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EXHIBIT 1.1
UNDERWRITING AGREEMENT
__________, 2000
Lehman Brothers Inc.
FleetBoston Robertson Stephens Inc.
SG Cowen Securities Corporation
c/o Lehman Brothers Inc.
555 California Street, 30th Floor
San Francisco, CA 94104
Ladies and Gentlemen:
INTRODUCTORY. Virage Logic Corporation, a Delaware corporation
(the "Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of 3,750,000 shares (the "Firm
Shares") of its Common Stock, $.001 par value (the "Common Shares"). In
addition, the Company has granted to the Underwriters an option to purchase up
to an additional 562,500 Common Shares (the "Option Shares") as provided in
Section 2. The Firm Shares and, if and to the extent such option is exercised,
the Option Shares are collectively called the "Shares." Lehman Brothers Inc.
("Lehman Brothers"), FleetBoston Robertson Stephens Inc., SG Cowen Securities
Corporation and Fidelity Capital Markets, a division of National Financial
Services Corporation have agreed to act as representatives of the several
Underwriters (in such capacity, the "Representatives") in connection with the
offering and sale of the Shares.
As a part of the offering contemplated by this Agreement, Lehman
Brothers has agreed to reserve out of the Shares, up to 262,500 shares, for sale
to the Company's employees, officers, and directors and other parties associated
with the Company (collectively, "Directed Share Participants"), upon the terms
and conditions set forth in the Prospectus under the heading "Underwriting" (the
"Directed Share Program") and in accordance with the rules and regulations of
the National Association of Securities Dealers, Inc. The Shares to be sold by
Lehman Brothers pursuant to the Directed Share Program (the "Directed Shares")
will be sold by Lehman Brothers pursuant to this Agreement at the public
offering price. Any Directed Shares not orally confirmed for purchase by any
Directed Share Participants on or immediately after the date of this Agreement
will be offered to the public by Lehman Brothers as set forth in the Prospectus.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(File No. 333-36108), which contains a form of prospectus, subject to
completion, to be used in connection with the public offering and sale of the
Shares. Each such prospectus, subject to completion, used in connection with
such public offering is called a "preliminary prospectus." Such registration
statement, as amended, including the
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financial statements, exhibits and schedules thereto, in the form in which it
was declared effective by the Commission under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), including any information deemed to be a part thereof at the
time of effectiveness pursuant to Rule 430A under the Securities Act, is called
the "Registration Statement." Any registration statement filed by the Company
pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b)
Registration Statement," and from and after the date and time of filing of the
Rule 462(b) Registration Statement the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. Such prospectus, in the form
first used by the Underwriters to confirm sales of the Shares, is called the
"Prospectus." All references in this Agreement to the Registration Statement,
the Rule 462(b) Registration Statement, a preliminary prospectus, the
Prospectus, or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its agreements with the Underwriters
as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to each
Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sale of
the Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times, complied and will comply in all material
respects with the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. Each
preliminary prospectus, as of its date, and the Prospectus, as amended or
supplemented, as of its date and at all subsequent times through the 30th day
after the date hereof, did not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties set forth in the two
immediately preceding sentences do not apply to statements in or omissions from
the Registration Statement, any Rule 462(b) Registration Statement, or
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any post-effective amendment thereto, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by the
Representatives expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to each Representative one complete conformed copy of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Representatives have reasonably
requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as of
which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business or operations, whether or not arising from transactions
in the ordinary course of business, of the Company and its subsidiary,
considered as one entity (any such change or effect, where the context so
requires, is called a "Material Adverse Change" or a "Material Adverse Effect");
(ii) the Company and its subsidiary, considered as one entity, have not incurred
any material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company or,
except for dividends paid to the Company, its subsidiary on any class of capital
stock or repurchase or redemption by the Company or its subsidiary of any class
of capital stock.
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(h) Independent Accountants. Ernst & Young LLP and Mohler, Nixon &
Williams Accountancy Corporation who have expressed their opinion with respect
to the financial statements (which term as used in this Agreement includes the
related notes thereto) filed with the Commission as a part of the Registration
Statement and included in the Prospectus, are independent public or certified
public accountants as required by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its subsidiary as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. Such financial
statements have been prepared in conformity with generally accepted accounting
principles as applied in the United States applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial data set
forth in the Prospectus under the captions "Summary--Summary Selected Financial
Data," "Selected Financial Data" and "Capitalization" fairly present the
information set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement.
(j) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles as applied in the United States and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity, other than
Virage Logic International, a California corporation.
(l) Incorporation and Good Standing of the Company and its Subsidiary.
Each of the Company and its subsidiary has been duly organized and is validly
existing as a corporation, in good standing under the laws of the jurisdiction
in which it is organized with full corporate power and authority to own its
properties and conduct its business as described in the prospectus, and is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction which requires such qualification.
(m) Capitalization of the Subsidiary. All the outstanding shares of
capital stock of the subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of the subsidiary are owned
by the Company directly free and clear of any security interests, claims, liens
or encumbrances.
(n) No Prohibition on Subsidiary from Paying Dividends or Making Other
Distributions. The Company's subsidiary is not currently prohibited, directly or
indirectly,
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from paying any dividends to the Company, from making any other distribution on
such subsidiary's capital stock, from repaying to the Company any loans or
advances to such subsidiary from the Company or from transferring any of such
subsidiary's property or assets to the Company, except as described in or
contemplated by the Prospectus.
(o) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Shares (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Shares have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding Common Shares were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company or its subsidiary other than those accurately described in the
Prospectus. The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted thereunder,
set forth in the Prospectus accurately and fairly describes such plans,
arrangements, options and rights.
(p) Stock Exchange Listing. The Shares have been approved for inclusion
on the Nasdaq National Market, subject only to official notice of issuance.
(q) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, LLC and (iii) by the federal and
provincial laws of Canada or other foreign jurisdiction in which the Shares are
offered or sold.
