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6,364,000 SHARES
SIMPLE TECHNOLOGY, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_______ ___, 2000
LEHMAN BROTHERS INC.
BANC OF AMERICA SECURITIES LLC
FIDELITY CAPITAL MARKETS, A DIVISION
OF NATIONAL FINANCIAL SERVICES CORPORATION
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Simple Technology, Inc., a California corporation (the
"Company"), proposes to sell 6,364,000 shares (the "Firm Stock") of the
Company's Common Stock, par value $0.001 per share (the "Common Stock"). In
addition, the Company proposes to grant to the Underwriters named in Schedule 1
hereto (the "Underwriters") an option to purchase up to an additional 954,600
shares of the Common Stock on the terms and for the purposes set forth in
Section 3 (the "Option Stock"). The Firm Stock and the Option Stock, if
purchased, are hereinafter collectively called the "Stock." This is to confirm
the agreement concerning the purchase of the Stock from the Company by the
Underwriters.
It is understood and agreed that the Company has consummated
or will consummate the following transactions (each a "Transaction" and
collectively, the "Transactions") prior to or concurrent with the closing of the
offering: (i) the issuance of undistributed earnings notes (the "Undistributed
Earnings Notes") to trusts established for the benefit of the Principal
Shareholders (as defined below) and members of their respective families
(collectively, the "Shareholder Trusts") in the aggregate principal amount equal
to the Company's undistributed earnings from the date of the Company's formation
through the date immediately prior to the completion of the offering; (ii) the
issuance of the additional paid-in capital notes (the "Additional Paid-In
Capital Notes") in the amount of $3.0 million representing additional paid-in
capital proceeds originally invested by the Principal Shareholders or the
Shareholder Trusts; (iii) the termination of the Company's S corporation status
under Subchapter S of the Internal Revenue Code of
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1986, as amended, and the regulations and published interpretations thereunder
(the "Code"); (iv) the execution of a Distribution and Tax Indemnity Agreement,
dated as of the date hereof, among the Company and the Shareholder Trusts (the
"Tax Indemnity Agreement"); and (v) the payoff of the Undistributed Earnings
Notes and the Additional Paid-In Capital Notes with a portion of the net
proceeds from the offering.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
PRINCIPAL SHAREHOLDERS. The Company and each of the principal shareholders of
the Company named in Schedule 2 hereto (the "Principal Shareholders")
represents, warrants and agrees that:
(a) A registration statement on Form S-1, and amendments thereto, with
respect to the Stock have (i) been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the Securities Act
and (iii) become effective under the Securities Act. Copies of such
registration statement and each of the amendments thereto have been
delivered by the Company to you as the representatives (the
"Representatives") of the Underwriters. As used in this Agreement,
"Effective Time" means the date and the time as of which such registration
statement, or the most recent post-effective amendment thereto, if any, was
declared effective by the Commission; "Effective Date" means the date of
the Effective Time; "Preliminary Prospectus" means each prospectus included
in such registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Representatives pursuant
to Rule 424(a) of the Rules and Regulations; "Registration Statement" means
such registration statement, as amended at the Effective Time, including
all information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in accordance with
Section 6(a) hereof and deemed to be a part of the registration statement
as of the Effective Time pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations; and "Prospectus" means such final prospectus, as
first filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations. If the Company has filed an
abbreviated registration statement to register additional shares of Common
Stock pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462
Registration Statement. The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus.
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(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the requirements
of the Securities Act and the Rules and Regulations and do not and will
not, as of the applicable effective date (as to the Registration Statement
and any amendment thereto) and as of the applicable filing date (as to the
Prospectus and any amendment or supplement thereto) contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; PROVIDED that no representation or warranty is made as to
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information
furnished to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein.
(c) The Company and each of its subsidiaries (as defined in Section
17) have been duly incorporated or, in the case of limited liability
companies, organized, and are validly existing as corporations or limited
liability companies, as the case may be, in good standing under the laws of
their respective jurisdictions of incorporation or organization, are duly
qualified to do business and are in good standing as foreign corporations
or limited liability companies, as the case may be, in each jurisdiction in
which their respective ownership or lease of property or the conduct of
their respective businesses requires such qualification, and have all
corporate or limited liability company power and authority necessary to own
or hold their respective properties and to conduct the businesses in which
they are engaged except where the failure to so qualify would not in the
aggregate have a material adverse effect on the Company and its
subsidiaries taken as a whole; and none of the subsidiaries of the Company
is a "significant subsidiary," as such term is defined in Rule 405 of the
Rules and Regulations.
