Exhibit 1
3,500,000 Shares(1)
Deckers Outdoor Corporation
Common Stock
($.01 Par Value)
EQUITY UNDERWRITING AGREEMENT
April __, 2004
RBC Capital Markets Corporation
Piper Jaffray & Co.
As the Representatives of the
several underwriters named in Schedule I hereto
c/o RBC Capital Markets
60 South Sixth Street
Minneapolis, MN 55402
Ladies and Gentlemen:
Deckers Outdoor Corporation, a Delaware corporation (the "Company"),
and certain stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose to sell to the several underwriters (the
"Underwriters") named in Schedule I hereto for whom you are acting as
representatives (the "Representatives") an aggregate of 3,500,000 shares of the
Company's Common Stock, $.01 par value (the "Firm Shares"), of which 1,500,000
shares (the "Company Shares") will be sold by the Company and 2,000,000 shares
will be sold by the Selling Stockholders. The respective amounts of the Firm
Shares to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Selling Stockholders also propose to sell
at the Underwriters' option an aggregate of up to 525,000 additional shares of
the Company's Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company and the Selling
Stockholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b)
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1 Plus an option to purchase up to 525,000 additional shares to cover
over-allotments.
that the several Underwriters are willing, acting severally and not jointly, to
purchase the numbers of Firm Shares set forth opposite their respective names in
Schedule I, plus their pro rata portion of the Option Shares if you elect to
exercise the over-allotment option in whole or in part for the accounts of the
several Underwriters. The Firm Shares and the Option Shares (to the extent the
aforementioned option is exercised) are herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to each of the
Underwriters as follows:
(a) A registration statement on Form S-3 (File No. 333-113237)
with respect to the Shares has been prepared by the Company in conformity in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") and has been filed
with the Commission. The Company has complied with the conditions for the use of
Form S-3. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, together with copies of all documents
expressly incorporated therein by reference, have heretofore been delivered by
the Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all documents expressly incorporated therein by reference as of the date of the
Prospectus referred to below and all information omitted therefrom in reliance
upon Rule 430A and contained in the Prospectus referred to below, has become
effective under the Act and no post-effective amendment to the Registration
Statement has been filed as of the date of this Agreement. "Prospectus" means
the form of prospectus first filed with the Commission pursuant to Rule 424(b),
including all documents expressly incorporated therein by reference as of the
date of such form of prospectus. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein referred
to as a "Preliminary Prospectus."
(b) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements that are required to be stated therein by, and will
conform to, the requirements of the Act and the Rules and Regulations. The
Registration Statement when it became effective did not contain, and any
amendment or supplement thereto will not contain, any untrue statement of a
material fact and do not omit, and will not omit, to
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state any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representatives, specifically for use in the
preparation thereof. Such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects. Each document filed or to be filed pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in
the Registration Statement and the Prospectus complied or will comply when so
filed with the Exchange Act and the Rules and Regulations in all material
respects.
(c) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid, legal, and binding obligation
of the Company, enforceable in accordance with its terms, except as rights to
indemnity hereunder may be limited by federal or state securities laws and
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally, and
subject to general principles of equity. The Company has full power and
authority to enter into this Agreement and to authorize, issue and sell the
Company Shares as contemplated by this Agreement.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. Each of the
subsidiaries of the Company, as listed in Exhibit A hereto (collectively, the
"Subsidiaries"), has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement. The
Subsidiaries are the only subsidiaries, direct or indirect, of the Company. The
Company and each of the Subsidiaries are duly qualified to transact business and
are in good standing in all jurisdictions in which the conduct of their business
requires such qualification except where the failure to be so qualified or to be
in good standing would not have a material adverse effect on the condition
(financial or otherwise), properties, assets, liabilities, rights, operations,
earnings, business, management or prospects of the Company and its Subsidiaries
taken as a whole, whether or not arising from transactions in the ordinary
course of business (a "Material Adverse Effect"). The outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and to the extent shown in Exhibit A
hereto are wholly owned by the Company or another Subsidiary free and clear of
all liens, encumbrances and equities and claims except as otherwise disclosed in
the Prospectus; and 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 the Subsidiaries are
outstanding.
(e) The outstanding shares of Common Stock of the Company,
including all outstanding shares to be sold by the Selling Stockholders, have
been duly authorized and validly issued and are fully paid and non-assessable;
other than the rights to purchase 1/100 of a share of
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Series B Junior Participating Preferred Stock, par value $0.01 per share issued
pursuant to the Rights Agreement, dated as of November 12, 1998 (the "Rights
Agreement"), and as otherwise described in the Registration Statement, 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 the Company are outstanding; the Company Shares and
the Shares to be sold by the Selling Stockholders following the exercise of
stock options by them have been duly authorized and, when issued and paid for as
contemplated herein or in the applicable stock option agreement, will be validly
issued, fully paid and non-assessable; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue and sale thereof. Neither
the filing of the Registration Statement nor the offering or sale of the Shares
as contemplated by this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to the registration of any
shares of Common Stock.
(f) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct as of the date set forth
therein. All of the Shares conform to the description thereof contained in the
Registration Statement. The form of certificates for the Shares conforms to the
corporate law of the State of Delaware. Immediately after the issuance and sale
of the Shares to the Underwriters, no shares of Preferred Stock of the Company
shall be issued and outstanding and except as provided in the Rights Agreement
no holder of any shares of capital stock, securities convertible into or
exchangeable or exercisable for capital stock or options, warrants or other
rights to purchase capital stock or any other securities of the Company shall
have any existing or future right to acquire any shares of Preferred Stock of
the Company.
(g) The Company has not distributed and will not distribute
any prospectus or other offering material (including, without limitation,
content on the Company's website that may be deemed to be a prospectus or other
offering material) in connection with the offering and sale of the Shares other
than any Preliminary Prospectus or the Prospectus or other materials permitted
by the Act to be distributed by the Company.
(h) The consolidated financial statements of the Company and
the Subsidiaries, together with related notes and schedules as set forth or
incorporated by reference in the Registration Statement, present fairly the
financial position and the results of operations and cash flows of the Company
and the consolidated Subsidiaries, at the indicated dates and for the indicated
periods. Such financial statements and related notes and schedules comply in all
material respects as to form with the Rules and Regulations with respect thereto
and have been prepared in accordance with U.S. generally accepted accounting
principles, consistently applied throughout the periods involved, except as
disclosed therein, and all adjustments necessary for a fair presentation of
results for such periods have been made. No other financial statements or
supporting schedules are required to be included in the Registration Statement.
The summary financial and statistical data included or incorporated by reference
in the Registration Statement presents fairly the information shown therein, and
such data has been compiled on a basis consistent with the financial statements
presented therein and the books and records of the Company. The pro forma
financial information and related notes thereto included in the Registration
Statement and the Prospectus present fairly the information shown therein, have
been prepared in all material respects in
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accordance with the Act and the rules of the Commission with respect to pro
forma financial information, have been prepared on a basis consistent with the
historical financial statements of the Company and have been compiled on the pro
forma bases described therein, and (i) the assumptions underlying the pro forma
adjustments are reasonable, (ii) such adjustments are appropriate to give effect
to the transactions or circumstances referred to therein and have been properly
applied to the historical amounts in the compilation of such statements and
(iii) such statements fairly present the pro forma results of operations and
information purported to be shown therein for the respective periods therein
specified based on the assumptions identified therein. The financial information
included in the Prospectus included under the captions "Summary Consolidated
Financial Data," "Capitalization," "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," (and any amendment or supplement thereto) present fairly in
accordance with GAAP the information shown therein (except for non-GAAP
financial measures and ratios which have been presented in compliance with
Regulation G) and have been compiled on a basis consistent with that of the
audited and unaudited financial statements from which they were derived.
(i) Except (i) as described in the Registration Statement and
the Prospectus, (ii) as reflected in the Company's audited balance sheet at
December 31, 2003 or liabilities described in any notes thereto (or liabilities
for which neither accrual nor footnote disclosure is required pursuant to GAAP)
or (iii) for liabilities incurred in the ordinary course of business since
December 31, 2003 consistent with past practice, neither the Company nor any
subsidiary has any material liabilities or obligations of any nature. Except as
described in the Registration Statement and the Prospectus, neither the Company
nor any subsidiary has engaged in or effected any transaction or arrangement
that would constitute an "off-balance sheet arrangement" (as defined in Item 303
of Regulation S-K of the Commission).