(r) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or its subsidiary
pursuant to, (i) the charter or by-laws of the Company or its subsidiary, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which the Company or its subsidiary is a party or bound or to
which their property is subject, except for such conflicts for which third party
consents have been obtained or which could not reasonably be expected to have a
Material Adverse Effect, or (iii) any statute, law, rule, regulation, judgment,
order or decree applicable to the Company or its subsidiary of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or its subsidiary or any of their
properties.
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(s) No Defaults or Violations. Neither the Company nor its subsidiary is
in violation or default of (i) any provision of its charter or by-laws, (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such subsidiary or any
of its properties, as applicable, except any such violation or default which
would not, singly or in the aggregate, result in a Material Adverse Change
except as otherwise disclosed in the Prospectus.
(t) No Actions, Suits or Proceedings. No action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or its subsidiary or their property is pending or, to the
best knowledge of the Company, threatened that (i) could reasonably be expected
to have a Material Adverse Effect on the performance of this Agreement or the
consummation of any of the transactions contemplated hereby or (ii) could
reasonably be expected to result in a Material Adverse Effect.
(u) All Necessary Permits, Etc. The Company and its subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses, and neither the Company nor its subsidiary
has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(v) Title to Properties. The Company and its subsidiary have good and
marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(i) above, in each case free and
clear of any security interests, mortgages, liens, encumbrances, equities,
claims and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or such subsidiary. To the
Company's knowledge, the real property, improvements, equipment and personal
property held under lease by the Company or its subsidiary are held under valid
and enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company or such
subsidiary.
(w) Tax Law Compliance. The Company and its subsidiary have filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them. The
Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(i) above in respect of all
federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or its subsidiary has not been finally
determined. The Company is not aware of any tax deficiency that has been or
might be asserted or threatened against the Company that could result in a
Material Adverse Change.
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(x) Intellectual Property Rights. Each of the Company and its subsidiary
owns or possesses adequate rights to use all patents, patent rights or licenses,
inventions, collaborative research agreements, trade secrets, know-how,
trademarks, service marks, trade names and copyrights which are necessary to
conduct its businesses as described in the Registration Statement and
Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Material Adverse Change. There is no
claim being made against the Company regarding patents, patent rights or
licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company and its
subsidiary do not in the conduct of their business as now or proposed to be
conducted as described in the Prospectus infringe or conflict with any right or
patent of any third party, or any discovery, invention, product or process which
is the subject of a patent application filed by any third party, known to the
Company or its subsidiary, which such infringement or conflict is reasonably
likely to result in a Material Adverse Change.
(y) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares.
(z) Company Not an "Investment Company". The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Shares will not be, an "investment company" or an entity "controlled" by
an "investment company" within the meaning of the Investment Company Act and
will conduct its business in a manner so that it will not become subject to the
Investment Company Act.
(aa) Insurance. Each of the Company and its subsidiary is insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiary against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and Directors and Officers liability. The Company
has no reason to believe that it or its subsidiary will not be able (i) to renew
its existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor its
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
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(bb) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or its subsidiary exists or is
imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers or international
distributors that might be expected to result in a Material Adverse Change.
(cc) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(dd) Lock-Up Agreements. Each officer and director of the Company and
each beneficial owner of one or more percent of the outstanding issued share
capital of the Company has agreed to sign an agreement substantially in the form
attached hereto as Exhibit A (the "Lock-up Agreements"). The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the Lock-up Agreements presently in
effect or effected hereby. The Company hereby represents and warrants and agrees
that during the 180 days following the date of the Prospectus (the "Lock-Up
Period"), the Company will not (i) release any of its officers, directors or
other securityholders from any lock-up agreements currently existing or
hereafter effected or (ii) consent to the removal of any transfer-restrictive
legend from any certificate representing any Common Shares, in each case without
the prior written consent of Lehman Brothers.
(ee) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or its subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
(ff) No Unlawful Contributions or Other Payments. Neither the Company
nor its subsidiary nor, to the best of the Company's knowledge, any employee or
agent of the Company or any subsidiary, has made any contribution or other
payment to any official of, or candidate for, any federal, state or foreign
office in violation of any law or of the character required to be disclosed in
the Prospectus.
(gg) Environmental Laws. (i) The Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company is not currently aware that it
will be required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section 9601, et seq.), or otherwise designated as a contaminated site
under applicable state or local law.
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(hh) ERISA Compliance. The Company and its subsidiary and any "employee
benefit plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiary or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
Company or its subsidiary, any member of any group of organizations described in
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder (the
"Code") of which the Company or such subsidiary is a member. No "reportable
event" (as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or maintained by the
Company, its subsidiary or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its subsidiary or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would have
any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither
the Company, its subsidiary nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiary or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(ii) Consents Required in Connection with the Directed Share Program. No
consent, approval, authorization or order of, or qualification with, any
governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered.
(jj) No Improper Influence in Connection with the Directed Share
Program. The Company has not offered, or caused Lehman Brothers to offer, Shares
to any person pursuant to the Directed Share Program with the specific intent to
unlawfully influence (i) a customer or supplier of the Company to alter the
customer's or supplier's level or type of business with the Company or (ii) a
trade journalist or publication to write or publish favorable information about
the Company or its products.
Any certificate signed by an officer of the Company and delivered
to the Representatives or to counsel for the Underwriters shall be deemed to be
a representation and warranty by the Company to each Underwriter as to the
matters set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) The Firm Shares. The Company agrees to issue and sell to the several
Underwriters the Firm Shares upon the terms herein set forth. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Shares set forth opposite their names on Schedule A. The purchase price per
Firm Share to be paid by the several Underwriters to the Company shall be $[___]
per share.