(d) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; and, except as disclosed in the Prospectus, all of the issued
shares of capital stock of each corporate subsidiary of the Company and all
of the membership interests in each limited liability company subsidiary of
the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and (except for directors' qualifying shares and
except as set forth in the Prospectus) are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or claims.
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(e) The unissued shares of the Stock to be issued and sold by the
Company to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided herein,
will be duly and validly issued, fully paid and non-assessable; and the
Stock will conform to the description thereof contained in the Prospectus.
(f) Each of this Agreement and the Tax Indemnity Agreement has been
duly authorized, executed and delivered by the Company.
(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the Tax
Indemnity Agreement, the Undistributed Earnings Notes and the Additional
Paid-In Capital Notes.
(h) The execution, delivery and performance of this Agreement and each
of the other documents to be entered into in connection with the
Transactions by the Company and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such actions result in any violation
of the provisions of the charter or by-laws or operating agreement, as the
case may be, of the Company or any of its subsidiaries or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their properties or assets; and except for the registration of the Stock
under the Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and applicable state
securities laws in connection with the purchase and distribution of the
Stock by the Underwriters, no consent, approval, authorization or order of,
or filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement or any of the other documents to be entered into in connection
with the other Transactions by the Company and the consummation of the
transactions contemplated hereby and thereby.
(i) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned
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by such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement
filed by the Company under the Securities Act.
(j) Except as described in the Registration Statement, the Company has
not sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to Rule
144A under, or Regulations D or S of, the Securities Act, other than shares
issued pursuant to employee benefit plans, qualified stock options plans or
other employee compensation plans or pursuant to outstanding options,
rights or warrants.
(k) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest financial statements included in the
Prospectus, any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
such date, there has not been any change in the capital stock of the
Company or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
consolidated financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus.
(l) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved. No other financial statements and
supporting schedules are required to be included in the Registration
Statement or Prospectus. The financial data set forth in the Prospectus
under the captions "Summary--Summary Consolidated Financial Data,"
"Selected Consolidated 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 Prospectus. The pro forma
consolidated financial data of the Company and its subsidiaries and the
related notes thereto included under the caption "Summary--Summary
Consolidated Financial Data," "Selected Consolidated Financial Data" and
elsewhere in the Prospectus present fairly the information contained
therein, have been prepared in accordance with the Commission's rules
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and guidelines with respect to pro forma financial data and have been
properly presented on the bases described therein, and the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein. No other pro forma financial data is required to be
included in the Registration Statement pursuant to Regulation S-X.
(m) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and who
have delivered the initial letter referred to in Section 8(h) hereof, are
independent public accountants as required by the Securities Act and the
Rules and Regulations.
(n) Neither the Company nor any of its subsidiaries owns any real
property. The Company and each of its subsidiaries have good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects, except (i) such as
are described in the Prospectus (ii) such as do not materially affect the
value of such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and its
subsidiaries or (iii) where the failure to have such good and marketable
title would not, individually or in the aggregate, have a material adverse
effect on the Company and its subsidiaries taken as a whole; and all real
property and buildings held under lease by the Company and its subsidiaries
that are material to the Company and its subsidiaries taken as a whole, are
held by them under valid, subsisting and enforceable leases, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries.
(o) The Company and each of its subsidiaries carry, or are covered by,
insurance covering risks that are material to the Company on a consolidated
basis in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses
in similar industries.
(p) The Company and each of its subsidiaries own or possess adequate
rights to use all patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations,
copyrights, know-how, manufacturing processes, formulae, trade secrets,
licenses and rights in any thereof and any other intangible property and
assets which are material to them (herein called "Proprietary Rights") and
necessary for the conduct of their respective businesses as described in
the Prospectus. The Company and each of its subsidiaries takes security
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measures to provide adequate trade secret protection of its material
non-patented technology. Except as disclosed in the Prospectus, the Company
has not received any notice of infringement or conflict with asserted
rights of others with respect to any Proprietary Rights, and except as
described in the Prospectus, no action, suit, arbitration, or legal,
administrative or other proceeding, or investigation is pending, or, to the
knowledge of the Company, is threatened, which involves any Proprietary
Rights. The Proprietary Rights of the Company referred to in the Prospectus
do not infringe or conflict with any right or valid and enforceable 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, where such
infringement or conflict would have a material adverse effect on the
Company. The Company is not subject to any judgment, order, writ,
injunction or decree of any court or any Federal, state, local, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator, nor, has it
entered into or is a party to any contract which restricts or impairs the
use of any such Proprietary Rights in a manner which would have a material
adverse effect on the use of any of the Proprietary Rights. The Company has
complied in all material respects with its respective contractual
obligations relating to the protection of the Proprietary Rights used
pursuant to licenses. Except as disclosed in the Prospectus, to the
Company's knowledge no person is infringing on or violating the Proprietary
Rights owned or used by the Company.
