_______________ Shares
LIVINGSTON ENTERPRISES, INC.
COMMON STOCK, no par value
UNDERWRITING AGREEMENT
__________, 1997
_____________, 1997
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Livingston Enterprises, Inc., a California corporation (the
"Company"), proposes to issue and sell to the several Underwriters named in
Schedule II hereto (the "Underwriters"), and certain shareholders of the
Company (the "Selling Shareholders") named in Schedule I hereto severally
propose to sell to the several Underwriters, an aggregate of _______________
shares of the Common Stock, no par value, of the Company (the "Firm Shares").
The Company also proposes to issue and sell to the several
Underwriters not more than an additional ______________ shares of its Common
Stock, no par value, of which _____________ shares are to be issued and sold
by the Company and _____________ shares are to be sold by the Selling
Shareholders, each Selling Shareholder selling the amount set forth opposite
such Selling Shareholder's name in Schedule I hereto (the "Additional
Shares") if and to the extent that you, as Managers of the offering, shall
have determined to exercise, on behalf of the Underwriters, the right to
purchase such shares of common stock granted to the Underwriters in Section 3
hereof. The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares." The shares of Common Stock, no par
value, of the Company to be outstanding after giving effect to the sales
contemplated hereby are hereinafter referred to as the "Common
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Stock." The Company and the Selling Shareholders are hereinafter sometimes
collectively referred to as the "Sellers."
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, including a prospectus, relating
to the Shares. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A
under the Securities Act of 1933, as amended (the "Securities Act"), is
hereinafter referred to as the "Registration Statement"; the prospectus in
the form first used to confirm sales of Shares is hereinafter referred to as
the "Prospectus." If the Company has filed an abbreviated registration
statement to register additional shares of Common Stock pursuant to Rule
462(b) under the Securities Act (the "Rule 462 Registration Statement"), then
any reference herein to the term "Registration Statement" shall be deemed to
include such Rule 462 Registration Statement.
As part of the offering contemplated by this Agreement, Morgan
Stanley & Co. Incorporated ("Morgan Stanley") has agreed to reserve out of
the Shares set forth opposite its name on Schedule II to this Agreement, up
to _____________________ shares, for sale to the Company's employees,
officers, and directors, and other parties associated with the Company
(collectively, "Participants"), as set forth in the Prospectus under the
heading "Underwriting" (the "Directed Share Program"). The Shares to be sold
by Morgan Stanley pursuant to the Directed Share Program (the "Directed
Shares") will be sold by Morgan Stanley pursuant to this Agreement at the
public offering price. Any Directed Shares not orally confirmed for purchase
by any Participants by the end of the first business day after the date on
which this Agreement is executed will be offered to the public by Morgan
Stanley as set forth in the Prospectus.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE CHIEF
EXECUTIVE OFFICER. The Company and the Chief Executive Officer, Steven M.
Willens, represent and warrant to and agree with each of the Underwriters
that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the
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Registration Statement is in effect, and no proceedings for such purpose
are pending before or threatened by the Commission.
(b) (i) The Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any 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, (ii)
the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus
does not contain and, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set
forth in this paragraph 1(b) do not apply to statements or
omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for
use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole.
(d) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own
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its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole; all
of the issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned directly by the Company, free
and clear of all liens, encumbrances, equities or claims.
(e) The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor
any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result
in a material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, except as described
in or contemplated by the Prospectus.
(f) This Agreement has been duly authorized, executed and delivered
by the Company.
(g) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(h) The shares of Common Stock (including the Shares to be sold by
the Selling Shareholders) outstanding prior to the issuance of the Shares
to be sold by the Company have been duly authorized and are validly issued,
fully paid and non-assessable.
(i) The Shares to be sold by the Company have been duly authorized
and, when issued and delivered in accordance
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with the terms of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(j) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or
by-laws of the Company or any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company and
its subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement). Subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, (1) the Company and its subsidiaries have not
incurred any material liability or obligation, direct or contingent, nor
entered into any material transaction not in the ordinary course of
business; (2) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of
any kind on its capital stock other than ordinary and customary dividends
and shares of Common Stock repurchased from employees at the issuance
price pursuant to the Company's 1994 Stock Option Plan; and (3) there
has not been any material change in the capital stock, short-term debt or
long-term debt of the Company and its consolidated subsidiaries, except
in each case as described in or contemplated by the Prospectus.