(j) The Company and the Subsidiaries maintain disclosure
controls and procedures (as defined in Rule 13a-15(e) of the Commission) that
are designed to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and forms; the Company and the Subsidiaries maintain internal
control over financial reporting (as defined in Rule 13a-15(f) of the
Commission) sufficient to provide reasonable assurance regarding the (i)
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, (ii) maintenance of records that
in reasonable detail accurately and fairly reflect transactions and dispositions
of the assets of the Company and the Subsidiaries, (iii) recording of
transactions as necessary to permit preparation of financial statements in
accordance with GAAP and that receipts and expenditures of the Company and the
Subsidiaries are being made only in accordance with authorizations of management
and directors of the Company or the applicable Subsidiary, and (iv) prevention
or timely detection of unauthorized acquisition, use or disposition of the
Company's or the Subsidiaries' assets that could have a material effect on the
financial statements; the Company's management evaluates, with the participation
of the Company's principal executive and principal financial officers, or
persons performing similar functions, (i)
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the effectiveness of the Company's and the Subsidiaries' disclosure controls and
procedures as of the end of each fiscal quarter, and (ii) any change in the
Company's or the Subsidiaries' internal control over financial reporting that
occurred during each of the Company's fiscal quarters that has materially
affected, or is reasonably likely to materially affect, the Company's or the
Subsidiaries' internal control over financial reporting.
(k) KPMG LLP, which has certified certain financial statements
of the Company and delivered its opinion with respect to the audited financial
statements and schedules included in the Registration Statement and the
Prospectus, are independent public accountants with respect to the Company as
required by the Act and the Rules and Regulations.
(l) There is no action, suit, claim or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise, which if
determined adversely to the Company or any of its Subsidiaries might have a
Material Adverse Effect or prevent the consummation of the transactions
contemplated hereby, except as set forth in the Registration Statement and the
Prospectus.
(m) No labor problem or dispute with the employees of the
Company or the Subsidiaries exists or, to the Company's knowledge, is threatened
or imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or its Subsidiaries' principal
suppliers, contractors or customers, that could have a Material Adverse Effect.
(n) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial statements
hereinabove described or as described in the Registration Statement, subject to
no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements or as described in the Registration
Statement or which are not material in amount to the Company and the
Subsidiaries taken as a whole. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases conforming in all material
respects to the description thereof set forth in the Registration Statement and
the Prospectus.
(o) Except as described in the Registration Statement and the
Prospectus, the Company and the Subsidiaries have filed all Federal, State,
local and foreign tax returns which have been required to be filed and have paid
all taxes indicated by said returns and all assessments received by them or any
of them, to the extent that such taxes and assessments have become due and are
not being contested in good faith and for which an adequate reserve or accrual
has been established in accordance with U.S. generally accepted accounting
principles. Except as described in the Registration Statement and the
Prospectus, all tax liabilities of the Company and the Subsidiaries have been
adequately provided for in the financial statements of the Company, and the
Company does not know of any actual or proposed additional material tax
assessments. The Company has restructured the Internet and catalog division such
that the collection, reporting and payment of state sales taxes is not required
with respect to sales made from such division. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or
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any political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance or sale by the Company
of the Shares.
(p) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, as it may be amended or
supplemented, (i) there has not been any material adverse change or any
development involving a prospective change that has had or is reasonably likely
to have a Material Adverse Effect, whether or not occurring in the ordinary
course of business, (ii) there has not been any material transaction entered
into or any material transaction that is probable of being entered into by the
Company or the Subsidiaries, other than transactions in the ordinary course of
business and transactions described in the Registration Statement and the
Prospectus, as it may be amended or supplemented, and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock. The Company and the Subsidiaries have no
material contingent obligations that are not disclosed in the Company's
financial statements in the Registration Statement and the Prospectus.
(q) Neither the Company nor any of the Subsidiaries is, or
with the giving of notice or lapse of time or both, will be, in violation of or
in default under its Certificate of Incorporation ("Charter"). Neither the
Company nor any of the Subsidiaries is, or with the giving of notice or lapse of
time or both, will be, in violation of or in default under its By-Laws or under
any agreement, lease, contract, indenture or other instrument or obligation to
which it is a party or by which it, or any of its properties, is bound and which
violation or default has had or is reasonably likely to have a Material Adverse
Effect. The execution and delivery of this Agreement and the consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any contract, indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any of the Subsidiaries is
a party, or of the Charter or By-Laws of the Company or any order, rule or
regulation applicable to the Company or any of the Subsidiaries of any court or
of any regulatory body or administrative agency or other governmental body
having jurisdiction or result in the creation or imposition of any lien, charge
or encumbrance upon any assets or property of the Company or any of the
Subsidiaries, and no consent, approval, authorization or order of, or
qualification or filing with, any governmental body, any lender or any other
person is required for the performance by the Company of its obligations under
this Agreement, except such consents received prior to the date hereof and such
as may be required by the state securities or Blue Sky laws or international
jurisdictions in connection with the offer and sale of the Shares.
(r) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body or any lender or other person necessary in connection with the
execution and delivery by the Company of this Agreement and the consummation of
the transactions herein contemplated (except such additional steps as may be
required by the Commission, the National Association of Securities Dealers, Inc.
(the "NASD") or such additional steps as may be necessary to qualify the Shares
for public offering by the Underwriters under state securities or Blue Sky
laws), including without limitation the listing of the Shares on the Nasdaq
National Market, has been obtained or made and is in full force and effect.
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To the knowledge of the Company or the Subsidiaries there is no governmental or
legal proceeding, judgment, order, injunction or other restraint issued or filed
with respect to the transactions contemplated by this Agreement, or the
performance by the Company of its respective obligations thereunder other than
proceedings described in the Registration Statement and the Prospectus.
(s) The Company and each of the Subsidiaries has all material
licenses, certifications, permits, franchises, approvals, clearances and other
regulatory authorizations ("Permits") from governmental authorities as are
necessary to conduct its businesses as currently conducted and to own, lease and
operate its properties in the manner described in the Prospectus. There is no
material claim, proceeding or controversy, pending or, to the knowledge of the
Company or any of the Subsidiaries, threatened, involving the status of or
sanctions under any of the Permits. The Company and each of the Subsidiaries has
fulfilled and performed all of its material obligations with respect to the
Permits, and no event has occurred which allows, or after notice or lapse of
time would allow, the revocation, termination, modification or other impairment
of the rights of the Company or any of the Subsidiaries under such Permits.
(t) To the Company's knowledge, there are no affiliations or
associations between any member of the NASD and any of the Company's officers,
directors or 5% or greater security holders, except as set forth in the
Registration Statement.
(u) Neither the Company, nor to the Company's knowledge, any
of its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares. The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on the Nasdaq National Market in
accordance with Regulation M under the Exchange Act.
(v) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement and the
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
(w) The Company and each of the Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries. All
policies of insurance insuring the Company or any Subsidiary or any of their
respective businesses, assets, employees, officers and directors are in full
force and effect, and the Company and the Subsidiaries are in compliance with
the terms of such policies in all material respects. There are no claims by the
Company or any Subsidiary under any such policy or instrument as to which an
insurance company is denying liability or defending under a reservation of
rights clause.
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(x) The Company is in compliance in all material respects with
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect
to any "pension plan" (as defined in ERISA) for which the Company would have any
liability; the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal from,
any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company would
have any liability and that is intended to be qualified under Section 401(a) of
the Code is so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of such
qualification. The Company is in compliance in all material respects with all
national and local laws that govern benefits provided to Company employees
located in China and Macau.
(y) Other than as contemplated by this Agreement, the Company
has not incurred any liability for any finder's or broker's fee, or agent's
commission in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
(z) Other than the Subsidiaries, the Company does not own,
directly or indirectly, any shares of capital stock and does not have any other
equity or ownership or proprietary interest in any corporation, partnership,
association, trust, limited liability company, joint venture or other entity.
(aa) Neither the Company nor any of the Subsidiaries has sent
or received any notice indicating the termination of or intention to terminate
any of the contracts or agreements referred to or described in the Registration
Statement or the Prospectus, or filed as an exhibit to the Registration
Statement, and no such termination has been threatened by the Company, any
Subsidiary or any other party to any such contract or agreement.
(bb) Except as described in the Registration Statement and the
Prospectus, neither the Company nor any Subsidiary is in violation of any
statute, rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the transportation, storage, use,
disposal or release of hazardous materials, hazardous chemicals, toxic
substances or radioactive or biological materials or relating to the protection
or restoration of the environment or human exposure to hazardous materials,
hazardous chemicals, toxic substances or radioactive or biological materials
(collectively, "Environmental Laws"). Neither the Company nor any of the
Subsidiaries owns or operates any real property contaminated with any substance
that is subject to any Environmental Laws, is liable for any off-site disposal
or contamination pursuant to any Environmental Laws, or is subject to any claim
relating to any Environmental Laws, which claim would individually or in the
aggregate have a Material Adverse Effect; and the Company is not aware of any
pending investigation which might lead to such a claim.
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(cc) Except as described in the Registration Statement and in
the Prospectus, the Company has not, since July 30, 2002, extended or arranged
for the extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer of the Company; and
the Company has not maintained any such credit except such credit that was
outstanding on or before July 30, 2002, and there has been no material
modification of any term of such credit or any renewal of such credit on or
after July 30, 2002.