(q) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company
or any of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, might have a material adverse
effect on the consolidated financial position, shareholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries; and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(r) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been described in the Prospectus or filed as exhibits to the
Registration Statement.
(s) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, shareholders,
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customers or suppliers of the Company on the other hand, which is required
to be described in the Prospectus which is not so described.
(t) No labor disturbance by the employees of the Company exists or, to
the knowledge of the Company, is imminent, which might be expected to have
a material adverse effect on the consolidated financial position,
shareholders' equity, results of operations, business or prospects of the
Company and its subsidiaries taken as a whole.
(u) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would be likely to have any liability; the
Company has not incurred and does not expect to incur liability under (i)
Title IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 or 4971 of the Code; and each "pension
plan" for which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act,
which would cause the loss of such qualification.
(v) The Company and each of its subsidiaries has filed all federal,
state and local income and franchise tax returns required to be filed
through the date hereof and has paid all taxes due thereon, and no tax
deficiency has been determined adversely to the Company or any of its
subsidiaries which has had (nor does the Company have any knowledge of any
tax deficiency which, if determined adversely to the Company or any of its
subsidiaries, would reasonably be expected to have) a material adverse
effect on the consolidated financial position, shareholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries taken as a whole. The Company has made all filings necessary
to be treated as an S corporation, as defined in Section 1361(a) of the
Code, from the date of the Company's election thereof through the date
hereof or has otherwise received written permission from the IRS to be
treated as an S corporation.
(w) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, the Company has not (i) issued or granted any securities other
than employee stock options, (ii) incurred any liability or obligation,
direct or contingent, other than liabilities and obligations which were
incurred in the ordinary course of business, (iii) entered into any
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transaction not in the ordinary course of business or (iv) declared or paid
any dividend on its capital stock.
(x) The Company (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted only
in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(y) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or by-laws or operating agreement, as the case may
be, (ii) is in default in any material respect, and no event has occurred
which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets is subject
and which is material to the Company or (iii) is in violation in any
material respect of any law, ordinance, governmental rule, regulation or
court decree to which it or its property or assets may be subject or has
failed to obtain any material license, permit, certificate, franchise or
other governmental authorization or permit necessary to the ownership of
its property or to the conduct of its business, in each case where such
violation or failure under this clause (iii) would reasonably be expected
to have a material adverse effect on the Company.
(z) Neither the Company nor any of its subsidiaries, nor any director,
officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its subsidiaries, has used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from corporate funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or made any bribe, payoff, influence
payment, kickback or other unlawful payment.
(aa) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of
its subsidiaries (or, to the knowledge of the Company, any of their
predecessors in interest) at, upon or from any of the property
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now or previously owned or leased by the Company or its subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, except for any violation or remedial action which would not have,
or could not be reasonably likely to have, singularly or in the aggregate
with all such violations and remedial actions, a material adverse effect on
the consolidated financial position, shareholders' equity or results of
operations of the Company and its subsidiaries; there has been no material
spill, discharge, leak, emission, injection, escape, dumping or release of
any kind onto such property or into the environment surrounding such
property of any toxic wastes, medical wastes, solid wastes, hazardous
wastes or hazardous substances due to or caused by the Company or any of
its subsidiaries or with respect to which the Company or any of its
subsidiaries have knowledge, except for any such spill, discharge, leak,
emission, injection, escape, dumping or release which would not have or
would not be reasonably likely to have, singularly or in the aggregate with
all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a material adverse effect on the consolidated
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries; and the terms "hazardous wastes", "toxic
wastes", "hazardous substances" and "medical wastes" shall have the
meanings specified in any local, state, federal and foreign laws or
regulations with respect to environmental protection applicable to the
Company or any of its subsidiaries.