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(b) The First Closing Date. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made by the Company and the
Representatives at 6:00 a.m. San Francisco time, at the offices of Heller Ehrman
White & McAuliffe LLP (or at such other place and time as may be agreed upon
among the Representatives and the Company), (i) on the third (3rd) full business
day following the first day that Shares are traded, (ii) if this Agreement is
executed and delivered after 1:30 P.M., San Francisco time, the fourth (4th)
full business day following the day that this Agreement is executed and
delivered or (iii) at such other time and date not later that seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 8 hereof),
such time and date of payment and delivery being herein called the "Closing
Date"; provided, however, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
2(g) and 3(e) hereof, the Representatives may, in their sole discretion,
postpone the Closing Date until no later that two (2) full business days
following delivery of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of 562,500 Option Shares from the Company at the
purchase price per share to be paid by the Underwriters for the Firm Shares. The
option granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of such
notice of exercise. If any Option Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Option Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on Schedule A opposite the name of such Underwriter bears to the total number of
Firm Shares. The Representatives may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the Company.
(d) Public Offering of the Shares. The Representatives hereby advise the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representatives have been authorized,
for their own accounts and the accounts of the several Underwriters, to accept
delivery of and
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receipt for, and make payment of the purchase price for, the Firm Shares and any
Option Shares the Underwriters have agreed to purchase. Lehman Brothers,
individually and not as a Representative of the Underwriters, may (but shall not
be obligated to) make payment for any Shares to be purchased by any Underwriter
whose funds shall not have been received by the Representatives by the First
Closing Date or the Second Closing Date, as the case may be, for the account of
such Underwriter, but any such payment shall not relieve such Underwriter from
any of its obligations under this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives, for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
SECTION 3. COVENANTS OF THE COMPANY.
The Company further covenants and agrees with each Underwriter as
follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to become effective simultaneously with the
Registration Statement, (ii) use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the
Securities Act is followed, to prepare and timely file with the Commission under
Rule 424(b) under the Securities Act 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
Securities Act and (iii) not file any amendment to the 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
Securities Act. If the Company elects to rely on Rule 462(b) under the
Securities Act, the Company shall file a Rule 462(b) Registration Statement with
the Commission in compliance with Rule 462(b) under the Securities Act prior to
the time
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confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
(b) Securities Act Compliance. 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.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) 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.
(d) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, 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 or counsel for the Underwriters, 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, and furnish at its own
expense to the Underwriters and to dealers, 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.
(e) Copies of the Prospectus and any Amendments and Supplements Thereto.
The Company agrees to furnish the Representatives, without charge, during the
period beginning on the date hereof and ending on the later of the First Closing
Date or such date, as in the opinion of counsel for the Underwriters, the
Prospectus is no longer required by law to be delivered in connection with sales
by an Underwriter or dealer (the "Prospectus Delivery Period"), as many copies
of the Prospectus and any amendments and supplements thereto as the
Representatives may request.
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(f) Insurance. The Company shall obtain Directors and Officers liability
insurance in the minimum amount of $10 million which shall apply to the offering
contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve month period
ending on _____________ that satisfies the provisions of Section 11(a) of the
Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act within the time periods required by the Exchange Act and the rules
of the Nasdaq National Market.
(l) Agreement Not to Offer or Sell Additional Securities. The Company
will not, without the written consent of Lehman Brothers and except as described
in the Prospectus, offer, sell or contract to sell, or otherwise dispose of or
enter into any transaction which is designed to, or could be expected to, result
in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise by the Company or any affiliate
of the Company or any person in privity with the Company or any affiliate of the
Company) directly or indirectly, or announce the offering of, any other Common
Shares or any securities convertible into, or exchangeable for, Common Shares;
provided, however, that the Company may (i) issue and sell Common Shares
pursuant to any director or employee stock option plan, stock ownership plan or
dividend reinvestment plan of the Company in effect at the date of the
Prospectus and described in the Prospectus so long as none of those shares may
be transferred during the Lock-Up Period and the Company shall enter stop
transfer instructions with its transfer agent and registrar against the transfer
of any such Common Shares and (ii) the Company may issue Common Shares issuable
upon the conversion of securities or the exercise of warrants outstanding at the
date of the Prospectus and described in the Prospectus. These restrictions
terminate after the close of trading of the Shares on the final day of the
Lock-Up Period
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(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
(n) Directed Share Program. The Company (i) will comply with all
applicable securities and other applicable laws, rules and regulations in each
jurisdiction in which the Directed Shares are offered in connection with the
Directed Share Program, and (ii) will pay all reasonable fees and disbursements
of counsel incurred by the Underwriters in connection with the Directed Share
Program and any stamp duties, similar taxes or duties or other taxes, if any,
incurred by the Underwriters in connection with the Directed Share Program.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS.
The obligations of the several Underwriters to purchase and pay
for the Shares as provided herein on the First Closing Date and, with respect to
the Option Shares, the Second Closing Date, shall be subject to the accuracy of
the representations and warranties on the part of the Company set forth in
Section 1 hereof as of the date hereof and as of the First Closing Date as
though then made and, with respect to the Option Shares, as of the Second
Closing Date as though then made, to the timely performance by the Company of
its covenants and other obligations hereunder, and to each of the following
additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No
Objection from the National Association of Securities Dealers, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel; and the National Association
of Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
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(c) No Material Adverse Change. Subsequent to the execution and delivery
of this Agreement and prior to the First Closing Date, or the Second Closing
Date, as the case may be, there shall not have been any Material Adverse Change
in the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiary considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus.
(d) Opinion of Counsel for the Company. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Heller Ehrman White & McAuliffe LLP counsel for the Company substantially in
the form of Exhibit B attached hereto, dated the First Closing Date, or the
Second Closing Date, addressed to the Underwriters and with reproduced copies or
signed counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely as
to questions of fact upon representations or certificates of officers of the
Company, and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to Underwriters'
Counsel.
(e) Opinion of Intellectual Property Counsel for the Company. You shall
have received on the First Closing Date, or the Second Closing Date, as the case
may be, opinions of Fenwick & West LLP and Smith & Danamraj, intellectual
property counsel for the Company substantially in the form of Exhibit C attached
hereto.