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(l) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(m) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(n) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(o) The Company and its subsidiaries (i) 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, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants, (ii)
have received all permits, licenses or other approvals required of them
under applicable occupational safety and health and environmental laws to
conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval, except where
such noncompliance with, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals would not, singly or in the aggregate, have
a material adverse effect on the Company and its subsidiaries, taken as a
whole, except as described in or contemplated by the Prospectus.
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(p) There are no costs or liabilities associated with occupational
safety and health and environmental laws (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with occupational safety and health and
environmental laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(q) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company or to require the Company to
include such securities with the Shares registered pursuant to the
Registration Statement.
(r) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as 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 and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such 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 its subsidiaries, in each
case except as described in or contemplated by the Prospectus.
(s) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks with trade
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names currently employed by them in connection with the business
now operated by them, and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in any material adverse
change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
(t) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in or contemplated by
the Prospectus, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could result in any material adverse
change in the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(u) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any such subsidiary has been refused
any insurance coverage sought or applied for; and neither the Company nor
any such subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely
affect the condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.
(v) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are
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executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability; (3) access to assets is permitted only in
accordance with management's general or specific authorization; and
(4) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(w) The Company has not offered, or caused the Underwriters to offer,
Shares to any person pursuant to the Directed Share Program with the
specific intent to unlawfully influence (i) a customer or supplier of the
Company to alter the customer's or supplier's level or type of business
with the Company, or (ii) a trade journalist or publication to write or
publish favorable information about the Company or its products.
(x) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba.
Furthermore, the Company represents and warrants to Morgan Stanley
that (i) the Registration Statement, the Prospectus and any preliminary
prospectus comply, and any further amendments or supplements thereto will
comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share Program,
and that (ii) no authorization, approval, consent, license, order, registration
or qualification of or with any government, governmental instrumentality or
court, other than such as have been obtained, is necessary under the securities
laws and regulations of foreign jurisdictions in which the Directed Shares are
offered outside the United States.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
of the Selling Shareholders represents and warrants to and agrees with each of
the Underwriters that:
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(a) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Shareholder.
(b) The execution and delivery by such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement signed by such Selling Shareholder and
____________, as Custodian, relating to the deposit of the Shares to be
sold by such Selling Shareholder (the "Custody Agreement") and the Power of
Attorney appointing certain individuals as such Selling Shareholder's
attorneys-in-fact to the extent set forth therein, relating to the
transactions contemplated hereby and by the Registration Statement (the
"Power of Attorney") will not contravene any provision of applicable law,
or the certificate of incorporation or by-laws of such Selling Shareholder
(if such Selling Shareholder is a corporation), or any agreement or other
instrument binding upon such Selling Shareholder or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
such Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for
the performance by such Selling Shareholder of its obligations under this
Agreement or the Custody Agreement or Power of Attorney of such Selling
Shareholder, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Shares.
(c) Such Selling Shareholder has, and on the Closing Date will have,
valid title to the Shares to be sold by such Selling Shareholder and the
legal right and power, and all authorization and approval required by law,
to enter into this Agreement, the Custody Agreement and the Power of
Attorney and to sell, transfer and deliver the Shares to be sold by such
Selling Shareholder.
(d) The Shares to be sold by such Selling Shareholder pursuant to
this Agreement have been duly authorized and are validly issued, fully paid
and non-assessable.
(e) The Custody Agreement and the Power of Attorney
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have been duly authorized, executed and delivered by such Selling
Shareholder and are valid and binding agreements of such Selling
Shareholder.
(f) Delivery of the Shares to be sold by such Selling Shareholder
pursuant to this Agreement will pass title to such Shares free and clear of
any security interests, claims, liens, equities and other encumbrances.
(g) (i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain
any 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, (ii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all material
respects with the Securities Act and the applicable rules and regulations
of the Commission thereunder and (iii) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph 2(g) do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
3. AGREEMENTS TO SELL AND PURCHASE. Each Seller, severally and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Seller at $______ a share (the "Purchase
Price") the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
number of Firm Shares to be sold by such Seller as the number of Firm Shares set
forth in Schedule II hereto opposite the name of such Underwriter bears to the
total number of Firm Shares.