(bb) The Company is not, nor as of the Closing Date after giving
effect to the consummation of the Transactions and the application of the
net proceeds from the offering as described in the Prospectus, will it be,
and no subsidiary of the Company is required to register as, an "investment
company" or an entity "controlled" by an "investment company" within the
meaning of such terms under the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(cc) On or prior to the Closing Date, each of the documents to be
entered into in connection with the Transactions will have been duly
authorized, executed and delivered by the Company in substantially the form
previously provided to the Underwriters and will conform in all material
respects to the descriptions thereof in the Prospectus.
(dd) [None of the Directed Shares (as defined below) distributed in
connection with the Directed Share Program (as defined below) will be
offered or sold outside of the United States.] No consent, approval,
authorization or order of, or qualification with, any governmental body or
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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. The Company has not offered, or caused Lehman
Brothers Inc. to offer, Stock 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.
(ee) Neither the Company nor any of its affiliates has taken, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock
(including the Stock) to facilitate the sale or resale of such shares.
(ff) There are no affiliations or associations, as such terms are
defined in the Rules and Regulations of the NASD, between any member of the
National Association of Securities Dealers, Inc. and any of the Company's
officers or directors or shareholders that own at least five percent of the
aggregate number of outstanding shares of Common Stock.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE PRINCIPAL
SHAREHOLDERS. Each Principal Shareholder severally represents, warrants and
agrees that the Principal Shareholder has full right, power and authority to
enter into this Agreement; the execution, delivery and performance of this
Agreement by the Principal Shareholder and the consummation by the Principal
Shareholder of the transactions contemplated hereby will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Principal Shareholder is
a party or by which the Principal Shareholder is bound or to which any of the
property or assets of the Principal Shareholder is subject, nor will such
actions result in any violation of any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the
Principal Shareholder or the property or assets of the Principal Shareholder;
and no consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement by the Principal
Shareholder and the consummation by the Principal Shareholder of the
transactions contemplated hereby.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 6,364,000 shares of
the Firm Stock to the several Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase the number of shares of the Firm
Stock set forth opposite that Underwriter's name in Schedule 1 hereto. The
respective purchase obligations of the Underwriters with
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respect to the Firm Stock shall be rounded among the Underwriters to avoid
fractional shares, as the Representatives may determine.
In addition, the Company grants to the Underwriters an option to purchase
up to 954,600 shares of Option Stock during the period specified in Section 5
hereof. Such option is granted solely for the purpose of covering
over-allotments in the sale of Firm Stock and is exercisable as provided in
Section 5 hereof. Shares of Option Stock shall be purchased severally for the
account of the Underwriters in proportion to the number of shares of Firm Stock
set forth opposite the name of such Underwriters in Schedule 1 hereto. The
respective purchase obligations of each Underwriter with respect to the Option
Stock shall be adjusted by the Representatives so that no Underwriter shall be
obligated to purchase Option Stock other than in 100 share amounts.
The price to the Underwriters of both the Firm Stock and any Option Stock
shall be $_____ per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on any Delivery Date (as hereinafter defined), except upon payment for
all the Stock to be purchased on such Delivery Date as provided herein.
4. OFFERING OF STOCK BY THE UNDERWRITERS.
Upon authorization by the Representatives of the release of the Firm Stock,
the several Underwriters propose to offer the Firm Stock for sale upon the terms
and conditions set forth in the Prospectus; PROVIDED, HOWEVER, that no Stock
registered pursuant to the Rule 462(b) Registration Statement, if any, shall be
offered prior to the Effective Time thereof.
5. DELIVERY OF AND PAYMENT FOR THE STOCK. Delivery of and payment for the
Firm Stock shall be made at the offices of Brobeck, Phleger & Harrison LLP, 550
South Hope Street, Los Angeles, California 90071, at 10:00 A.M., New York City
time, on the [third] full business day following the date of this Agreement or
at such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to as
the "First Delivery Date." On the First Delivery Date, the Company shall deliver
or cause to be delivered certificates representing the Firm Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by wire transfer in immediately
available funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Firm Stock shall be
registered in such names and in such denominations as the Representatives shall
request in writing not less than two full business days prior to the First
Delivery Date. For the purpose of expediting the checking and packaging of the
certificates for the Firm Stock, the Company shall make the certificates
representing the Firm Stock available for inspection by the Representatives in
New York, New York, not later than 2:00 P.M., New York City time, on the
business day prior to the First Delivery Date.