(dd) No payments or inducements have been made or given,
directly or indirectly, to any federal, state, local or foreign official or
candidate for any federal, state or local office in the United States or foreign
offices by the Company or any Subsidiary, by any of their officers, directors,
employees or agents or, to the knowledge of the Company, by any other person in
connection with any opportunity, contract, permit, certificate, consent, order,
approval, waiver or other authorization relating to the business of the Company
or any Subsidiary, except for such payments or inducements as were lawful under
applicable laws, rules and regulations. Neither the Company nor any Subsidiary,
nor, to the best knowledge of the Company, any director, officer, agent,
employee or other person associated with or acting on behalf of the Company or
any Subsidiary, (i) has used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political activity;
(ii) made any direct or indirect unlawful payment to any government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe,
unlawful rebate, payoff, influence payment, kickback or other unlawful payment
in connection with the business of the Company or any Subsidiary.
(ee) Except as described in the Registration Statement and the
Prospectus, the Company and each of the Subsidiaries owns, licenses, or
otherwise has rights in all United States and foreign patents, trademarks,
service marks, tradenames, copyrights, trade secrets and other proprietary
rights necessary for the conduct of its respective business as currently carried
on and as proposed to be carried on as described in the Registration Statement
and the Prospectus (collectively and together with any applications or
registrations for the foregoing, the "Intellectual Property"). Except as
described in the Registration Statement and the Prospectus, (i) no third parties
have obtained rights to any such Intellectual Property from the Company, other
than licenses granted in the ordinary course and those that would not have a
Material Adverse Effect; (ii) to the Company's knowledge, there is no
infringement or misappropriation by third parties of any such Intellectual
Property; (iii) there is no pending or, to the Company's knowledge, threatened
action, suit, proceeding or claim by others challenging the Company's or any
Subsidiary's rights in or to any such Intellectual Property, and the Company is
unaware of any facts which would form a basis for any such claim; (iv) there is
no pending or, to the Company's knowledge, threatened action, suit, proceeding
or claim by others challenging the validity, enforceability, or scope of any
such Intellectual Property, and the Company is unaware of any facts which would
form a basis for any such claim; (v) there is no prior, pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by others
alleging that the Company or any of the Subsidiaries, or any of the Company's or
the Subsidiaries' products, product candidates or services, infringes,
misappropriates or otherwise violates, or would infringe upon, misappropriate or
otherwise violate the development or commercialization of a
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third party's products, product candidates or services or any patent, trademark,
copyright, trade secret or other proprietary right of others, and the Company is
unaware of any facts which would form a basis for any such claim; (vi) to the
Company's knowledge there is no third-party patent or patent application that
contains claims that cover or may cover any Intellectual Property described in
the Prospectus as being owned by or licensed to the Company or any of the
Subsidiaries or that is necessary for the conduct of their businesses as
currently or contemplated to be conducted or that interferes with the issued or
pending claims of any such Intellectual Property; (vii) there is no prior art or
public or commercial activity of which the Company is aware that may render any
patent held by the Company or any of the Subsidiaries invalid or any patent
application held by the Company or any of the Subsidiaries unpatentable which
has not been disclosed to the U.S. Patent and Trademark Office; and (viii)
neither the Company nor any of the Subsidiaries has committed any act or omitted
to undertake any act that would render the Intellectual Property invalid or
unenforceable in whole or in part. None of the technology employed by the
Company has been obtained or, to the Company's knowledge, is being used by the
Company in violation of the rights of any person or third party. Except as
described in the Registration Statement and the Prospectus, the Company knows of
no infringement or misappropriation by others of the Intellectual Property.
Schedule III lists all of the issued patents in which the Company or any of the
Subsidiaries has rights.
(ff) Except as described in the Registration Statement and the
Prospectus, the conduct of business by the Company and each of the Subsidiaries
complies, and at all times has complied, in all material respects with federal,
state, local and foreign laws, statutes, ordinances, rules, regulations,
decrees, orders, Permits and other similar items ("Laws") applicable to its
business, including, without limitation, the Occupational Safety and Health Act,
the Environmental Protection Act, the Toxic Substance Control Act and similar
federal, state, local and foreign Laws applicable to hazardous or regulated
substances and radioactive or biologic materials and licensing and certification
Laws covering any aspect of the business of the Company or any of the
Subsidiaries. Except as described in the Registration Statement and the
Prospectus, neither the Company nor any of the Subsidiaries has received any
notification asserting, or has knowledge of, any present or past failure to
comply with or violation of any such Laws.
(gg) The information contained in the Registration Statement
and the Prospectus regarding the Company's expectations, plans and intentions,
and any other information that constitutes "forward-looking" information within
the meaning of the Act and the Exchange Act, were made by the Company on a
reasonable basis and reflect the Company's good faith belief and/or estimate of
the matters described therein at the time such statements were made.
(hh) Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Underwriters in connection
with the offering of the Shares contemplated hereby shall be deemed a
representation and warranty by the Company to each Underwriter and shall be
deemed to be a part of this Section 1 and incorporated herein by this reference.
11
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS.
Each of the Selling Stockholders severally and not jointly
represents and warrants to each of the Underwriters as follows:
(a) Such Selling Stockholder now has, or upon the exercise of
options for the purchase of such Shares will have, and at the Closing Date (as
defined in paragraph (c) of Section 3 below) and the Option Closing Date (as
defined in paragraph (d) of Section 3 below), if any, will have, good and
marketable title to the Firm Shares and the Option Shares to be sold by such
Selling Stockholder hereunder, free and clear of any liens, encumbrances,
equities or claims, and full right, power and authority to effect the sale and
delivery of such Firm Shares and Option Shares; and upon the delivery of,
against payment for, such Firm Shares and Option Shares pursuant to this
Agreement, the Underwriters will acquire good and marketable title thereto, free
and clear of any liens, encumbrances, equities or claims.
(b) Such Selling Stockholder has full right, power and
authority to execute and deliver this Agreement, the Power of Attorney, and the
Custodian Agreement referred to below and to perform its obligations under such
Agreements. The execution and delivery of this Agreement, the Power of Attorney
and the Custodian Agreement and the consummation by such Selling Stockholder of
the transactions herein and therein contemplated and the fulfillment by such
Selling Stockholder of the terms hereof will not require any consent, approval,
authorization, or other order of any court, regulatory body, administrative
agency or other governmental body (except as may be required under the Act and
state securities laws or Blue Sky laws) or any lender or other person and will
not result in a breach of any of the terms and provisions of, or constitute a
default under, the organizational documents of such Selling Stockholder, if not
an individual, or any indenture, mortgage, deed of trust or other agreement or
instrument to which such Selling Stockholder is a party, or by which such
Selling Stockholder is bound, or to which any of the property or assets of such
Selling Stockholder is subject, or of any statute or of any order, rule or
regulation applicable to such Selling Stockholder of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction. To the knowledge of such Selling Stockholder, there is no
governmental or legal proceeding, judgment, order, injunction or other restraint
issued or filed with respect to the transactions contemplated by this Agreement,
or the performance by such Selling Stockholder of its respective obligations
thereunder other than proceedings described in the Registration and the
Prospectus.
(c) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Stockholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.
(d) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties of the
Company contained herein or the
12
information contained in the Registration Statement, such Selling Stockholder
has no reason to believe that the representations and warranties of the Company
contained in Section 1 are not true and correct, is familiar with the
Registration Statement and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement which has adversely
affected or may adversely affect the business of the Company or any of the
Subsidiaries; and the sale of the Firm Shares and the Option Shares by such
Selling Stockholder pursuant hereto is not prompted by any information
concerning the Company or any of the Subsidiaries which is not set forth in the
Registration Statement or the documents incorporated by reference therein. The
information pertaining to such Selling Stockholder under the caption "Principal
and Selling Stockholders" in the Prospectus is complete and accurate in all
material respects.
(e) To the extent that any statements or omissions made in the
Registration Statement, the Prospectus or any amendment or supplement thereto
are made in reliance upon and in conformity with written information furnished
to the Company by such Selling Stockholder expressly for use therein, such
Registration Statement and Prospectus did not, and any further amendments or
supplements to the Registration Statement and the Prospectus, when they become
effective or are filed with the Commission, as the case may be, will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
3. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set forth, the
Company and the Selling Stockholders agree to sell to the Underwriters and each
Underwriter agrees, severally and not jointly, to purchase, at a price of $_____
per share, the number of Firm Shares set forth opposite the name of each
Underwriter in Schedule I hereof, subject to adjustments in accordance with
Section 11 hereof. The number of Firm Shares to be purchased by each Underwriter
from each seller shall be as nearly as practicable in the same proportion to the
total number of Firm Shares being sold by each seller as the number of Firm
Shares being purchased by each Underwriter bears to the total number of Firm
Shares to be sold hereunder. The obligations of the Company and of each of the
Selling Stockholders shall be several and not joint.