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On the basis of the representations and warranties
contained in this Agreement, and subject to its terms and
conditions, the Company agrees to sell to the Underwriters the
Additional Shares, and the Underwriters shall have a one-time right
to purchase, severally and not jointly, up to _______________
Additional Shares at the Purchase Price. If you, on behalf of the
Underwriters, elect to exercise such option, you shall so notify
the Company in writing not later than 30 days after the date of
this Agreement, which notice shall specify the number of Additional
Shares to be purchased by the Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing
Date nor later than ten business days after the date of such
notice. Additional Shares may be purchased as provided in Section
5 hereof solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares. If any Additional
Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject
to such adjustments to eliminate fractional shares as you may
determine) that bears the same proportion to the total number of
Additional Shares to be purchased as the number of Firm Shares set
forth in Schedule II hereto opposite the name of such Underwriter
bears to the total number of Firm Shares.
Each Seller hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, during the period ending 180 days after
the date of the Prospectus, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase
or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the 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 (A) the Shares to be sold hereunder or (B) the issuance by
the Company of shares of Common Stock upon the exercise of an
option
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or warrant or the conversion of a security outstanding on the date
hereof of which the Underwriters have been advised in writing. In
addition, each Selling Shareholder, agrees that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of
the Underwriters, it will not, during the period ending 180 days
after the date of the Prospectus, make any demand for, or exercise
any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or
exchangeable for Common Stock.
4. TERMS OF PUBLIC OFFERING. The Sellers are advised by
you that the Underwriters propose to make a public offering of
their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective as
in your judgment is advisable. The Sellers are further advised by
you that the Shares are to be offered to the public initially at
$_____________ a share (the "Public Offering Price") and to certain
dealers selected by you at a price that represents a concession not
in excess of $______ a share under the Public Offering Price, and
that any Underwriter may allow, and such dealers may reallow, a
concession, not in excess of $_____ a share, to any Underwriter or
to certain other dealers.
5. PAYMENT AND DELIVERY. Payment for the Firm Shares to
be sold by each Seller shall be made to such Seller in Federal or
other funds immediately available in New York City against delivery
of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on ____________,
1997, or at such other time on the same or such other date, not
later than _________, 1997,(1) as shall be designated in writing by
you. The time and date of such payment are hereinafter referred to
as the "Closing Date."
Payment for any Additional Shares shall be made to the
Company in Federal or other funds immediately available in New York
City against delivery of such Additional Shares for the respective
accounts of the several Underwriters at 10:00 A.M., New York City
time, on the date specified in the notice described in Section 3 or
at such other time on the same or on such other
- -------------------------
(1) Insert date 5 business days after the date inserted in the immediately
preceding blank.
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date, in any event not later than _______, 1997,(2) as shall be
designated in writing by you. The time and date of such payment
are hereinafter referred to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares
shall be in definitive form and registered in such names and in
such denominations as you shall request in writing not later than
one full business day prior to the Closing Date or the Option
Closing Date, as the case may be. The certificates evidencing the
Firm Shares and Additional Shares shall be delivered to you on the
Closing Date or the Option Closing Date, as the case may be, for
the respective accounts of the several Underwriters, with any
transfer taxes payable in connection with the transfer of the
Shares to the Underwriters duly paid, against payment of the
Purchase Price therefor.
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The
obligations of the Sellers to sell the Shares to the Underwriters
and the several obligations of the Underwriters to purchase and pay
for the Shares on the Closing Date are subject to the condition
that the Registration Statement shall have become effective not
later than 5:00 p.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject
to the following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating
accorded any of the Company's securities by any "nationally
recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act; and
- ---------------------
(2) Insert date 10 business days after the expiration of the green shoe
option.