(f) Opinion of Counsel for the Underwriters. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of O'Melveny & Myers LLP, counsel for the Underwriters, in a form
reasonably satisfactory to the Representatives. The Company shall have furnished
to such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(g) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
each of Ernst & Young LLP and Mohler, Nixon & Williams Accountancy Corporation
addressed to the Underwriters, dated the First Closing Date or the Second
Closing Date, as the case may be, confirming that they are independent certified
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable published Rules and Regulations and based upon
the procedures described in such letters delivered to you concurrently with the
execution of this Agreement (each such letter herein called an "Original
Letter"), but carried out to a date not more than four (4) business days prior
to the First Closing Date or the Second Closing Date, as the case may be, (i)
confirming, to the extent true, that the statements and conclusions set forth in
such person's Original Letter are accurate as of the First Closing Date or the
Second Closing Date, as the case may be, and (ii) setting forth any revisions
and additions to the statements and conclusions set forth in such person's
Original Letter which are necessary to reflect any changes in the facts
described in such person's Original Letter since the date of such
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letter, or to reflect the availability of more recent financial statements, data
or information. The letters shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiary considered as one enterprise from that set
forth in the Registration Statement or Prospectus, which, in your sole judgment,
is material and adverse and that makes it, in your sole judgment, impracticable
or inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus. The Original Letter from Ernst & Young LLP and the Original
Letter from Mohler, Nixon & Williams Accountancy Corporation shall be addressed
to or for the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the consolidated balance sheet of the Company as of September 30, 1999 and 1998,
in the case of Ernst & Young LLP, and 1997, in the case of Mohler, Nixon &
Williams Accountancy Corporation, and related consolidated statements of
operations, shareholders' equity, and cash flows for the twelve (12) months
ended as of the dates of the balance sheets referred to in such letter, (iii) in
the case of the Original Letter from Ernst & Young LLP state that they have
performed the procedures set out in Statement on Auditing Standards ("SAS") No.
71 for a review of interim financial information and providing the report of
Ernst & Young LLP as described in SAS No. 71 on the financial statements for
each of the quarters in the two-quarter period ended March 31, 2000 (the
"Quarterly Financial Statements"), (iv) state that in the course of such review,
nothing came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial Statements in
order for them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented, and (v) address other matters
agreed upon by Ernst & Young LLP and Mohler, Nixon & Williams Accountancy
Corporation and you. In addition, you shall have received from Ernst & Young LLP
and Mohler, Nixon & Williams Accountancy Corporation a letter addressed to the
Company and made available to you for the use of the Underwriters stating that
their review of the Company's system of internal accounting controls, to the
extent they deemed necessary in establishing the scope of their examination of
the Company's consolidated financial statements as of September 30, 1999, 1998
and 1997, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(h) Officers' Certificate. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the First
Closing Date or the Second Closing Date, as the case may be, and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
First Closing Date or the Second Closing Date, as the case may be;
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(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Securities Act;
(iii) When the Registration Statement became effective and at all
times subsequent thereto up to the delivery of such certificate, (a) the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and in all material respects
conformed to the requirements of the Securities Act, (b) the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, did not and does not include any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and (c) since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiary considered as one enterprise, (b) any
transaction that is material to the Company and its subsidiary
considered as one enterprise, except transactions entered into in the
ordinary course of business, (c) any obligation, direct or contingent,
that is material to the Company and its subsidiary considered as one
enterprise, incurred by the Company or its subsidiary, except
obligations incurred in the ordinary course of business, (d) any change
in the capital stock or outstanding indebtedness of the Company or its
subsidiary that is material to the Company and its subsidiary considered
as one enterprise, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or its
subsidiary, or (f) any loss or damage (whether or not insured) to the
property of the Company or its subsidiary which has been sustained or
will have been sustained which has a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiary considered as one
enterprise.
(i) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
Company and each beneficial owner of one or more percent of the outstanding
issued share capital of the Company.
(j) Stock Exchange Listing. The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(k) Compliance with Prospectus Delivery Requirements. The Company shall
have complied with the provisions of Sections 2(g) and 3(e) hereof with respect
to the furnishing of Prospectuses.
(l) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the
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Underwriters shall have received such information, documents and opinions as
they may reasonably require for the purposes of enabling them to pass upon the
issuance and sale of the Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied
when and as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
SECTION 5. PAYMENT OF EXPENSES.
The Company agrees to pay all costs, fees and expenses incurred
in connection with the performance of its obligations hereunder and in
connection with the transactions contemplated hereby, including without
limitation (i) all expenses incident to the issuance and delivery of the Shares
(including all printing and engraving costs), (ii) all fees and expenses of the
registrar and transfer agent of the Common Shares, (iii) all necessary issue,
transfer and other stamp taxes in connection with the issuance and sale of the
Shares to the Underwriters, (iv) all fees and expenses of the Company's counsel
and independent public or certified public accountants, (v) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement (including financial statements,
exhibits, schedules, consents and certificates of experts), each preliminary
prospectus and the Prospectus, and all amendments and supplements thereto, and
this Agreement, (vi) all costs and expenses incurred by Underwriters counsel in
connection with the Directed Share Program, (vii) all filing fees, attorneys'
fees and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Shares for offer and sale under the
state securities or blue sky laws or the provincial securities laws of Canada or
any other country, and, if requested by the Representatives, preparing and
printing a "Blue Sky Survey," an "International Blue Sky Survey" or other
memorandum, and any supplements thereto, advising the Underwriters of such
qualifications, registrations and exemptions, (viii) the filing fees incident
to, and the reasonable fees and expenses of counsel for the Underwriters in
connection with, the National Association of Securities Dealers, LLC review and
approval of the Underwriters' participation in the offering and distribution of
the Common Shares, (ix) the fees and expenses associated with including the
Shares on the Nasdaq National Market, (x) all costs and expenses incident to the
travel and accommodation of the Company's employees on the "roadshow," and (xi)
all other fees, costs and expenses referred to in Item 13 of Part II of the
Registration Statement. Except as provided in this Section 5, Section 6, and
Section 7 hereof, the Underwriters shall pay their own expenses, including the
fees and disbursements of their counsel.