(b) Certificates in negotiable form for the total number of
the Shares to be sold hereunder by the Selling Stockholders have been placed in
custody with ____________________ as custodian (the "Custodian") pursuant to the
Custodian Agreement executed by each Selling Stockholder for delivery of all
Firm Shares and any Option Shares to be sold hereunder by the Selling
Stockholders. Each of the Selling Stockholders specifically agrees that the Firm
Shares and any Option Shares represented by the certificates held in custody for
the Selling Stockholders under the Custodian Agreement are subject to the
interests of the Underwriters hereunder, that the arrangements made by the
Selling Stockholders for such custody are to that extent irrevocable, and that
the obligations of the Selling Stockholders hereunder shall not be terminable by
any act or deed of the Selling Stockholders (or by any other person, firm or
corporation including the Company, the Custodian or the Underwriters) or by
operation of law (including the death of an individual Selling
13
Stockholder or the dissolution of a corporate Selling Stockholder) or by the
occurrence of any other event or events, except as set forth in the Custodian
Agreement. If any such event should occur prior to the delivery to the
Underwriters of the Firm Shares or the Option Shares hereunder, certificates for
the Firm Shares or the Options Shares, as the case may be, shall be delivered by
the Custodian in accordance with the terms and conditions of this Agreement as
if such event has not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares held by it against
delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be
made in Federal (same day) funds to an account designated by the Company for the
shares to be sold by it and to an account designated by the Custodian for the
shares to be sold by the Selling Stockholders. Such payment and delivery are to
be made through the facilities of the Depository Trust Company at 10:00 a.m.,
New York time, on the third business day after the date of this Agreement or at
such other time and date not later than five business days thereafter as you and
the Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and not permitted by law or executive order to be closed.)
(d) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Selling Stockholders hereby grant an option to the several
Underwriters to purchase the Option Shares at the price per share as set forth
in the first paragraph of this Section. The option granted hereby may be
exercised in whole or in part from time to time by giving written notice (i) at
any time before the Closing Date and (ii) thereafter within 30 days after the
date of this Agreement, by you, as the Representatives of the several
Underwriters, to the Company, the Attorney-in-Fact, and the Custodian setting
forth the number of Option Shares as to which the several Underwriters are
exercising the option, the names and denominations in which the Option Shares
are to be registered and the time and date at which such shares are to be
delivered. If the option granted hereby is exercised in part, the respective
number of Option Shares to be sold by each of the Selling Stockholders shall be
in the same proportion to the total number of Option Shares being sold as the
number of Option Shares indicated as being sold by each of the Selling
Stockholders in the third column of Schedule II hereof bears to the total number
of Option Shares set forth in the third column of Schedule II, adjusted by you
in such manner as to avoid fractional shares. The time and date at which Option
Shares are to be delivered shall be determined by the Representatives but shall
not be earlier than two nor later than ten full business days after the exercise
of such option, nor in any event prior to the Closing Date (each such time and
date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is two or more days before the Closing Date, the notice
of exercise shall set the Closing Date as the Option Closing Date. The number of
Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the number of
Firm Shares being purchased by such Underwriter bears to the total number of
Firm Shares, adjusted by you in such manner as to avoid fractional shares. The
option with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters.
You, as the Representatives of the several Underwriters, may cancel such option
at any time prior to its expiration by giving written
14
notice of such cancellation to the Company and the Attorney-in-Fact. To the
extent, if any, that the option is exercised, payment for the Option Shares
shall be made on the Option Closing Date in Federal (same day) funds drawn to
the order of " , as Custodian" for the Option Shares to be sold by the
Selling Stockholders against delivery of certificates therefor through the
facilities of the Depository Trust Company, New York, New York.
(e) The Firm Shares and the Option Shares, if any, shall be
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
applicable Option Closing Date, as the case may be. The Firm Shares and the
Option Shares shall be delivered to you on the Closing Date or an 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.
(f) If on the Closing Date or an Option Closing Date, if any,
any Selling Stockholder fails to have delivered the Firm Shares or the Option
Shares that such Selling Stockholder has agreed to sell on such date as set
forth in Schedule II hereto, the Company agrees that it will sell or arrange for
the sale of that number of shares of Common Stock to the Underwriters which
represents the Firm Shares or the Option Shares that such Selling Stockholder
has failed to deliver, as set forth in Schedule II hereto, or such lesser number
as may be requested by the Representatives.
4. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a
public offering of the Firm Shares as soon as the Representatives deem it
advisable to do so. The Firm Shares are to be initially offered to the public at
the public offering price set forth in the Prospectus. The Representatives may
from time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 3 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the
Representatives for the Underwriters in the offering and sale of the Shares in
accordance with a Master Agreement Among Underwriters entered into by you and
the several other Underwriters.
5. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the several Underwriters
that:
(a) The Company will (i) if the procedure in Rule 430A of the
Rules and Regulations is followed, use its best efforts, to prepare and timely
file with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Representatives containing information
previously omitted at the time of effectiveness of the Registration Statement in
reliance on Rule 430A of the Rules and Regulations; (ii) not file any amendment
to the
15
Registration Statement or supplement to the Prospectus of which the
Representatives shall not previously have been advised and furnished with a copy
or to which the Representatives shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations; and (iii) file on a
timely basis all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission subsequent to the date
of the Prospectus and prior to the termination of the offering of the Shares by
the Underwriters.
(b) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
(c) The Company will advise the Representatives promptly (i)
when the Registration Statement or any post-effective amendment thereto shall
have become effective; (ii) of receipt of any comments from the Commission;
(iii) of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional information;
and (iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the use of the Prospectus or of
the institution of any proceedings for that purpose. The Company will use its
best efforts to prevent the issuance of any such stop order preventing or
suspending the use of the Prospectus and to obtain as soon as possible the
lifting thereof, if issued.
(d) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. 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 the Representatives may reasonably request for distribution of the Shares.
(e) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives, at or
before the Closing Date, four signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith and all documents
incorporated by referenced therein (excluding exhibits), and will deliver to the
Representatives such number of copies of the Registration Statement (including
such number of copies of the exhibits filed therewith and the documents
incorporated by reference therein (excluding exhibits) that may reasonably be
requested) and of all amendments thereto, as the Representatives may reasonably
request.
16
(f) The Company will comply with the Act, the Exchange Act and
the Rules and Regulations so as to permit the completion of the distribution of
the Shares as contemplated in this Agreement and the Prospectus. If during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Representatives, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus so that
the Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with the law.
(g) The Company will timely file such reports under the
Exchange Act as are necessary to make generally available to holders of its
securities as soon as may be practicable, but in no event later than 15 months
after the effective date of the Registration Statement, an earning statement
(which need not be audited but shall be in reasonable detail) covering a period
of 12 months commencing after the effective date of the Registration Statement,
which will satisfy the provisions of Section 11(a) of the Act (including Rule
158 of the Rules and Regulations).
(h) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim financial statements of the Company for
any quarterly period subsequent to the period covered by the most recent
financial statements appearing in the Registration Statement and the Prospectus.
(i) No offer, sale, contract for the sale, short sale, pledge
or other disposition of any shares of Common Stock of the Company, securities
convertible into or exchangeable or exercisable for shares of Common Stock or
derivatives with respect to shares of Common Stock (or agreement for such) will
be made, directly or indirectly, by the Company for a period of 90 days after
the date of this Agreement otherwise than hereunder or with the prior written
consent of RBC Capital Markets Corporation; provided, that this provision will
not restrict the Company from issuing shares of Common Stock upon the exercise
of any option outstanding on the date hereof or from granting awards of or
options to purchase shares of Common Stock pursuant to employee benefit plans as
described in the Prospectus and consistent with past practice.
(j) The Company has caused each officer and director of the
Company and each Selling Stockholder to furnish to you, on or prior to the date
of this agreement, a letter or letters, in form and substance satisfactory to
the Underwriters, pursuant to which each such person shall agree not to (i)
offer, sell, contract to sell, sell short, pledge or otherwise dispose of,
whether directly or indirectly, any shares of Common Stock of the Company,
securities convertible into or exchangeable or exercisable for shares of Common
Stock or derivatives with respect to shares of Common Stock beneficially owned
by such person, (ii) enter into any transactions that would have the same
effect, (iii) enter into any swap, hedge or other arrangement that transfers, in
whole or in
17
part, any of the economic consequences of ownership of Common Stock, whether any
of these transactions are to be settled by delivery of Common Stock or other
securities, in cash or otherwise, (iv) publicly disclose the intention to make
any offer, sale, contract to sell, short sale, pledge or other disposition or to
enter into any such other transaction, swap, hedge or other arrangement, (v) or
request the registration of any of the foregoing under the Act for a period of
90 days after the date of this Agreement, directly or indirectly, except with
the prior written consent of RBC Capital Markets Corporation (the "Lockup
Agreements").
(k) The Company shall apply the net proceeds of its sale of
the Shares as described under the heading "Use of Proceeds" in the Prospectus.
(l) The Company shall not invest or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the 1940 Act.
(m) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock.