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(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations
of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) that,
in your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Wilson, Sonsini, Goodrich & Rosati, outside counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure
to
15
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct
its business as described in the Prospectus and is duly qualified
to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken
as a whole;
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock (including the Shares to be sold
by the Selling Shareholders) outstanding prior to the issuance of the
Shares to be sold by the Company have been duly authorized and are
validly issued, fully paid and non-assessable;
(v) all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned directly by
the Company, free and clear of all liens, encumbrances, equities or
claims;
(vi) the Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the
terms of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject
to any preemptive or similar rights;
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(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company or, to the
best of such counsel's knowledge, any agreement or other instrument
binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or,
to the best of such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may
be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares;
(ix) the statements (A) in the Prospectus under the captions
"Business--Legal Proceedings" (and to the discussions of the
"Settlement" in other portions of the Prospectus incorporated
therein), "Description of Capital Stock" and "Underwriters" and
(B) in the Registration Statement in Items 14 and 15, in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the matters
referred to therein;
(x) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is a party or to which any of
the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or
the Prospectus and are not so described or of any statutes,
regulations, contracts or other documents that are required to be
described in the
17
Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement that are not described or filed as
required;
(xi) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended;
(xii) such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein
as to which such counsel need not express any opinion) comply as to
form in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder, (B)
has no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the Registration Statement and
the prospectus included therein at the time the Registration
Statement became effective contained any
18
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 and (C) has no reason to believe
that (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not
express any belief) the Prospectus contains any untrue statement of
a material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of Wilson, Sonsini, Goodrich & Rosati, counsel for the Selling
Shareholders, dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by or on behalf of each of the Selling Shareholders;
(ii) the execution and delivery by each Selling Shareholder
of, and the performance by such Selling Shareholder of its
obligations under, this Agreement and the Custody Agreement and
Powers of Attorney of such Selling Shareholder will not contravene
any provision of applicable law, or the certificate of
incorporation or by-laws of such Selling Shareholder (if such
Selling Shareholder is a corporation), or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
such Selling Shareholder or, to the best of such counsel's
knowledge, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over such Selling Shareholder,
and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by such Selling Shareholder of its obligations
under this Agreement or the Custody Agreement or Power of Attorney
of such Selling Shareholder, except such as may be required by the
securities or Blue Sky laws of the
19
various states in connection with offer and sale of the Shares;
(iii) each of the Selling Shareholders has valid title to the
Shares to be sold by such Selling Shareholder and the legal right
and power, and all authorization and approval required by law, to
enter into this Agreement and the Custody Agreement and Power of
Attorney of such Selling Shareholder and to sell, transfer and
deliver the Shares to be sold by such Selling Shareholder;
(iv) the Custody Agreement and the Power of Attorney of each
Selling Shareholder have been duly authorized, executed and delivered
by such Selling Shareholder and are valid and binding agreements of
such Selling Shareholder;
(v) delivery of the Shares to be sold by each Selling
Shareholder pursuant to this Agreement will pass title to such Shares
free and clear of any security interests, claims, liens, equities and
other encumbrances; and
(vi) such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein
as to which such counsel need not express any opinion) comply as to
form in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder, (B)
has no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the Registration Statement and
the prospectus included therein at the time the Registration
Statement became effective 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 and (C) has no reason to believe that (except for
financial statements and schedules and other financial
20
and statistical data as to which such counsel need not express any
belief) the Prospectus contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(e) The Underwriters shall have received on the Closing Date an
opinion of Brobeck, Phleger & Harrison LLP, counsel for the Underwriters,
dated the Closing Date, covering the matters referred to in subparagraphs
(vi), (vii), (ix) (but only as to the statements in the Prospectus under
"Description of Capital Stock" and "Underwriters") and (xiii) of paragraph
(c) above.
With respect to subparagraph (xiii) of paragraph (c) above,
Wilson, Sonsini, Goodrich & Rosati and Brobeck, Phleger & Harrison
LLP and with respect to subparagraph (vi) of paragraph (d) above,
Wilson, Sonsini, Goodrich & Rosati, may state that their opinion
and belief are based upon their participation in the preparation of
the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents
thereof, but are without independent check or verification, except
as specified. With respect to paragraph (d) above, Wilson,
Sonsini, Goodrich & Rosati may rely upon an opinion or opinions of
counsel for any Selling Shareholders and, with respect to factual
matters and to the extent such counsel deems appropriate, upon the
representations of each Selling Shareholder contained herein and in
the Custody Agreement and Power of Attorney of such Selling
Shareholder and in other documents and instruments; PROVIDED that
(A) each such counsel for the Selling Shareholders is satisfactory
to your counsel, (B) a copy of each opinion so relied upon is
delivered to you and is in form and substance satisfactory to your
counsel, (C) copies of such Custody Agreements and Powers of
Attorney and of any such other documents and instruments shall be
delivered to you and shall be in form and substance satisfactory to
your counsel and (D) Wilson, Sonsini, Goodrich & Rosati shall state
in their opinion that they are justified in relying on each such
other opinion.