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SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.
If this Agreement is terminated by the Representatives pursuant
to Section 4, Section 8, or Section 9, or if the sale to the Underwriters of the
Shares on the First Closing Date is not consummated because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or to comply with any provision hereof, the Company agrees to reimburse the
Representatives and the other Underwriters (or such Underwriters as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by the
Representatives and the Underwriters in connection with the proposed purchase
and the offering and sale of the Shares, including but not limited to fees and
disbursements of counsel, printing expenses, travel and accommodation expenses,
postage, facsimile and telephone charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Underwriters.
The Company agrees to indemnify and hold harmless each
Underwriter, its officers and employees, and each person, if any, who controls
any Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained (A) in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A under the Securities Act, or (B) in any
materials or information provided to investors by, or with the approval of, the
Company in connection with the marketing or the offering of the Shares (the
"Marketing Materials"), including any roadshow or investor presentations made to
investors by the Company (whether in person or electronically), or the omission
or alleged omission therefrom of a material fact required to be stated in the
Registration Statement, any amendment thereto, or in any Marketing Materials, or
necessary to make the statements therein not misleading; or (ii) upon any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon any matter
covered by clause (i) or (ii) above, provided that the Company shall not be
liable under this clause (iii) to the extent that a court of competent
jurisdiction shall have determined by a final judgment that such loss, claim,
damage, liability or action resulted directly from any such acts or failures to
act undertaken or omitted to be taken by such Underwriter through its gross
negligence or willful misconduct; and to reimburse each Underwriter and each
such
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controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by Lehman Brothers) as such expenses are
reasonably incurred by such Underwriter or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, that such loss,
claim, damage, liability or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Representatives expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided further that with respect to any preliminary prospectus,
the foregoing indemnity agreement shall not inure to the benefit of any
Underwriter from whom the person asserting any loss, claim, damage, liability or
expense purchased Shares, or any person controlling such Underwriter, if copies
of the Prospectus were timely delivered to the Underwriter pursuant to Section 2
and a copy of the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, if required by law so
to have been delivered, at or prior to the written confirmation of the sale of
the Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
20
<PAGE> 21
(c) Information Provided by the Underwriters. The Company and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act, hereby acknowledges that the only information that the
Underwriters have furnished to the Company expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) are the statements set forth in the table in the first
paragraph, the second paragraph, the fourth paragraph, the fifth paragraph, the
seventh paragraph regarding underwriting discounts and commissions, the 13th and
14th paragraphs regarding stabilization and short sales, the 15th paragraph
regarding offers in Canada, the 18th paragraph regarding electronic distribution
through the Internet and the 19th paragraph regarding the Directed Share
Program, all under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party shall not relieve it from any liability
hereunder to the extent it is not prejudiced as a proximate result of such
failure and in any event shall not relieve it from any liability which it may
have otherwise than on account of this indemnity agreement. In case any such
action is brought against any indemnified party and such indemnified party seeks
or intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (Lehman Brothers in the case of Section 7(b) and Section 8),
representing the indemnified parties who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party.
21
<PAGE> 22
(e) Settlements. The indemnifying party under this Section 7 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, 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 against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 60 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section 7
is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such 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 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, on the
one hand, and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds (before deducting expenses) received by the
Company from the sale of the Shares sold by it in the offering bears to the
total underwriting discounts and commissions received by the Underwriters in
connection with the sale of such Shares, in each case as described in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this Section 7(f) 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
22
<PAGE> 23
considerations referred to above in this Section 7(f). 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 Section 7(f) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (f), (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 Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section 7(f)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than forty-five
(45) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representations and warranties 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 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 7.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
(j) Indemnification for Directed Share Program. Under no circumstances
will Lehman Brothers or any other Underwriter be liable to the Company or to any
Directed Share Participant for any action taken or omitted to be taken in good
faith in connection with the Directed Share Program.
The Company agrees to pay all fees and disbursements incurred by the
Underwriters in connection with the Directed Share Program, including counsel
fees and any stamp duties or other taxes incurred by the Underwriters in
connection with the Directed Share Program.
In connection with the offer and sale of the Directed Shares, the Company
agrees, promptly upon a request in writing, to indemnify and hold harmless
Lehman Brothers and the other Underwriters from and against any loss, claim,
damage, expense, liability
23
<PAGE> 24
or action which (i) arises out of, or is based upon, any untrue statement or
alleged untrue statement of material fact contained in any material prepared by
or with the approval of the Company for distribution to Directed Share
Participants in connection with the Directed Share Program or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) arises out of
the failure of any Directed Share Participant to pay for and accept delivery of
Directed Shares that the Directed Share Participant agrees to purchase or (iii)
is otherwise related to the Directed Share Program, other than losses, claims,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted directly from bad faith or gross
negligence of Lehman Brothers; provided that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. Any claim for
indemnification shall be made in accordance with and subject to the procedures
set forth in Section 7(d) and (e).
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS.
If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the several Underwriters shall fail or refuse to
purchase Shares that it or they have agreed to purchase hereunder on such date,
and the aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on Schedule A
bears to the aggregate number of Firm Shares set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the Underwriters shall fail or refuse to purchase Shares and the
aggregate number of Shares with respect to which such default occurs exceeds 10%
of the aggregate number of Shares to be purchased on such date, and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Shares are not made within 48 hours after such default, this Agreement shall
terminate without liability of any party to any other party except that the
provisions of Section 5, Section 6, and Section 7 shall at all times be
effective and shall survive such termination. In any such case either the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, but in no event for
longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.
24
<PAGE> 25
As used in this Agreement, the term "Underwriter" shall be deemed
to include any person substituted for a defaulting Underwriter under this
Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT.