6. COVENANTS OF THE SELLING STOCKHOLDERS.
Each of the Selling Stockholders covenants and agrees with the
several Underwriters that:
(a) For a period of 90 days after the date of this Agreement,
such Selling Stockholder will not make or cause to be made any (i) offer, sale,
contract for the sale, short sale, pledge or other disposition, whether direct
or indirect, of any shares of Common Stock of the Company, securities
convertible into or exchangeable or exercisable for shares of Common Stock or
derivatives with respect to shares of Common Stock beneficially owned by the
Selling Stockholder, (ii) transactions that would have the same effect, (iii)
swap, hedge or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of Common Stock, whether any of these
transactions are to be settled by delivery of Common Stock or other securities,
in cash or otherwise, (iv) public disclosure of the intention to make any offer,
sale, contract to sell, short sale, pledge or other disposition or to enter into
any such other transaction, swap, hedge or other arrangement, or (v) request the
Company to register any of the foregoing under the Act, without the prior
written consent of RBC Capital Markets Corporation or unless otherwise permitted
hereunder.
(b) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Stockholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-8 or W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
18
(c) Such Selling Stockholder will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
7. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to
the performance of the obligations of the Company and the Selling Stockholders
under this Agreement, including, without limiting the generality of the
foregoing, the following: accounting fees of the Company; the fees and
disbursements of counsel for the Company and the Selling Stockholders; the cost
of printing and delivering to, or as reasonably requested by, the Underwriters
copies of the Registration Statement, Preliminary Prospectuses, the Prospectus,
the Underwriters' Selling Memorandum and the Underwriters' Invitation Letter, if
any, any Nasdaq National Market listing application or notice, the Blue Sky
Survey and any supplements or amendments thereto; the filing fees of the
Commission; the filing fees and expenses (including legal fees and disbursements
of counsel to the Underwriters) incident to securing any required review by the
NASD of the terms of the sale of the Shares; the listing fee of the Nasdaq
National Market; 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 with the prior approval of the Company in
connection with the road show; and the expenses, including the fees and
disbursements of counsel to the Underwriters up to a maximum amount of $3,000,
incurred in connection with the qualification of the Shares under state
securities or Blue Sky laws. To the extent, if at all, that any of the Selling
Stockholders engage special legal counsel to represent them in connection with
this offering, the fees and expenses of such counsel shall be borne by such
Selling Stockholder. Any transfer taxes imposed on the sale of the Shares to the
several Underwriters will be paid by the Company and the Selling Stockholders
pro rata.
The Company and the Selling Stockholders shall not, however,
be required to pay for any of the Underwriters' expenses (other than those
related to qualification under NASD rules and state securities or Blue Sky laws)
except that, if this Agreement shall not be consummated because the conditions
in Section 8 hereof are not satisfied, or because this Agreement is terminated
by the Representatives pursuant to Section 13 hereof, or by reason of any
failure, refusal or inability on the part of the Company or the Selling
Stockholders to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on its part to be performed,
unless such failure to satisfy said condition or to comply with said terms be
due to the default or omission of any Underwriter or (as to Sections 8(d) and
8(e)) of counsel to the Underwriters, then the Company shall reimburse the
several Underwriters for reasonable out-of-pocket expenses, including all fees
and disbursements of counsel, reasonably incurred in connection with
investigating, marketing and proposing to market the Shares or in contemplation
of performing their obligations hereunder; but the Company shall not in any
event be liable to any of the several
19
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares. It is understood, however, that except as provided in
this Section 7 and Section 10, the Underwriters shall pay all costs and expenses
incident to the performance of their obligations under this Agreement,
including, without limitation, the fees and disbursements of counsel to the
Underwriters.
8. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the
Firm Shares on the Closing Date and the Option Shares, if any, on the Option
Closing Date are subject to the accuracy, as of the Closing Date and the Option
Closing Date, if any, of the representations and warranties of the Company and
the Selling Stockholders contained herein, and to the performance by the Company
and the Selling Stockholders of their covenants and obligations hereunder and to
the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company or the Selling
Stockholders, shall be contemplated by the Commission and no injunction,
restraining order, or order of any nature by a Federal or state court of
competent jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing
Date and the Option Closing Date, if any, the opinion of Sheppard Mullin Richter
& Hampton LLP, counsel for the Company and the Selling Stockholders, dated the
Closing Date or the Option Closing Date, if any, addressed to the Underwriters
(and stating that it may be relied upon by Alston & Bird LLP, counsel for the
Underwriters) to the effect that:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and has all corporate power and corporate authority necessary to own its
properties and to conduct its business as described in the Registration
Statement. Each of the Subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation (to the extent good standing is a concept recognized in such
jurisdiction), and has all corporate power and corporate authority necessary to
own its properties and to conduct its business as described in the Registration
Statement. The Company and each of the Subsidiaries is qualified to do business
as a foreign corporation in each state where it owns or leases any material
property or conducts any material business, except where failure to so qualify
would not have a Material Adverse Effect. Except as set forth in the Prospectus,
all issued and outstanding shares of capital stock of each of the Subsidiaries
are duly authorized and validly issued and are fully paid and nonassessable and
are
20
directly owned by the Company, and except as set forth in the Prospectus, to
such counsel's knowledge, the outstanding shares of capital stock of each of the
Subsidiaries are owned free and clear of all liens, encumbrances, equities and
claims, and no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any obligations into any
shares of capital stock of or of ownership interests in the Subsidiaries are
outstanding.
(ii) The Company has authorized capital stock as set
forth under the caption "Capitalization" in the Prospectus; the outstanding
shares of the Company's Common Stock, including all outstanding Shares to be
sold by the Selling Stockholders, have been duly authorized and validly issued
and are fully paid and non-assessable; the Shares to be sold by the Company and
the Shares to be sold by the Selling Stockholders following the exercise of
stock options by them, when issued and paid for as contemplated herein or in the
applicable stock option agreement, will be duly authorized, validly issued,
fully paid and non-assessable; all of the Shares conform to the description
thereof contained in the Prospectus; the certificates for the Shares, assuming
they are in the form filed with the Commission, comply with the requirements of
Delaware law and the Nasdaq Stock Market; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue or sale
thereof.
(iii) To such counsel's knowledge, except as
described in the Prospectus, there are no preemptive rights, or presently
outstanding options, warrants, conversion or exchange privileges or rights to
purchase from the Company any of the authorized but unissued stock of the
Company, and except as described in or contemplated by the Prospectus, to such
counsel's knowledge, no holder of any securities of the Company or any other
person has the right, contractual or otherwise, which has not been satisfied or
effectively waived, to cause the Company to sell or otherwise issue to them, or
to permit them to underwrite the sale of, any of the Shares or the right to have
any Common Stock or other securities of the Company included in the Registration
Statement or the right, as a result of the filing of the Registration Statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company.
(iv) The Registration Statement has become effective
under the Act, the required filings of the Prospectus, including any supplements
thereto, pursuant to Rule 424(b) have been made in the manner and within the
time periods required by Rule 424(b) and, to such counsel's knowledge, no stop
order proceedings suspending the effectiveness of the Registration Statement
have been instituted or are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus, each
amendment or supplement thereto and each document enumerated as being
incorporated by reference therein comply as to form in all material respects
with the requirements of the Act and the applicable Rules and Regulations
(except that such counsel need express no opinion as to the financial statements
and related schedules therein). The conditions for the use of Form S-3, set
forth in the General Instructions thereto, have been satisfied.
(vi) The statements under the captions "Description
of Capital Stock," "Risk Factors -- We may be subject to certain federal
regulatory fines.", and the second paragraph of
21
"Business -- Legal Proceedings" in the Prospectus and in Item 15 of the
Registration Statement, insofar as such statements constitute a summary of
documents referred to therein or matters of law, fairly summarize in all
material respects the information called for with respect to such documents and
matters.
(vii) To such counsel's knowledge, there are no
contracts or documents required to be filed as exhibits to the Registration
Statement or described in the Registration Statement or the Prospectus that are
not so filed or described as required, and such contracts and documents as are
summarized in the Registration Statement or the Prospectus are fairly summarized
in all material respects.
(viii) To such counsel's knowledge and except as set
forth in the Prospectus, there is no material legal or governmental action,
suit, proceeding or investigation pending or threatened against the Company or
any of the Subsidiaries.
(ix) The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions herein
contemplated do not and will not result in a material violation or breach of any
of the terms or provisions of, or constitute a default under, (a) the Charter or
By-Laws of the Company or (b) any material contract, indenture, mortgage, deed
of trust or other agreement or instrument known to such counsel to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries may be bound, or (c) any order, rule or regulation known to
such counsel of any court or regulatory body, administrative agency or other
governmental body having jurisdiction that is applicable to the Company or any
of the Subsidiaries; and, to such counsel's knowledge, will not result in the
creation or imposition of any lien, charge or encumbrance upon any material
assets or property of the Company or any of the Subsidiaries.
(x) This Agreement has been duly authorized, executed
and delivered by the Company.
