of counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding which may
be brought against, the respective indemnified parties, in each case arising out
of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (including the Prospectus
as part thereof and any Rule 462(b) registration statement) or any
post-effective amendment thereto (including any Rule 462(b) registration
statement), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
and the Selling Securityholders contained in this paragraph (a) shall not apply
to any such losses, claims, damages, liabilities or expenses if such statement
or omission was made in reliance upon and in conformity with information
furnished as herein stated or otherwise furnished in writing to the Company by
or on behalf of any Underwriter for use in any Preliminary Prospectus or the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, (2) the indemnity agreement contained in this paragraph (a)
with respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Stock which is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
(excluding the documents incorporated therein by reference) and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented) unless the failure is the result of noncompliance by the Company
with paragraph (c) of Section 6 hereof. The indemnity agreements of the Company
and the Selling Securityholders contained in this paragraph (a) and the
representations and warranties of the Company and the Selling Securityholders
contained in Section 2 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its officers who signs the Registration Statement on his
own behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, and the Selling Securityholders from and against any
and all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement) or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto) or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished as herein stated or otherwise
furnished in writing to the Company by or on behalf of such indemnifying
Underwriter for use in any Preliminary Prospectus or the Registration Statement
or the Prospectus or any such amendment thereof or supplement thereto. The
indemnity agreement of each Underwriter contained in this paragraph (b) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the delivery of
and payment for the Stock.
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(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall not
relieve such indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise than on account
of such indemnity agreement. Any indemnifying party shall be entitled at its own
expense to participate in the defense of any action, suit or proceeding against,
or investigation or inquiry of, an indemnified party. Any indemnifying party
shall be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (herein called the Notice of Defense) to the
indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. If, within a reasonable time after receipt of
the Notice, an indemnifying party gives a Notice of Defense and the counsel
chosen by the indemnifying party or parties is reasonably satisfactory to the
indemnified party or parties, the indemnifying party or parties will not be
liable under paragraphs (a) through (c) of this Section 7 for any legal or other
expenses subsequently incurred by the indemnified party or parties in connection
with the defense of the action, suit, investigation, inquiry or proceeding,
except that (A) the indemnifying party or parties shall bear the legal and other
expenses incurred in connection with the conduct of the defense as referred to
in clause (i) of the proviso to the preceding sentence and (B) the indemnifying
party or parties shall bear such other expenses as it or they have authorized to
be incurred by the indemnified party or parties. If, within a reasonable time
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Securityholders on the one hand and the Underwriters on
the other shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Stock received by the Company and the
Selling Securityholders and the total underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus,
bear to the aggregate public offering price of the Stock. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by each indemnifying party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.
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The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation or preparing to defend or defending against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Stock purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) No indemnifying party will, without the prior written consent of
the indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any person who controls such indemnified party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is
a party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party and each such controlling person from all liability arising out of such
claim, action, suit or proceeding.
(f) The liability of each Selling Securityholder, under such Selling
Securityholder's representations and warranties contained in Section 2 hereof
and under the indemnity, contribution and reimbursement agreements contained in
the provisions of this Section 7 and Section 11 hereof shall be limited to the
lesser of (i) an amount equal to the price of the Stock sold by such Selling
Securityholder to the Underwriters as set forth in paragraph (a) of Section 3
hereof or (ii) his pro rata portion of the liability hereunder calculated by
multiplying the total liability by a fraction, the numerator of which is the
number of shares of Stock sold by such Selling Securityholder and the
denominator of which is the total number of shares of Stock sold hereunder. The
Company and the Selling Securityholders may agree, as among themselves and
without limiting the rights of the Underwriters under this Agreement, as to the
respective amounts of such liability for which they each shall be responsible.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States on
or after the date hereof, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States would, in the
Underwriters' reasonable judgment, make the offering or delivery of the Stock
impracticable, (iii) a suspension of trading in securities generally or a
material adverse decline in the value of securities generally on the New York
Stock Exchange, the American Stock Exchange, or The Nasdaq Stock Market, or
limitations on prices (other than limitations on hours or numbers of days of
trading) for securities on either such exchange or system, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of, or commencement of any proceeding or investigation
by, any court, legislative body, agency or other governmental
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authority which in the Underwriters' reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which
causes a material adverse decline in the value of securities on the New York
Stock Exchange, the American Stock Exchange, or The Nasdaq Stock Market. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company or the Selling Securityholders to the Underwriters and
no liability of the Underwriters to the Company or the Selling Securityholders;
provided, however, that in the event of any such termination the Company and the
Selling Securityholders agree to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of the
Company and the Selling Securityholders under this Agreement, including all
costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Option Stock is to be purchased, as the case may be,
and to the following further conditions:
(a) The Registration Statement shall have become effective;
and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings therefor shall be pending or threatened by
the Commission.