This Agreement may be terminated by the Representatives by notice
given to the Company if (a) at any time after the execution and delivery of this
Agreement and prior to the First Closing Date (i) trading or quotation in any of
the Company's securities shall have been suspended or limited by the Commission
or by the Nasdaq Stock Market, or trading in securities generally on either the
Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York or California authorities; (iii) there
shall have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any change in the United States or
international financial markets, or any substantial change or development
involving a prospective change in United States' or international political,
financial or economic conditions, as in the judgment of the Representatives is
material and adverse and makes it impracticable or inadvisable to market the
Common Shares in the manner and on the terms contemplated in the Prospectus or
to enforce contracts for the sale of securities; (iv) in the reasonable judgment
of the Representatives there shall have occurred any Material Adverse Change; or
(v) the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the reasonable judgment of
the Representatives may interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured; and (b) in the case of any of the events specified 9(a)(i)-(v),
such event singly or together with any other event, makes it, in your judgment,
impracticable or inadvisable to market the Common Shares in the manner and on
the terms contemplated in the Prospectus. Any termination pursuant to this
Section 9 shall be without liability on the part of (x) the Company to any
Underwriter, except that the Company shall be obligated to reimburse the
expenses of the Representatives and the Underwriters pursuant to Sections 5 and
6 hereof, (y) any Underwriter to the Company or any person controlling the
Company, or (z) of any party hereto to any other party except that the
provisions of Section 7 shall at all times be effective and shall survive such
termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations,
warranties and other statements of the Company and of the several Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
25
<PAGE> 26
SECTION 11. NOTICES.
All communications hereunder shall be in writing and shall be
mailed, hand delivered or telecopied and confirmed to the parties hereto as
follows:
If to the Representatives:
Lehman Brothers Inc.
555 California Street, 30th Floor
San Francisco, California 94104
Facsimile: (415) 274-5200
Attention: General Counsel
If to the Company:
Virage Logic Corporation
46501 Landing Parkway
Fremont, California 94538
Facsimile: (510) 360-8500
Attention: Chief Financial Officer
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 12. SUCCESSORS.
This Agreement will inure to the benefit of and be binding upon
the parties hereto, including any substitute Underwriters pursuant to Section 8
hereof, and to the benefit of the employees, officers and directors and
controlling persons referred to in Section 7, and to their respective
successors, and no other person will have any right or obligation hereunder. The
term "successors" shall not include any purchaser of the Shares as such from any
of the Underwriters merely by reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY.
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 hereof. 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.
SECTION 14. SECTION 14. GOVERNING LAW PROVISIONS.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
26
<PAGE> 27
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the personal jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
SECTION 15. GENERAL PROVISIONS.
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 be executed in two or more counterparts, each
one of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement may not be
amended or modified unless in writing 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. Section headings herein are
for the convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
[The remainder of this page has been intentionally left blank.]
27
<PAGE> 28
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
VIRAGE LOGIC CORPORATION
By:
---------------------------------
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
Representatives as of the date first above written.
LEHMAN BROTHERS INC.
By:______________________________________
Authorized Signatory
FLEETBOSTON ROBERTSON STEPHENS INC.
By:______________________________________
Authorized Signatory
SG COWEN SECURITIES CORPORATION
By:______________________________________
Authorized Signatory
On their behalf and on behalf of each of the several Underwriters named in
Schedule A hereto.
BY LEHMAN BROTHERS INC.
By:______________________________________
Authorized Signatory
S-1
<PAGE> 29
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Firm Shares
To be
Underwriters Purchased
----------------------------------------------------------------------- -----------
<S> <C>
Lehman Brothers Inc.................................................... [___]
FleetBoston Robertson Stephens Inc..................................... [___]
SG Cowen Securities Corporation........................................ [___]
Fidelity Capital Markets, a division of National Financial Services
Corporation ........................................................... [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
[___] ................................................................. [___]
------------------------------------------------------------------------ ---------------
Total.......................................................... [___]
===============
</TABLE>
Schedule A
<PAGE> 30
EXHIBIT A
LOCK-UP AGREEMENT
April 5, 2000
FleetBoston Robertson Stephens Inc.
As Representative of the Several Underwriters
555 California Street, Suite 2600
San Francisco, California 94104
Re: Virage Logic Corp. (the "Company")
Ladies and Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company (the "Common Stock"), options or warrants to
purchase shares of Common Stock or securities convertible into or exchangeable
or exercisable for Common Stock (collectively, the "Securities"). This letter is
being delivered to you in connection with the proposed Underwriting Agreement
(the "Underwriting Agreement") to be entered into by and between the Company and
you, as Representative of the several Underwriters, with respect to the initial
public offering (the "Offering") of Common Stock of the Company. The undersigned
recognizes that the Offering will be of benefit to the undersigned and will
benefit the Company, by, among other things, raising additional capital for its
operations.
In order to induce you to enter into the Underwriting Agreement, the
undersigned will not, without the prior written consent of FleetBoston Robertson
Stephens Inc. ("Robertson Stephens"), (i) sell, offer to sell, contract to sell,
hypothecate, pledge, grant any option to sell or otherwise dispose of, or file
(or participate in the filing of) a registration statement with the Securities
and Exchange Commission (the "Commission") in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission promulgated
thereunder with respect to, any shares of Common Stock of the Company or any
Securities of the Company, (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of Common Stock or any Securities, whether any such transaction is to
be settled by delivery of Common Stock or such other Securities, in cash or
otherwise, or (iii) publicly announce an intention to effect any transaction
specified in clause (i) or (ii), in the case of each of clauses (i), (ii) and
(iii) for a period of 180 days after the date of execution of the Underwriting
Agreement. The foregoing notwithstanding, the undersigned may, without the prior
written consent of Robertson Stephens, dispose of shares of Common Stock or
Securities (1) acquired in open market transactions after the completion of the
Offering, or (2) which are disposed of (x) as bona fide gifts approved by
Robertson Stephens, and (y) as a distribution to partners or shareholders of
such person; provided that in the case of each of clauses (x) and (y), such
donees, transferees or distributees enter into lock-up agreements with you to
the effect stated above. The undersigned also agrees and consents to the entry
of stop transfer instructions with the Company's transfer agent and registrar
against the transfer of shares of Common Stock or Securities held by the
undersigned except in compliance with the foregoing restrictions.
This Agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assignees of the
undersigned. If for any reason the Underwriting Agreement shall be terminated
prior to the time of purchase (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.
Yours very truly,
---------------------------------------
Name:
A-1
<PAGE> 31
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company and each Significant Subsidiary (as that term is
defined in Regulation S-X of the Securities Act) has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction, if any, in which the ownership or leasing
of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a Material Adverse Effect. To such counsel's
knowledge, the Company does not own or control, directly or indirectly,
any corporation, association or other entity other than [list
subsidiaries];
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and
outstanding shares of capital stock of the Company outstanding prior to
the issuance of the Shares have been duly and validly issued and are
fully paid and nonassessable, and will not have been issued in violation
of or subject to any preemptive right arising under the certificate of
incorporation or Delaware General Corporation Law, or, to such counsel's
knowledge, any co-sale right, right of first refusal or other similar
right, other than any registration rights described in Opinion (xix)
hereof;
(v) All issued and outstanding shares of capital stock of each
Significant Subsidiary of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, and have not been
issued in violation of or subject to any preemptive right arising under
the certificate of incorporation or California Corporations Code, or, to
such counsel's knowledge, any co-sale right, right of first refusal or
other similar right, other than any registration rights described in
Opinion (xix) hereof and are owned by the Company free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable
interest;
(vi) The Firm Shares or the Option Shares, as the case may be, to
be issued by the Company pursuant to the terms of this Agreement have
been duly authorized and, upon issuance and delivery against payment
therefor in accordance with the terms hereof, will be duly and validly
issued and fully paid and nonassessable, and will not have been issued
in violation of or subject to any preemptive right arising under the
certificate of incorporation or Delaware General Corporation Law, or,
any co-sale right, right of first refusal or other similar right, other
than any registration rights described in Opinion (xix) hereof.
B-1
<PAGE> 32
(vii) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver to the Underwriters
the Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization, execution
and delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally or by general equitable principles (whether relief is sought
in a proceeding at law or in equity);
(ix) The Registration Statement has become effective under the
Securities Act and the Shares have been validly registered under the
Securities Act and the applicable rules and regulations of the
Commission thereunder and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Securities Act;
(x) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the 8-A
Registration Statement has become effective under the Exchange Act; the
Common Shares have been validly registered under the Exchange Act and
the applicable rules and regulations of the Commission thereunder and,
to such counsel's knowledge, no stop order suspending the effectiveness
of the Form 8-A Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Exchange Act;
(xi) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules) and financial data derived therefrom as
to which such counsel need express no opinion), as of the effective date
of the Registration Statement, complied as to form in all material
respects with the requirements of the Securities Act and the applicable
Rules and Regulations;
(xii) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such counsel
and is a fair summary of such matters and conclusions; and the forms of
certificates evidencing the Common Stock and filed as exhibits to the
Registration Statement comply with Delaware law;
(xiii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes is
accurate and fairly present the information required to be presented by
the Securities Act;
(xiv) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a
character required to be described or referred to in the Registration
Statement or Prospectus or to be filed
B-2
<PAGE> 33
as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
(xv) The performance of this Agreement and the consummation of
the transactions herein contemplated (other than performance of the
Company's indemnification obligations hereunder, concerning which no
opinion need be expressed) will not (a) result in any violation of the
Company's charter or bylaws or (b) to such counsel's knowledge, result
in a material breach or violation of any of the terms and provisions of,
or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or
instrument filed as an exhibit to the Registration Statement, or any
applicable statute, rule or regulation known to such counsel or, to such
counsel's knowledge, any order, writ or decree of any court, government
or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries, or over any of their properties or operations;
(xvi) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries, or over
any of their properties or operations is necessary in connection with
the consummation by the Company of the transactions herein contemplated,
except (i) such as have been obtained under the Securities Act, (ii)
such as may be required under state or other securities or Blue Sky laws
in connection with the purchase and the distribution of the Shares by
the Underwriters, (iii) such as may be required by the National
Association of Securities Dealers, LLC and (iv) such as may be required
under the federal or provincial laws of Canada or other foreign
jurisdiction in which Shares are sold;
(xvii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or
any of its subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus by the Securities Act, other
than those described therein;
(xviii) To such counsel's knowledge, neither the Company nor any
of its subsidiaries is presently (a) in material violation of its
respective charter or bylaws, or (b) in material breach of any
applicable statute, rule or regulation known to such counsel or, to such
counsel's knowledge, any order, writ or decree of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries, or over any of their properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Shares or
other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company
having rights known to such counsel to registration of Common Shares or
other securities, because of the filing of the Registration Statement by
the Company, have, with respect to the offering contemplated thereby,
waived such rights or such rights have expired by reason of lapse of
time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration
Statement pursuant to the exercise of and in full satisfaction of such
rights.
B-3
<PAGE> 34
(xx) The Company is not and, after giving effect to the offering
and the sale of the Shares and the application of the proceeds thereof
as described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended.
In addition, such counsel shall state that such counsel has participated
in conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the First Closing Date or Second Closing Date, as the case may be, the
Registration Statement and any amendment or supplement thereto (other than the
financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel need express
no comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement, the Prospectus and
any amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
B-4
<PAGE> 35
EXHIBIT C
MATTERS TO BE COVERED IN THE OPINION OF
INTELLECTUAL PROPERTY COUNSEL FOR THE COMPANY
INTELLECTUAL PROPERTY OPINION FROM FENWICK & WEST
References to the Prospectus in this Exhibit C include any supplements
thereto at the Closing Date.