(xi) No approval, consent, order, authorization,
designation, declaration or filing by or with any United States federal,
Delaware corporate or California regulatory, administrative or other
governmental body or to such counsel's knowledge any lender or other person is
necessary in connection with the execution and delivery of this Agreement by the
Company or by or on behalf of the Selling Stockholders and the consummation of
the transactions therein contemplated (other than as may be required by the NASD
or as required by state securities or Blue Sky laws, as to which such counsel
may express no opinion) except such as have been obtained or made, specifying
the same; such counsel knows of no governmental or legal proceeding, judgment,
order, injunction or other restraint issued or filed with respect to the
transactions contemplated by this Agreement or the performance by the Company or
the Selling Stockholders of their respective obligations thereunder other than
proceedings described in the Registration Statement and in the Prospectus.
22
(xii) The Company is not, and will not become, as a
result of the consummation of the transactions contemplated by this Agreement,
and the application of the net proceeds therefrom as described in the
Prospectus, an investment company as defined in the Investment Company Act of
1940.
(xiii) This Agreement, the Custodian Agreement and
the Power of Attorney have been duly authorized, executed and delivered by or on
behalf of the Selling Stockholders and constitute the valid and binding
obligations of the Selling Stockholders in accordance with their terms.
(xiv) The performance by each Selling Stockholder of
the provisions of this Agreement, the Custodian Agreement and the Power of
Attorney and the consummation of the transactions contemplated herein and
therein will not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, the organizational documents of
any such Selling Stockholder that is not a natural person, or any material
contract, indenture, mortgage, deed of trust or other agreement or instrument
known to such counsel to which such Selling Stockholder is a party or by which
such Selling Stockholder may be bound or, to the knowledge of such counsel, any
order, rule or regulation applicable to such Selling Stockholder of any court or
of any regulatory body or administrative agency or other governmental body
having jurisdiction, and, to the knowledge of such counsel, will not result in
the creation or imposition of any lien, charge or encumbrance upon any assets or
property of such Selling Stockholder.
(xv) To such counsel's knowledge, each Selling
Stockholder has full legal right, power and authority, and any approval required
by law (other than as required by state securities or Blue Sky laws as to which
we express no opinion) to sell, assign, transfer and deliver the portion of the
Shares to be sold by such Selling Stockholder.
(xvi) Upon payment by the Underwriters for the Shares
to be sold by the Selling Stockholders, delivery to the Custodian of
certificates representing such Shares (assuming that the Custodian, in taking
delivery of such certificates, is acting on behalf of The Depository Trust
Company ("DTC")), each such certificate being indorsed by an effective
endorsement to Cede & Co. ("Cede"), as nominee of DTC, registration of such
Shares in the name of Cede and crediting of such Shares by DTC to securities
accounts of the Underwriters, and assuming that neither DTC nor any of the
Underwriters has notice of any "adverse claim" (as defined in Section 8-102 of
the Uniform Commercial Code ("UCC")) to such Shares, (i) DTC will be a
"protected purchaser" of such Shares, within the meaning of Section 8-303 of the
UCC; and (ii) under Section 8-501 of the UCC, the Underwriters will acquire
securities entitlements to such Shares credited to their respective accounts,
and under Section 8-502 of the UCC, no action based on any "adverse claim" (as
defined in Section 8-102 of the UCC) to such Shares, whether framed in
conversion, replevin, constructive trust, equitable lien or other theory, may be
asserted against any of the Underwriters with respect to such security
entitlements.
23
In rendering such opinion, Sheppard Mullin Richter & Hampton
LLP may rely as to matters governed by the laws of states other than California
or Delaware or Federal laws, on local counsel in such jurisdictions, provided
that in each case Sheppard Mullin Richter & Hampton LLP shall state that they
believe that they and the Underwriters are justified in relying on such other
counsel. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that (i) the Registration Statement, at the
time it became effective under the Act (but after giving effect to any
modifications incorporated therein pursuant to Rule 430A under the Act) and as
of the Closing Date and the Option Closing Date, if any, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date and the Option
Closing Date, if any, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements, in
the light of the circumstances under which they are made, not misleading (except
that such counsel need express no view as to financial statements and related
schedules and statistical information therein). With respect to such statement,
Sheppard Mullin Richter & Hampton LLP may state that their belief is based upon
the procedures set forth therein, but is without independent check and
verification.
(c) The Representatives shall have received on the Closing
Date and the Option Closing Date, if any, opinions of Greer, Burns & Crain, LLP,
special counsel for the Company with respect to patent and proprietary rights,
dated the Closing Date and the Option Closing Date, if any, addressed to the
Underwriters (and stating that it may be relied upon by Alston & Bird LLP,
counsel for the Underwriters) to the effect that:
(i) To such counsel's knowledge, except as described
in the Prospectus, (A) the Company and its Subsidiaries have valid license
rights or clear title to the Intellectual Property, and there are no rights of
third parties to any such Intellectual Property; (B) there is no infringement,
misappropriation, or other violation by third parties of any of the Intellectual
Property; (C) there is no infringement, misappropriation, or other violation by
the Company and its Subsidiaries of any intellectual property of others; (D)
there is no pending or threatened action, suit, proceeding or claim by
governmental authorities or others that the Company and its Subsidiaries
infringe or otherwise violate any intellectual property of others, and such
counsel is unaware of any facts which would form a reasonable basis for any such
claim; and (E) there is no pending or threatened action, suit, proceeding or
claim by governmental authorities or others challenging the rights of the
Company and its Subsidiaries in or to, or challenging the scope of, any
Intellectual Property, and such counsel is unaware of any facts which would form
a reasonable basis for any such claim.
(ii) To such counsel's knowledge, the patent
applications of the Company and its Subsidiaries presently on file disclose
patentable subject matter, and such counsel is not aware of any inventorship
challenges, any interference which has been declared or provoked, or any other
material fact with respect to the patent applications of the Company and its
Subsidiaries presently on file that (A) would preclude the issuance of patents
with respect to
24
such applications or (B) would lead such counsel to conclude that such patents,
when issued, would not be valid and enforceable in accordance with applicable
regulations.
(iii) Such counsel has reviewed the "Risk Factors"
and "Business" portions of the Registration Statement and the Prospectus
referencing the Intellectual Property, including, but not limited to, the
statements under the captions "Risk Factors -- Establishing and protecting our
trademarks, patents and other intellectual property is costly and may be
difficult outside the U.S. If our efforts to do so are unsuccessful, the value
of our brands could suffer.", "Risk Factors -- We may lose pending litigation
and the rights to certain of our intellectual property.", "Risk Factors --
Counterfeiting of our brands can divert sales and damage our brand image,",
"Risk Factors -- As our patents expire, our competitors will be able to copy our
technology or incorporate it in their products without paying royalties.",
"Business -- Patents and Trademarks" and the first paragraph of "Business --
Legal Proceedings" in the Prospectus (collectively, the "Intellectual Property
Sections"). On the basis of such counsel's representation of the Company, such
counsel has no reason to believe that the information in the Intellectual
Property Sections contains any untrue statement or material fact or omits to
state a material fact necessary to make the statements therein not misleading
and insofar as such Intellectual Property Sections constitute statements or
summaries of matters of law, to such counsel's knowledge, such Intellectual
Property Sections are, in all material respects, accurate and complete
statements or summaries, as the case may be, of the matters referred to therein.
(d) The Representatives shall have received from Alston & Bird
LLP, counsel to the Underwriters, an opinion dated the Closing Date and the
Option Closing Date, if any, with respect to the formation of the Company, the
validity of the Shares and other related matters as the Representatives
reasonably may request, and such counsel shall have received such papers and
information as they request to enable them to pass upon such matters.
(e) The Representatives shall have received at or prior to the
Closing Date from Alston & Bird LLP a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the state
securities or Blue Sky laws of such jurisdictions as the Representatives may
reasonably have designated to the Company.
(f) You shall have received, on each of the date hereof, the
Closing Date and the Option Closing Date, if any, a letter dated the date
hereof, the Closing Date or the Option Closing Date, if any, in form and
substance satisfactory to you, of KPMG LLP confirming that they are independent
public accountants within the meaning of the Act and the applicable Rules and
Regulations and stating that in their opinion the financial statements and
schedules examined by them and included in the Registration Statement comply in
form in all material respects with the applicable accounting requirements of the
Act and the Rules and Regulations; and containing such other statements and
information as is ordinarily included in accountants' "comfort letters" to
Underwriters with respect to the financial statements and certain financial and
statistical information contained in the Registration Statement and the
Prospectus.