(b) The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing
the Stock, all corporate proceedings and other legal matters incident
to the foregoing, and the form of the Registration Statement and of the
Prospectus (except as to the financial statements, supporting schedules
footnotes and other financial and statistical information contained
therein), shall have been approved at or prior to the Closing Date by
Morrison & Foerster LLP, counsel for the Underwriters.
(c) You shall have received from Fenwick & West LLP, counsel
for the Company and the Selling Securityholders, an opinion, addressed
to the Underwriters and dated the Closing Date, covering the matters
set forth in Annex A hereto, respectively, and if Option Stock is
purchased at any date after the Closing Date, additional opinions from
each such counsel, addressed to the Underwriters and dated such later
date, confirming that the statements expressed as of the Closing Date
in such opinions remain valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date,
the statements made in the Registration Statement and the Prospectus
were true and correct and neither the Registration Statement nor the
Prospectus omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein,
respectively, not misleading, (ii) since the Effective Date, no event
has occurred which should have been set forth in a supplement or
amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein,
there has not been any material adverse change or any development
involving a prospective material adverse change in or affecting the
business, properties, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, and,
since such dates, except in the ordinary course of business, neither
the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained
therein, (iv) neither the Company nor any of its subsidiaries has any
material contingent obligations which are not disclosed in the
Registration Statement and the Prospectus, (v) there are not any
pending or known threatened legal proceedings to which the Company or
any of its subsidiaries is a party or of which property of the Company
or any of its subsidiaries is the subject which are material and which
are not disclosed in the Registration Statement and the Prospectus,
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(vi) there are not any franchises, contracts, leases or other documents
which are required to be filed as exhibits to the Registration
Statement which have not been filed as required, (vii) the
representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later
date on which Option Stock is to be purchased, as the case may be, and
(viii) there has not been any material change in the market for
securities in general or in political, financial or economic conditions
from those reasonably foreseeable as to render it impracticable in your
reasonable judgment to make a public offering of the Stock, or a
material adverse decline in the value of securities generally which
render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any
later date on which Option Stock is purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by the
President and the Chief Financial Officer of the Company, stating that
the respective signers of said certificate have carefully examined the
Registration Statement in the form in which it originally became
effective and the Prospectus contained therein and any supplements or
amendments thereto, and that the statements included in clauses (i)
through (vii) of paragraph (d) of this Section 9 are true and correct.
(f) You shall have received from Coopers & Lybrand L.L.P., a
letter or letters, addressed to the Underwriters and dated the Closing
Date and any later date on which Option Stock is purchased, confirming
that they are independent public accountants with respect to the
Company within the meaning of the Securities Act and the applicable
published rules and regulations thereunder and based upon the
procedures described in their letter delivered to you concurrently with
the execution of this Agreement (herein called the Original Letter),
but carried out to a date not more than three business days prior to
the Closing Date or such later date on which Option Stock is purchased
(i) confirming, to the extent true, that the statements and conclusions
set forth in the Original Letter are accurate as of the Closing Date or
such later date, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in
the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of the Original
Letter or to reflect the availability of more recent financial
statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or
affecting the business or properties of the Company or any of its
subsidiaries which, in your reasonable judgment, makes it impractical
or inadvisable to proceed with the public offering of the Stock or the
purchase of the Option Stock as contemplated by the Prospectus.
(g) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the
qualification referred to in paragraph (f) of Section 6 hereof.
(h) Prior to the Closing Date, the Stock to be issued and sold
by the Company shall have been duly authorized for listing by the
Nasdaq National Market upon official notice of issuance.
(i) On or prior to the Closing Date, you shall have received
from each of Thomas Kailath and the Selling Securityholders agreements,
in form reasonably satisfactory to Hambrecht & Quist LLC, stating that
without the prior written consent of Hambrecht & Quist LLC acting alone
or each of Hambrecht & Quist LLC and Wessels, Arnold & Henderson L.L.C.
acting jointly, such person or entity will not, for a period of 90 days
following the Effective Date, directly or indirectly, (i) sell, offer,
contract to sell, make any short sale, pledge, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for or any rights to purchase or
acquire Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences
or ownership of Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock
or such other securities, in cash or otherwise.