21
The opinions of Wilson, Sonsini, Goodrich & Rosati described in
paragraphs (c) and (d) above (and any opinions of counsel for any Selling
Shareholder referred to in the immediately preceding paragraph) shall be
rendered to the Underwriters at the request of the Company or one or more
of the Selling Shareholders, as the case may be, and shall so state
therein.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance
satisfactory to the Underwriters, from KPMG Peat Marwick LLP
independent public accountants, containing statements and
information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the
Registration Statement and the Prospectus; PROVIDED that the letter
delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and certain shareholders, officers
and directors of the Company relating to sales and certain other
dispositions of shares of Common Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full
force and effect on the Closing Date.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to you on
the Option Closing Date of such documents as you may reasonably
request with respect to the good standing of the Company, the due
authorization and issuance of the Additional Shares and other
matters related to the issuance of the Additional Shares.
7. COVENANTS OF THE COMPANY. In further consideration
of the agreements of the Underwriters herein contained, the Company
covenants with each Underwriter as follows:
(a) To furnish to you, without charge, four
22
signed copies of the Registration Statement (including exhibits
thereto) and for delivery to each other Underwriter a conformed
copy of the Registration Statement (without exhibits thereto) and
to furnish to you in New York City, without charge, prior to 10:00
A.M. New York City time on the business day next succeeding the
date of this Agreement and during the period mentioned in paragraph
(c) below, as many copies of the Prospectus and any supplements and
amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith
to prepare, file with the Commission and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have
been sold by you on behalf of the Underwriters and to any other
dealers upon request, either amendments or supplements to the
Prospectus so that the statements in the Prospectus as so amended
or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with
law.
23
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement
covering the twelve-month period ending ________, 1998(3) that
satisfies the provisions of Section 11(a) of the Securities Act and
the rules and regulations of the Commission thereunder.
(f) That in connection with the Directed Share Program, the
Company will ensure that the Directed Shares will be restricted to
the extent required by the National Association of Securities
Dealers, Inc. (the "NASD") or the NASD rules from sale, transfer,
assignment, pledge or hypothecation for a period of three months
following the date of the effectiveness of the Registration
Statement. You will notify the Company as to which Participants
will need to be so restricted. The Company will direct the
transfer agent to place stop transfer restrictions upon such
securities for such period of time.
(g) To pay all fees and disbursements of counsel incurred by
the Underwriters in connection with the Directed Share Program and
stamp duties, similar taxes or duties or other taxes, if any,
incurred by the Underwriters in connection with the Directed Share
Program.
Furthermore, the Company covenants with you that the
Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction
in which the Directed Shares are offered in connection with the
Directed Share Program.
8. EXPENSES. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is
terminated, the Sellers agree to pay or cause to be paid all
expenses incident to the performance of their obligations under
this Agreement, including: (i) the fees, disbursements and
- -----------------------
(3) Insert date one year after the end of the Company's fiscal quarter in
which the closing will occur.
24
expenses of the Company's counsel, the Company's accountants and counsel for
the Selling Shareholders in connection with the registration and delivery of
the Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration Statement, any
preliminary prospectus, the Prospectus and amendments and supplements to any
of the foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in
the quantities hereinabove specified, (ii) all costs and expenses related to
the transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or Legal Investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under
state securities laws as provided in Section 7(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and
disbursements of counsel to the Underwriters incurred in connection with the
review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all fees and expenses in
connection with the preparation and filing of the registration statement on
Form 8-A relating to the Common Stock and all costs and expenses incident to
listing the Shares on the Nasdaq National Market, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of the
Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including,
without limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company, travel and lodging expenses of the representatives and officers of
the Company and any such consultants, and the cost of any aircraft chartered
in connection with the road show, and (ix) all other costs and expenses
incident to the performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section. It is understood,
however, that except as provided in
25
this Section, Section 9 entitled "Indemnity and Contribution", and the last
paragraph of Section 11 below, the Underwriters will pay all of their costs
and expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
The provisions of this Section shall not supersede or otherwise
affect any agreement that the Sellers may otherwise have for the allocation
of such expenses among themselves.