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The option granted in Section 3 will expire 30 days after the date of this
Agreement and may be exercised in whole or in part from time to time by written
notice being given to the Company by the Representatives. Such notice shall set
forth the aggregate number of shares of Option Stock as to which the option is
being exercised, the names in which the shares of Option Stock are to be
registered, the denominations in which the shares of Option Stock are to be
issued and the date and time, as determined by the Representatives, when the
shares of Option Stock are to be delivered; PROVIDED, HOWEVER, that this date
and time shall not be earlier than the First Delivery Date nor earlier than the
second business day after the date on which the option shall have been exercised
nor later than the fifth business day after the date on which the option shall
have been exercised. The date and time the shares of Option Stock are delivered
are sometimes referred to as a "Second Delivery Date" and the First Delivery
Date and any Second Delivery Date are sometimes each referred to as a "Delivery
Date."
Delivery of and payment for the Option Stock shall be made at the place
specified in the first sentence of the first paragraph of this Section 5 (or at
such other place as shall be determined by agreement between the Representatives
and the Company) at 10:00 A.M., New York City time, on the such Second Delivery
Date. On such Second Delivery Date, the Company shall deliver or cause to be
delivered the certificates representing the Option Stock to the Representatives
for the account of each Underwriter against payment to or upon the order of the
Company of the purchase price by wire transfer in immediately available funds.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligation of each
Underwriter hereunder. Upon delivery, the Option Stock shall be registered in
such names and in such denominations as the Representatives shall request in the
aforesaid written notice. For the purpose of expediting the checking and
packaging of the certificates for the Option Stock, the Company shall make the
certificates representing the Option Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to such Second Delivery Date.
6. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To prepare the Rule 462(b) Registration Statement, if necessary,
in a form approved by the Representatives and to file such Rule 462(b)
Registration Statement with the Commission on the date hereof; to prepare
the Prospectus in a form approved by the Representatives and to file such
Prospectus pursuant to Rule 424(b) under the Securities Act not later than
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Securities Act; to
make no further amendment or any supplement to the Registration Statement
or to the Prospectus except as permitted herein; to advise the
Representatives, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or
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becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with copies
thereof; to advise the Representatives, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Stock for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Representatives and to counsel
for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed with
the Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case excluding exhibits) and
(ii) each Preliminary Prospectus, the Prospectus and any amended or
supplemented Prospectus; and, if the delivery of a prospectus is required
at any time after the Effective Time in connection with the offering or
sale of the Stock or any other securities relating thereto and if at such
time any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for any
other reason it shall be necessary to amend or supplement the Prospectus in
order to comply with the Securities Act, to notify the Representatives and,
upon their request, to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended or
supplemented Prospectus which will correct such statement or omission or
effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Representatives,
be required by the Securities Act or requested by the Commission;
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<PAGE>
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish a copy
thereof to the Representatives and counsel for the Underwriters and obtain
the consent of the Representatives to the filing;
(f) As soon as practicable after the Effective Date, to make generally
available to the Company's security holders and to deliver to the
Representatives an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Securities
Act and the Rules and Regulations (including, at the option of the Company,
Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal national
securities exchange or automatic quotation system upon which the Common
Stock may be listed or quoted pursuant to requirements of or agreements
with such exchange or to the Commission pursuant to the Exchange Act or any
rule or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for offering
and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Stock;
PROVIDED that in connection therewith 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;
(i) For a period of 180 days from the date of the Prospectus, not to,
directly or indirectly, (1) offer for sale, sell, pledge or otherwise
dispose of (or enter into any transaction or device which is designed to,
or could be expected to, result in the disposition by any person at any
time in the future of) any shares of Common Stock or securities convertible
into or exchangeable for Common Stock (other than the Stock and shares
issued pursuant to employee benefit plans, qualified stock option plans or
other employee compensation plans existing on the date hereof or pursuant
to currently outstanding options, warrants or rights), or sell or grant
options, rights or warrants with respect to any shares of Common Stock or
securities convertible into or exchangeable for Common Stock (other than
the grant of options pursuant to option plans existing on the date hereof),
or (2) enter into any swap or other derivatives transaction that transfers