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All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Morrison & Foerster LLP, counsel for the Underwriters,
shall be reasonably satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; provided, however, that (i) in the event of such
termination, the Company and the Selling Securityholders agree to indemnify and
hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholders
under this Agreement, including all costs and expenses referred to in paragraphs
(i) and (j) of Section 6 hereof, and (ii) if this Agreement is terminated by you
because of any refusal, inability or failure on the part of the Company or the
Selling Securityholders to perform any agreement herein, to fulfill any of the
conditions herein, or to comply with any provision hereof other than by reason
of a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not
be fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholders; provided, however, that in the event of any such termination
the Company and the Selling Securityholders jointly and severally agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement (and subject, in the case of a
Selling Securityholder, to the provisions of paragraph (f) of Section 7), the
Company and the Selling Securityholders hereby jointly and severally agree to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company, the Selling Securityholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholders and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.
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13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush Street,
San Francisco, California 94104; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office, 3260 Jay Street, Santa Clara,
California 95054-3309, Attention: Chief Financial Officer; and if to the Selling
Securityholders, shall be mailed, telegraphed or delivered to the Selling
Securityholders in care of Narenda Gupta at 3260 Jay Street, Santa Clara,
California 95054-3309. All notices given by telegraph shall be promptly
confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or the Selling Securityholders or their respective directors or
officers, and (c) delivery and payment for the Stock under this Agreement;
provided, however, that if this Agreement is terminated prior to the Closing
Date, the provisions of paragraph (l) of Section 6 hereof shall be of no further
force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
Please sign and return to the Company and to the Selling
Securityholders in care of the Company the enclosed duplicates of this letter,
whereupon this letter will become a binding agreement among the Company, the
Selling Securityholders and the several Underwriters in accordance with its
terms.
Very truly yours,
INTEGRATED SYSTEMS, INC.
By ___________________________________
David P. St. Charles
President, Chief Executive Officer
SELLING SECURITYHOLDERS:
Narendra K. Gupta
David P. St. Charles
Marco Thompson
By ___________________________________
[Attorney-in-Fact]
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
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WESSELS, ARNOLD & HENDERSON, L.L.C.
By Hambrecht & Quist LLC
By ___________________________
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
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SCHEDULE I
UNDERWRITERS
NUMBER OF SHARES
UNDERWRITERS TO BE PURCHASED
Hambrecht & Quist LLC......................................... 900,000
Wessels, Arnold & Henderson, L.L.C............................ 900,000
---------
Total......................................................... 1,800,000
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SCHEDULE II
SELLING SECURITYHOLDERS
NAME OF SELLING SECURITYHOLDERS NUMBER OF SHARES
TO BE SOLD
Narendra and Vinita Gupta............................. 1,020,000
David P. St. Charles.................................. 160,000
Marco Thompson........................................ 120,000
---------
Total................................................. 1,300,000
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ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF FENWICK & WEST LLP
COUNSEL FOR THE COMPANY
AND THE SELLING SECURITYHOLDERS
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, is duly
qualified as a foreign corporation and in good standing in each state
of the United States of America in which its ownership or leasing of
property requires such qualification (except where the failure to be so
qualified would not have a material adverse effect on the business,
properties, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole), and has full corporate power
and authority to own or lease its properties and conduct its business
as described in the Registration Statement; all the issued and
outstanding capital stock of each of the subsidiaries of the Company
has been duly authorized and validly issued and is fully paid and
nonassessable, and is owned by the Company free and clear of all liens,
encumbrances and security interests, and to the best of such counsel's
knowledge, no options, warrants or other rights to purchase, agreements
or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in such
subsidiaries are outstanding;
(ii) the authorized capital stock of the Company consists of
shares of Common Stock, $ - par value, of which there are
outstanding shares (including the Underwritten Stock plus the
number of any shares of Option Stock issued on the date hereof);
proper corporate proceedings have been taken validly to authorize such
authorized capital stock; all of the outstanding shares of such
capital stock (including the Underwritten Stock and the shares of
Option Stock issued, if any) have been duly and validly issued and
are fully paid and nonassessable; any Option Stock purchased after
the Closing Date, when issued and delivered to and paid for by the
Underwriters as provided in the Underwriting Agreement, will have been
duly and validly issued and be fully paid and nonassessable; and no
preemptive rights of, or rights of refusal in favor of,
securityholders exist with respect to the Stock, or the issue and
sale thereof, pursuant to the Articles of Incorporation or Bylaws of
the Company and, to the knowledge of such counsel, there are no
contractual preemptive rights that have not been waived, rights of
first refusal or rights of co-sale which exist with respect to the