9. INDEMNITY AND CONTRIBUTION. (a) The Company and, with
respect to Sections (i), (ii) and (iii) of this paragraph 9(a), Steve
Willens, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) (i)
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto); (ii)
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement
or omission based upon information relating to any Underwriter furnished to
the Company in writing by such Underwriter through you expressly for use
therein; (iii) caused by any untrue statement or alleged untrue statement of
a material fact contained in the prospectus wrapper material prepared by or
with the consent of the Company for distribution in foreign jurisdictions in
connection with the Directed Share Program attached to the Prospectus or any
preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statement therein, when considered in conjunction with the
Prospectus or any applicable preliminary prospectus, not misleading; (iv)
caused by the
26
failure of any Participant to pay for and accept delivery of the shares in
the Directed Share Program which, immediately following the effectiveness of
the Registration Statement, were subject to a properly confirmed agreement to
purchase; or (v) related to, arising out of, or in connection with the
Directed Share Program, provided that, the Company shall not be responsible
under this subparagraph (v) for any losses, claim, damages or liabilities (or
expenses relating thereto) that are finally judicially determined to have
resulted from your bad faith or gross negligence.
(b) Each Selling Shareholder agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only with reference to information
relating to such Selling Shareholder furnished in writing by or on behalf of
such Selling Shareholder expressly for use in the Registration Statement, any
preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Selling Shareholders, the
directors of the Company, the officers of the Company who sign the
Registration Statement and each person, if any, who controls the Company or
any Selling Shareholder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection
27
with defending or investigating any such action or claim) caused by any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Underwriter furnished
to the Company in writing by such Underwriter through you expressly for use
in the Registration Statement, any preliminary prospectus, the Prospectus or
any amendments or supplements thereto.
(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to paragraph (a), (b) or (c) of this Section
9, such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying
party shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (i) the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Underwriters and all
persons, if any, who control any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20
28
of the Exchange Act, (ii) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Company, its directors, its
officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either such Section and (iii) the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Selling Shareholders and all persons, if any, who control
any Selling Shareholder within the meaning of either such Section, and that
all such fees and expenses shall be reimbursed as they are incurred. In the
case of any such separate firm for the Underwriters and such control persons
of any Underwriters, such firm shall be designated in writing by Morgan
Stanley & Co. Incorporated. In the case of any such separate firm for the
Company, and such directors, officers and control persons of the Company,
such firm shall be designated in writing by the Company. In the case of any
such separate firm for the Selling Shareholders and such control persons of
any Selling Shareholders, such firm shall be designated in writing by the
persons named as attorneys-in-fact for the Selling Shareholders under the
Powers of Attorney. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are
29
the subject matter of such proceeding. Notwithstanding anything contained
herein to the contrary, if indemnity may be sought pursuant to paragraph (a)
of this Section 9 with regard to the Directed Share Program, then in addition
to such separate firm for the indemnified parties, the indemnifying party
shall be liable for the reasonable fees and expenses of not more than one
separate firm (in addition to any local counsel) for Morgan Stanley & Co.
Incorporated for the defense of any losses, claims, damages and liabilities
arising out of the Directed Share Program, and all persons, if any, who
control Morgan Stanley & Co. Incorporated within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act.
(e) To the extent the indemnification provided for in paragraph
(a), (b) or (c) of this Section 9 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on the
other hand from the offering of the Shares 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 the indemnifying party or
parties on the one hand and of the indemnified party or parties on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Sellers on
the one hand and the Underwriters on the other hand in connection with the
offering of the Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Shares (before
deducting expenses) received by each Seller and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate
Public Offering Price of the Shares. The relative fault of the Sellers on
the one hand and the Underwriters on the other hand shall be
30
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 Sellers or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Underwriters' respective obligations to contribute pursuant to this
Section 9 are several in proportion to the respective number of Shares they
have purchased hereunder, and not joint.
(f) The Sellers and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Section 9 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 that does not take
account of the equitable considerations referred to in paragraph (e) of this
Section 9. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, 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 Section 9, no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages that 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 Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 9 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this
Section 9 and the representations, warranties and other statements of the
Company and the Selling Shareholders contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of
this
31
Agreement, (ii) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, any Selling Shareholder or any person
controlling any Selling Shareholder, or the Company, its officers or
directors or any person controlling the Company and (iii) acceptance of and
payment for any of the Shares.
(h) Notwithstanding any other provision of this Agreement, the
liability of each Selling Shareholder under the representations, warranties
and agrements contained in this Agrement and under the indemnity and other
agrements contained in the provisions of this Section 9 shall be limited to
an amount equal to the initial public offering price of the Selling
Shareholder Shares sold by such Selling Shareholder to the Underwriters minus
the amount of the underwriting discount paid thereon to the Underwriters by
such Selling Shareholder. The Company and such Selling Shareholders may
agree, as among themselves and without limiting the rights of the
Underwriters under this Agrement, as to the respective amounts of such
liability for which they each shall be responsible.