25
(g) The Representatives shall have received on the Closing
Date and the Option Closing Date, if any, a certificate or certificates of the
Company's Chief Executive Officer and Chief Financial Officer to the effect
that, as of the Closing Date or the Option Closing Date, if any, each of them
severally represents as follows:
(i) The Registration Statement has become effective
under the Act, and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for such purpose have
been taken or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct as of the Closing
Date or the Option Closing Date, if any;
(iii) All filings required to have been made pursuant
to Rules 424 or 430A under the Act have been made;
(iv) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion, as of the effective date of
the Registration Statement, the statements contained in the Registration
Statement were true and correct as to each material fact stated therein and such
Registration Statement and Prospectus did not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, and since the effective date of the Registration Statement, no event
has occurred which should have been set forth in a supplement to or an amendment
of the Prospectus which has not been so set forth in such supplement or
amendment; and
(v) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any material adverse change or any development involving a prospective
change, which has had or is reasonably likely to have a Material Adverse Effect,
whether or not arising in the ordinary course of business.
(h) The Company and the Selling Stockholders shall have
furnished to the Representatives such further certificates and documents
confirming the representations and warranties, covenants and conditions
contained herein and related matters as the Representatives may reasonably have
requested.
(i) The Firm Shares and Option Shares, if any, have been
approved for designation upon notice of issuance on the Nasdaq National Market.
(j) The Lockup Agreements described in Section 5(j) are in
full force and effect.
26
The opinions and certificates mentioned in this Agreement
shall be deemed to be in compliance with the provisions hereof only if they are
in all material respects reasonably satisfactory to the Representatives and to
Alston & Bird LLP, counsel for the Underwriters.
If any of the conditions contained in this Section shall not
have been fulfilled when and as required by this Agreement, the obligations of
the Underwriters hereunder may be terminated by the Representatives by notifying
the Company and the Selling Stockholders of such termination in writing on or
prior to the Closing Date or the Option Closing Date, if any. In such event, the
Company, the Selling Stockholders and the Underwriters shall not be under any
obligation to each other except to the extent provided in Sections 7 and 10
hereof.
9. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY AND THE SELLING
STOCKHOLDERS.
The obligations of the Company and the Selling Stockholders to
sell and deliver the portion of the Shares required to be delivered as and when
specified in this Agreement are subject to the conditions that at the Closing
Date or the Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and in effect
or proceedings therefor initiated or threatened.
10. INDEMNIFICATION.
(a) The Company and Selling Stockholders Douglas B. Otto and
M. Scott Ash, jointly and severally, agree:
(i) to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, (ii) 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 (iii) any alleged act or failure to act by
any Underwriter in connection with the Shares or the offering contemplated
hereby and which arises out of or is based upon matters covered by clause (i) or
(ii) above; provided, however, that the Company and Messrs. Otto and Ash shall
not be liable under this clause (iii) to the extent that it is determined in a
final judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from such Underwriter's failure to
conduct a reasonable investigation, as such term is used in Section 11 of the
Act, or from acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct; provided
further, that the aggregate liability of Messrs. Otto and Ash pursuant to this
Section 10(a) will be limited to an amount equal to the aggregate proceeds, net
of underwriting commissions and discounts, to such respective Selling
Stockholders from the sale of Shares sold by them to the Underwriters; provided
27
further, that the Company and Messrs. Otto and Ash will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Company by or
through the Representatives specifically for use in the preparation thereof;
provided further, that the Company and Messrs. Otto and Ash will not be liable
to any Underwriter, or any person controlling such Underwriter within the
meaning of the Act, with respect to any loss, claim, damage or liability arising
out of or based on any untrue statement or alleged untrue statement of or
omission or alleged omission to state a material fact in any Preliminary
Prospectus which is corrected in the Prospectus if the person asserting any such
loss, claim, damage or liability purchased Shares from such Underwriter but was
not sent or given a copy of the Prospectus at or prior to the written
confirmation of the sale of such Shares to such person, and if copies of the
Prospectus were timely delivered to such Underwriter pursuant to Section 5
hereof.
(ii) to reimburse each Underwriter and each such
controlling person upon demand for any legal or other out-of-pocket expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding, or in obtaining
payment pursuant to this Section 10. In the event that it is finally judicially
determined that the Underwriters were not entitled to receive payments for legal
and other expenses pursuant to this subparagraph, the Underwriters will promptly
return all sums that had been advanced pursuant hereto.
(b) Each Underwriter severally and not jointly will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement, the Selling Stockholders and each
person, if any, who controls the Company or the Selling Stockholders within the
meaning of the Act, against any losses, claims, damages or liabilities to which
the Company or any such director, officer, Selling Stockholder or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other out-of-pocket expenses reasonably incurred by
the Company or any such director, officer, Selling Stockholder or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding, or in obtaining payment pursuant to
this Section 10; provided, however, that each Underwriter will be liable in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or
28
supplement, in reliance upon and in conformity with written information
furnished to the Company by or through the Representatives specifically for use
in the preparation thereof.
(c) Each of the Selling Stockholders other than Douglas B.
Otto and M. Scott Ash, severally and not jointly, agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act, against any losses, claims, damages or liability
to which such Underwriter or any such controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, (ii) the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iii) any alleged
act or failure to act by any Underwriter in connection with the Shares or the
offering contemplated hereby and which arises out of or is based upon matters
covered by clause (i) or (ii) above; provided, however, that such Selling
Stockholders shall not be liable under this clause (iii) to the extent that it
is determined in a final judgment by a court of competent jurisdiction that such
loss, claim, damage, liability or action resulted directly from such
Underwriter's failure to conduct a reasonable investigation, as such term is
used in Section 11 of the Act, or from acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence or willful
misconduct; provided further, that the aggregate liability of each such Selling
Stockholder pursuant to this Section 10(c) will be limited to an amount equal to
the aggregate proceeds, net of underwriting commissions and discounts, to such
Selling Stockholder from the sale of Shares sold by such Selling Stockholder to
the Underwriters; provided further, that each such Selling Stockholder, in his
capacity as Selling Stockholder, will be liable to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
such Selling Stockholder specifically for use in the preparation thereof;
provided further, that such Selling Stockholders will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof; provided
further that no such Selling Stockholder will be liable to any underwriter, or
any person controlling such Underwriter within the meaning of the Act, with
respect to any loss, claim, damage or liability arising out of or based on any
untrue statement or alleged untrue statement of or omission or alleged omission
to state a material fact in any Preliminary Prospectus which is corrected in the
Prospectus if the person asserting any such loss, claim, damage or liability
purchased Shares from such Underwriter but was not sent or given a copy of the
Prospectus at or prior to the written confirmation of the sale of such Shares to
such person, and if copies of the Prospectus were timely delivered to such
Underwriter pursuant to Section 5 hereof.
29
(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 this Section, such person (the "indemnified
party") shall promptly notify the person against whom such indemnity may be
sought (the "indemnifying party") in writing. No indemnification provided for in
Section 10(a), (b) or (c) shall be available to any party who shall fail to give
notice as provided in this Subsection if the party to whom notice was not given
was unaware of the proceeding to which such notice would have related and to the
extent and only the extent to which such party was materially prejudiced by the
failure to give such notice, but the failure to give such notice shall not
relieve the 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 the provisions of Section 10(a), (b) or (c). In case any such proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof with counsel satisfactory to such indemnified party and shall pay as
incurred 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 at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred (or within 30 days of presentation) the fees and
expenses of the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (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 or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action.
It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties unless the representation of all
such indemnified parties by same counsel would be inappropriate due to actual or
potential differing interests between or among them. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 10(a) or Section 10(c) and by the Company and the Selling Stockholders
in the case of parties indemnified pursuant to Section 10(b). 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. In addition, the indemnifying party will not, 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
or proceeding with respect to which indemnification may be sought hereunder
(whether or not any indemnified party is an actual or potential party to such
claim, action or proceeding) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action or proceeding.
30
(e) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 10(a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling Stockholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Subsection were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this Subsection. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to above in this Subsection
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim or in connection with obtaining payment pursuant to this Section
10. Notwithstanding the provisions of this Subsection, (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Subsection to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) In any proceeding relating to the Registration Statement,
any Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this Section
hereby consents to the jurisdiction of any court
31
having jurisdiction over any other contributing party, agrees that process
issuing from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any such
proceeding in which such other contributing party is a party.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or a successor to the
Company, its directors or officers, or any person controlling the Company, shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section.
11. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, if any, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company or a Selling Stockholder),
you, as the Representatives of the Underwriters, shall use your reasonable
efforts to procure within 36 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company and the Selling
Stockholders such amounts as may be agreed upon, and upon the terms set forth
herein, of the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company and the
Selling Stockholders or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company or of the Selling Stockholders
except to the extent provided in Section 10 hereof. In the event of a default by
any Underwriter or Underwriters as set forth in this Section, the Closing Date
or Option Closing Date, if any, may be postponed for such period, not exceeding
seven days, as you, as
32
Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
12. NOTICES.
All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered, or faxed and confirmed
as follows:
if to the Underwriters, to RBC Capital Markets Corporation
c/o RBC Capital Markets
60 South Sixth Street
Minneapolis, MN 55402
Attention: Wade Massad
Syndicate Director
Fax: (612) 371-2837
if to the Company or
the Selling Stockholders, to Deckers Outdoor Corporation
495-A South Fairview Avenue
Goleta, California 93117
Attention: M. Scott Ash
Chief Financial Officer
Fax: (805) 967-7862
13. TERMINATION.
(a) This Agreement may be terminated by you by notice to the
Company and the Selling Stockholders at any time prior to the Closing Date if
any of the following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
material adverse change or any development involving a prospective material
adverse change, which has had or is reasonably likely to have a Material Adverse
Effect, (ii) any outbreak or escalation of hostilities or declaration of war or
national emergency or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable or inadvisable to market the Shares or to enforce contracts for
the sale of the Shares, (iii) suspension of trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market, limitation on prices (other than limitations on hours or numbers of days
of trading) for securities on either such Exchange or such Market or material
disruption in securities settlement, payment or clearance services in the United
States, (iv) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court or other
33
governmental authority which in your opinion materially and adversely affects or
may materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading, or placement on any watch list for possible
downgrading, in the rating of the Company's debt securities by any "nationally
recognized statistical rating organization" (as defined for purposes of Rule
436(g) under the Exchange Act); (vii) the suspension of trading of the Company's
common stock by The Nasdaq Stock Market, the Commission, or any other
governmental authority or, (viii) the taking of any action by any governmental
body or agency in respect of its monetary or fiscal affairs which in your
reasonable opinion has a material adverse effect on the securities markets in
the United States; or
(b) as provided in Sections 8 and 11 of this Agreement.
14. SUCCESSORS.
This Agreement has been and is made solely for the benefit of
the Company, the Selling Stockholders and Underwriters and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
15. INFORMATION PROVIDED BY UNDERWRITERS.
The Company, the Selling Stockholders and the Underwriters
acknowledge and agree that the only information furnished or to be furnished by
any Underwriter to the Company for inclusion in any Prospectus or the
Registration Statement consists of the information contained under the headings
"Underwriting Discounts and Offering Expenses" (except for the information
furnished in the last paragraph thereof) and "Underwriters' Market Activities"
under the caption "Underwriting" in the Prospectus.
16. 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, by or on behalf of the Company or its
directors or officers or by or on behalf of any of the Selling Stockholders and
(c) delivery of and payment for the Shares under this Agreement.
This Agreement may be executed in 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 New York.
34
This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
This Agreement may only be amended or modified in writing,
signed by all of the parties hereto, and no condition herein (express or
implied) may be waived unless waived in writing by each party whom the condition
is meant to benefit.
The invalidity or unenforceability of any section, paragraph
or provision of this Agreement shall not affect the validity or enforceability
of any other section, paragraph or provision of this Agreement. If any section,
paragraph or provision of this Agreement is for any reason determined to be
invalid or unenforceable, there shall be deemed to be made such minor changes
(and only such minor changes) as are necessary to make it valid and enforceable.
[remainder of page intentionally blank]
35
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters in accordance with its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
Deckers Outdoor Corporation
By
--------------------------------------
Douglas B. Otto
Chief Executive Officer
Selling Stockholders listed on Schedule II
By
--------------------------------------
Douglas B. Otto
Attorney-in-Fact
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
RBC CAPITAL MARKETS CORPORATION
PIPER JAFFRAY & CO.
For themselves and as the Representatives of
the several Underwriters listed on Schedule I
36
By: RBC Capital Markets Corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
SCHEDULE I
SCHEDULE OF UNDERWRITERS
UNDERWRITER NUMBER OF FIRM SHARES TO BE PURCHASED
----------- -------------------------------------
RBC Capital Markets Corporation
Piper Jaffray & Co.
SG Cowen Securities Corporation
D.A. Davidson & Co.
First Albany Capital Inc.
Wedbush Morgan Securities Inc.
TOTAL
SCHEDULE II
SCHEDULE OF SELLING STOCKHOLDERS
SELLING STOCKHOLDER NUMBER OF FIRM SHARES TO BE NUMBER OF OPTION SHARES TO
SOLD BE SOLD
------------------- --------------------------- --------------------------
Douglas B. Otto 1,198,243
Rex A. Licklider 45,595
Gene E. Burleson 53,990
M. Scott Ash 70,000
Patrick C. Devaney 68,951
Constance X. Rishwain 52,500
Janice M. Howell 29,215
Robert P. Orlando 32,900
John M. Gibbons 10,000
John A. Kalinich 25,375
Daniel L. Terheggen 6,271
Mark Thatcher 272,560
James Douglas Otto Trust and 134,400
Douglas B. Otto Children's Trust
--------- -------
TOTAL 2,000,000 525,000
========= =======
SCHEDULE III
LIST OF ALL ISSUED PATENTS OWNED
IN WHOLE OR IN PART BY DECKERS OUTDOOR CORPORATION OR ANY OF ITS SUBSIDIARIES
US PATENTS
Title Appln No. Appln Date Patent No. Liens & Ownership
----- --------- ---------- ---------- -----------------
Sandal 512,625 11-Apr-90 5,056,241 Peninsula Fund
Shoe Sole Bottom and 55,939 17-Jun-96 D398,143 Peninsula Fund &
Periphery Comerica Bank
Sole Bottom and Periphery 56,119 24-Jun-96 D390,348 Peninsula Fund &
for Footwear Comerica Bank
Fleece Sock 09/001252 30-Dec-97 5,867,837 Peninsula Fund &
Comerica Bank
Footwear 29/099,562 22-Jan-99 D429,873 Peninsula Fund &
Comerica Bank
Footwear 29/102,977 6-Apr-99 D441,175 Peninsula Fund &
Comerica Bank
Footwear 29/114,352 22-Nov-99 D458,009 Peninsula Fund &
Comerica Bank
Footwear 29/123,313 15-May-00 D460,245 Peninsula Fund &
Comerica Bank
Footwear 29/123,315 15-May-00 D460,246 Peninsula Fund &
Comerica Bank
Footwear 29/123,305 15-May-00 D459,863 Peninsula Fund &
Comerica Bank
Footwear 29/123,301 15-May-00 D459,862 Peninsula Fund &
Comerica Bank
Footwear Securement System 10/130457 20-Aug-02
Footwear Sole and Arch 09/786,239 3-Sep-99 6,606,803 Peninsula Fund
Strapping System & Comerica Bank
Footwear Sole with 09/148,306 4-Sep-98 6,061,929 Peninsula Fund &
Integrally Molded Shank Comerica Bank
Self Adjusting Frame for 09/239,473 28-Jan-99 6,128,835 Peninsula Fund
Footwear & Comerica Bank
Title Appln No. Appln Date Patent No. Liens & Ownership
----- --------- ---------- ---------- -----------------
Sport Sandal Construction 560,569 12-Dec-83 4,584,782 Peninsula Fund &
Comerica Bank
Sport Sandal For Active Wear 07/096914 15-Sep-87 4,793,075 Peninsula Fund &
Comerica Bank
Surface of a Footwear Sole 29/114,038 17-Nov-99 D461,627 Peninsula Fund &
Comerica Bank
Tread Surface 29/123,252 15-May-00 D459,864 Peninsula Fund &
Comerica Bank
INTERNATIONAL PATENTS
Title Appln No. Appln Date Patent No. Country
----- --------- ---------- ---------- -------
Footwear Securement System 17741/01 17-Nov-00 Australia
Footwear Sole and Arch Strapping 58084/99 3-Sep-99 763736 Australia
System
Sport Sandal 21853/88 5-Sep-88 599880 Australia
Fleece Sock 2,227,352 16-Jan-98 2227352 Canada
Footwear 99312209.4 20-Jul-99 99312209.4 China
Footwear Sole and Arch Strapping 99810533.3 10-Aug-01 China
System
Footwear Sole and Arch Strapping 99945494.5 27-Nov-02 1109467 EU
System
Footwear 994635 22-Jul-99 994635 France
Footwear 49906922.6 21-Jul-99 49906922.6 Germany
Footwear 11-19656 22-Jul-99 1090957 Japan
Sport Sandal For Active Wear 11738/88 10-Sep-88 77573 Korea
Footwear Sole and Arch Strapping PA/a/2001/002347 2-Mar-01 Mexico
System
Sport Sandal For Active Wear 226061 6-Sep-88 226061 New Zealand
Footwear 2085164 22-Jul-99 2085164 UK
2
EXHIBIT A
LIST OF SUBSIDIARIES
Except as described below, all issued and outstanding shares of the Subsidiaries
are held by the Company.
SUBSIDIARY ISSUED AND OUTSTANDING SHARES
---------- -----------------------------
Holbrook Limited* 76
Phillipsburg Limited* 2
UGG Holdings, Inc. 100,875
Deckers Europe B.V. 400
Deckers Consumer Direct Corporation [ ]
* One share each of Holbrook Limited and Phillipsburg Limited is held by
Tapman (Nominees) Limited pursuant to a Declaration of Trust for the sole
benefit of and to the order of the Company. 66.65% of the shares of
Holbrook Limited and Phillipsburg Limited are pledged to Comerica
Bank-California in connection with the Company's credit facility.