Stock being sold by the Selling Securityholders or the issue and sale
of the Stock;
(iii) the Registration Statement has become effective under
the Securities Act and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement
or suspending or preventing the use of the Prospectus is in effect and
no proceedings for that purpose have been instituted or are pending or
contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as
to the financial statements and schedules and other financial data
contained therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Securities Act, the Exchange Act and with the rules and regulations of
the Commission thereunder;
(v) such counsel have no reason to believe that the
Registration Statement (except as to the financial statements and
schedules and other financial data contained or incorporated by
reference therein, as to which such counsel need not express any
opinion or belief) at the Effective Date contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus (except as to the financial
statements and schedules and other financial data contained or
incorporated by reference therein, as to which such counsel need not
express any opinion or belief) as of its date or at the Closing Date
(or any later date on which Option Stock is purchased), contained or
contains any untrue statement of a material
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fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading;
(vi) the information required to be set forth in the
Registration Statement in answer to Items 9 and 10 (insofar as it
relates to such counsel) of Form S-3 is to the best of such counsel's
knowledge accurately and adequately set forth therein in all material
respects or no response is required with respect to such Items, and, to
the best of such counsel's knowledge, the description of the Company's
stock option plans and the options granted and which may be granted
thereunder set forth or incorporated by reference in the Prospectus
accurately and fairly presents the information required to be shown
with respect to said plans and options to the extent required by the
Securities Act and the rules and regulations of the Commission
thereunder;
(vii) The statements under the captions "Risk Factors --
Acquisition-Related Risks," "Risk Factors -- Risk of Product Defect;
Product and Other Liability," "Risk Factors -- Limited Protection of
Proprietary Technology" "Risk Factors --Dependence on Licenses from
Third Parties," "Risk Factors --Concentration of Stock Ownership,"
"Business-Proprietary Rights," and "Selling Shareholders" in the
Prospectus and the Registration Statement insofar as such statements
constitute a summary of legal matters, documents or proceedings
referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings;
(viii) such counsel do not know of any franchises, contracts,
leases, documents or legal proceedings, pending or threatened, which in
the opinion of such counsel are of a character required to be described
in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement, which are not described and
filed as required;
(ix) the Underwriting Agreement has been duly authorized,
executed and delivered by the Company;
(x) based insofar as factual matters are concerned solely upon
certificates of the Selling Securityholders, the accuracy of which we
have no reason to question, (A) the Underwriting Agreement has been
duly executed and delivered by or on behalf of each of the Selling
Securityholders; (B) the Custody Agreement between the Selling
Securityholders and - , as Custodian, and the Power of Attorney
referred to in such Custody Agreement have been duly executed and
delivered by such Selling Securityholder; (C) the Custody Agreement
entered into by, and the Power of Attorney given by, such Selling
Securityholder is valid and binding on such Selling Securityholder; and
(D) each Selling Securityholder has full legal right and authority to
enter into the Underwriting Agreement and to sell, transfer and deliver
in the manner provided in the Underwriting Agreement the shares of
Stock sold by such Selling Securityholder hereunder;
(xi) the issue and sale by the Company of the shares of Stock
sold by the Company as contemplated by the Underwriting Agreement will
not conflict with, or result in a breach of, the Articles of
Incorporation or Bylaws of the Company or any of its subsidiaries or
any agreement or instrument known to such counsel to which the Company
or any of its subsidiaries is a party or any applicable law or
regulation, or so far as is known to such counsel, any order, writ,
injunction or decree, of any jurisdiction, court or governmental
instrumentality;
(xii) all holders of securities of the Company having rights
to the registration of shares of Common Stock, or other securities,
because of the filing of the Registration Statement by the Company have
waived such rights or such rights have expired by reason of lapse of
time following notification of the Company's intent to file the
Registration Statement;
(xiii) good and marketable title to the shares of Stock sold
by the Selling Securityholders under the Underwriting Agreement, free
and clear of all liens, encumbrances, equities, security interests and
claims, has been transferred to the Underwriters who have severally
purchased such shares of Stock under
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the Underwriting Agreement, assuming for the purpose of this opinion
that the Underwriters purchased the same in good faith without notice
of any adverse claims;
(xiv) based insofar as factual matters with respect to the
stock to be sold by the Selling Securityholders are concerned solely
upon certificates of the Selling Securityholders, the accuracy of which
such counsel have no reason to question,] no consent, approval,
authorization or order of any court or governmental agency or body is
required for the consummation of the transactions contemplated in the
Underwriting Agreement, except such as have been obtained under the
Securities Act and such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the
Stock by the Underwriters; and
(xv) the Stock sold by the Selling Securityholders is listed
and duly admitted to trading on the Nasdaq National Market, and the
Stock issued and sold by the Company will been duly authorized for
listing by the Nasdaq National Market upon official notice of issuance.
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