10. TERMINATION. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the
case may be, any of the New York Stock Exchange, the American Stock Exchange,
the National Association of Securities Dealers, Inc., the Chicago Board of
Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of
Trade, (ii) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iv), such event, singly or together with any other
such event, makes it, in your judgment, impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.
11. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase
Shares that it has or they have agreed to purchase hereunder on such date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of the Shares to be purchased on such date,
the other Underwriters shall be obligated severally in the proportions that
the number of Firm Shares set forth opposite their respective names in
Schedule II bears to the aggregate
32
number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase
the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; PROVIDED that in no event shall
the number of Shares that any Underwriter has agreed to purchase pursuant to
this Agreement be increased pursuant to this Section 11 by an amount in
excess of one-ninth of such number of Shares without the written consent of
such Underwriter. If, on the Closing Date, any Underwriter or Underwriters
shall fail or refuse to purchase Firm Shares and the aggregate number of Firm
Shares with respect to which such default occurs is more than one-tenth of
the aggregate number of Firm Shares to be purchased, and arrangements
satisfactory to you, the Company and the Selling Shareholders for the
purchase of such Firm Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Shareholders. In any
such case either you or the relevant Sellers shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that
the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on
the Option Closing Date, any Underwriter or Underwriters shall fail or refuse
to purchase Additional Shares and the aggregate number of Additional Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Additional Shares to be purchased, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation
hereunder to purchase Additional Shares or (ii) purchase not less than the
number of Additional Shares that such non-defaulting Underwriters would have
been obligated to purchase in the absence of such default. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of any Seller to
comply with the terms or to fulfill any of the conditions of this Agreement,
or if for any reason any Seller shall be unable to perform its obligations
under this Agreement, the Sellers will reimburse the Underwriters or such
33
Underwriters as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and
disbursements of their counsel) reasonably incurred by such Underwriters in
connection with this Agreement or the offering contemplated hereunder.
12. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
13. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
14. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
34
Very truly yours,
Livingston Enterprises, Inc.
By_____________________________
Name:
Title:
The Selling Shareholders
named in Schedule I hereto,
acting severally
By_____________________________
Attorney-in-Fact
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company
Acting severally on behalf
of themselves and the
several Underwriters named
herein.
By Morgan Stanley & Co.
Incorporated
35
By___________________________
Name:
Title:
36
SCHEDULE I
Number of Number of
Firm Shares Additional Shares
Selling Shareholder To Be Sold To Be Sold
------------------- ----------- -----------------
[NAMES OF SELLING SHAREHOLDERS]
_______________ _______________
Total........
=============== ===============
SCHEDULE II
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company
_______________
Total ........
===============
EXHIBIT A
LIVINGSTON ENTERPRISES, INC.
LOCK-UP AGREEMENT
May 2, 1997
Morgan Stanley & Co. Incorporated
Hambrecht & Quist LLC
Robertson, Stephens & Company
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs:
The undersigned understands that Morgan Stanley & Co. Incorporated
("Morgan Stanley"), as Representative of the several Underwriters, proposes
to enter into an Underwriting Agreement (the "Underwriting Agreement") with
Livingston Enterprises, Inc., a California corporation (the "Company")
providing for the public offering (the "Public Offering") by the several
Underwriters, including Morgan Stanley (the "Underwriters"), of
______________ shares (the "Shares") of the Common Stock, no par value, of
the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the final
prospectus relating to the Public Offering (the "Prospectus"), (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (provided that such shares or securities are
either now owned by the undersigned or are hereafter acquired prior to or in
connection with the Public Offering), or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of such shares of Common Stock, whether
any such transaction described in clause (1) or (2) 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 sale of any Shares to the
Underwriters pursuant to the Underwriting Agreement. In addition, the
undersigned agrees that, without the prior written consent of Morgan Stanley
on behalf of the Underwriters, it will not, during the period commencing on
the date hereof and ending 180 days after the date of the Prospectus, make
any demand for or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be
made pursuant to an Underwriting Agreement, the terms of which are subject to
agreement between the Company and the Underwriters.
Very truly yours,
---------------------------------
(Name)
---------------------------------
(Address)