Such counsel shall state that they act as patent and trademark counsel to
the Company and in such capacity are familiar with those patent applications and
trademarks of the Company filed by such counsel on behalf of the Company (the
"Intellectual Property"), and that, although they have conducted no special
investigation, they have read specified portions of the Registration Statement
and the Prospectus referring to the Intellectual Property, and in their opinion:
(i) The statements in the Prospectus under the captions "Risk Factors - If
we are not able to protect our intellectual property adequately, we will have
less proprietary technology to license, which will reduce our revenues and
profits," "-Third Parties may claim we are infringing or assisting others to
infringe their intellectual property rights, and we could suffer significant
litigation or licensing expenses or be prevented from licensing our technology,"
and "Business-Proprietary and Intellectual Property," insofar as such statements
constitute matters of law, legal conclusions or summaries of legal matters
relating to the Intellectual Property, or descriptions of the Intellectual
Property, have been reviewed by such counsel and are accurate and complete
summaries, in all material respects, of the matters referred to therein;
(ii) Such counsel knows of no material action, suit, claim or proceeding
relating to or affecting the Intellectual Property which is pending or
threatened against the Company or any of its officers or directors;
(iii) The Company is listed on the records of the United States Patent and
Trademark Office as the holder of record of the patent applications listed on a
schedule to such opinion;
(iv) To the knowledge of such counsel, rights to the listed patent
applications have been assigned to the Company and there are no claims of third
parties to any ownership interest or lien with respect to any of the listed
patent applications;
(v) To the knowledge of such counsel, there is no material defect in form
in the preparation or filing of the listed patent applications;
(vi) To the knowledge of such counsel, the listed patent applications are
being pursued by the Company within the United States, and such counsel has not
filed any foreign patent applications on behalf of the Company.
In addition, such counsel shall state that they have reviewed specified
portions of the Registration Statement and the Prospectus, under the captions
"Risk Factors - If we are not able to protect our intellectual property
adequately, we will have less proprietary technology to license, which will
reduce our revenues and profits," "-Third parties may claim we are infringing or
assisting others to infringe their intellectual property rights, and we could
suffer significant litigation or licensing expenses or be prevented from
licensing our technology," and "Business-Proprietary and Intellectual Property,"
and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of any statements
contained in the Registration Statement or Prospectus (other than as specified
in the numbered paragraphs above), in its review of such portions of the
Registration Statement and Prospectus nothing has come to its attention that
would lead it to believe that such portions of the Registration Statement, at
the time the Registration Statement became effective, contained an untrue
statement of a material fact regarding the Company's Intellectual Property or
omitted to state a material fact regarding the Company's Intellectual Property
required to be stated therein or necessary to make the statements therein not
misleading, or that such portions of the Prospectus, as of the date of the
Prospectus or the First Closing Date or the Second Closing Date, as the case may
be, contained an untrue statement of a material fact regarding the Company's
Intellectual Property or omitted to state a material fact regarding the
Company's Intellectual Property required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express not
belief as to patent applications not filed by it).
<PAGE> 36
Intellectual Property Opinion from Smith & Danamraj
References to the Prospectus in this Exhibit C include any supplements
thereto at the Closing Date.
Such counsel shall state that they act as the Company's intellectual
property counsel and in such capacity are familiar with the technology used by
the Company in its business and the manner of its use thereof and have read the
Registration Statement and the Prospectus, including particularly the portions
of the Registration Statement and the Prospectus referring to the Company's
patent applications and patent rights (collectively "Intellectual Property") and
in their opinion:
(i) The statements in the Prospectus under the captions "Risk Factors--If
we are not able to protect our intellectual property adequately, we will have
less proprietary technology to license, which will reduce our revenues and
profits," "--Third parties may claim we are infringing or assisting others to
infringe their intellectual property rights, and we could suffer significant
litigation or licensing expenses or be prevented from licensing our technology,"
and "Business--Proprietary and Intellectual Property," insofar as such
statements constitute matters of law, legal conclusions or summaries of legal
matters relating to Intellectual Property, or descriptions of the Company's
Intellectual Property, have been reviewed by such counsel and fairly present and
summarize, in all material respects, the matters referred to therein;
(ii) Such counsel knows of no material action, suit, claim or proceeding
relating to or affecting the Intellectual Property which is pending or
threatened against the Company or any of its officers or directors;
(iii) The Company is listed in the records of the United States Patent and
Trademark Office as the holder of record of the applications listed on a
schedule to such opinion (the "Applications"). To the knowledge of such counsel,
there are no claims of third parties to any ownership interest or lien with
respect to any of the Applications. Such counsel is not aware of any material
defect in form in the preparation or filing of the Applications on behalf of the
Company. To the knowledge of such counsel, the Applications are being pursued by
the Company. To the knowledge of such counsel, the Company owns as its sole
property the pending Applications;
(iv) To the knowledge of such counsel, the Company is not listed in the
records of any foreign patent offices as the holder of record of any foreign
patents (the "Foreign Patents") or foreign patent applications (the "Foreign
Applications"). To the knowledge of such counsel, no Foreign Applications are
being pursued by the Company; and
(v) Such counsel has no knowledge of any reason why any patent to be
issued as a result of any Application would not be presumed valid.
<PAGE> 37
In addition, such counsel shall state that they have reviewed the
Registration Statement and Prospectus and, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of any statements contained in the Registration Statement or the
Prospectus (other than as specified above), and any supplements or amendments
thereto, on the basis of the foregoing, nothing has come to their attention
which would lead them to believe that either the Registration Statement or any
amendments thereto, at the time the Registration Statement or such amendments
became effective, contained an untrue statement of a material fact regarding the
Company's Intellectual Property or omitted to state a material fact regarding
the Company's Intellectual Property required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus, as of its
date or at the First Closing Date or the Second Closing Date, as the case may
be, contained an untrue statement of a material fact regarding the Company's
Intellectual Property or omitted to state a material fact regarding the
Company's Intellectual Property necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements or schedules or other financial or statistical data
derived therefrom, included in the Registration Statement or the Prospectus or
any amendments or supplements thereto).