to
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<PAGE>
another, in whole or in part, any of the economic benefits or risks of
ownership of such shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or other securities, in cash or otherwise, in each case without the
prior written consent of Lehman Brothers Inc. on behalf of the
Underwriters; and to cause each shareholder, officer and director of the
Company to furnish to the Representatives, prior to the First Delivery
Date, a letter or letters, substantially in the form of Exhibit A hereto (a
"Lock-up Agreement");
(j) To deliver a Lock-up Agreement request to all current and former
employees of the Company who have been granted options under the Company's
employee benefit plans;
(k) Prior to the Effective Date, to apply for the inclusion of the
Stock on the National Market System and to use its best efforts to complete
that listing, subject only to official notice of issuance and evidence of
satisfactory distribution, prior to the First Delivery Date;
(l) To apply the net proceeds from the sale of the Stock being sold by
the Company as set forth in the Prospectus;
(m) To take such steps as shall be necessary to ensure that the
Company shall not become, and that any subsidiary of the Company shall not
be required to register as, an "investment company" or "controlled" by an
"investment company" within the meaning of such terms under the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder;
(n) Not to take, directly or indirectly, any action designed to cause
or result in, or which constitutes or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock (including the Stock) to facilitate the sale or resale of such
shares; and
(o) In connection with the Directed Share Program, to ensure that the
Directed Shares will be restricted to the extent required by the National
Association of Securities Dealers, Inc. or the rules of such association
from sale, transfer, assignment, pledge or hypothecation for a period of
three months following the date of the effectiveness of the Registration
Statement, and Lehman Brothers Inc. will notify the Company as to which
Directed Share Participants will need to be so restricted. At the request
of Lehman Brothers Inc., the Company will direct the transfer agent to
place stop transfer restrictions upon such securities for such period of
time.
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<PAGE>
7. EXPENSES. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of producing and distributing this Agreement and
any other related documents in connection with the offering, purchase, sale and
delivery of the stock; (e) the costs of distributing the terms of agreement
relating to the organization of the underwriting syndicate and selling group to
the members thereof by mail, telex or other means of communication; (f) the
filing fees incident to securing the review by the National Association of
Securities Dealers, Inc. of the terms of sale of the Stock; (g) any applicable
listing or other fees; (h) the fees and expenses of qualifying the Stock under
the securities laws of the several jurisdictions as provided in Section 6(h) and
of preparing, printing and distributing a Blue Sky Memorandum (including related
fees and expenses of counsel to the Underwriters); (i) all costs and expenses of
the Underwriters, including the reasonable fees and disbursements of outside
counsel for the Underwriters, incident to the Directed Share Program described
in Section 10, (j) the documented costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Stock, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show and (k) all other costs and expenses incident to the performance of the
obligations of the Company under this Agreement; PROVIDED that, except as
provided in this Section 7 and in Sections 10 and 13 the Underwriters shall pay
their own costs and expenses, including the costs and expenses of their counsel,
any transfer taxes on the Stock which they may sell and the expenses of
advertising any offering of the Stock made by the Underwriters.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of
the Underwriters hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Company and the
Principal Shareholders contained herein, to the performance by the Company and
the Principal Shareholders of their respective obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Rule 462(b) Registration Statement, if any, and the Prospectus
shall have been timely filed with the Commission in accordance with Section
6(a); no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened
17
<PAGE>
by the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been complied with or waived in writing by the
Commission.
(b) No Underwriter shall have discovered and disclosed to the Company
on or prior to such Delivery Date that the Registration Statement or the
Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Latham & Watkins, counsel for
the Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Stock, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement, the transactions contemplated hereby and the
other Transactions shall be reasonably satisfactory in all material
respects to counsel for the Underwriters, and the Company and the Principal
Shareholders shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon
such matters.
(d) Brobeck, Phleger & Harrison LLP shall have furnished to the
Representatives their written opinion, as counsel to the Company, addressed
to the Underwriters and dated such Delivery Date, in the form attached
hereto as Exhibit B.
(e) Knobbe, Martens, Olson & Bear, LLP shall have furnished to the
Representatives their written opinion, as intellectual property counsel to
the Company, addressed to the Underwriters and dated such Delivery Date, in
form and substance reasonably satisfactory to the Representatives, to the
effect that they serve as intellectual property counsel to the Company with
respect to the Proprietary Rights, and that:
(i) Such counsel is familiar with the technology used by the Company
in its business and the manner of its use thereof and has read the
Registration Statement and the Prospectus, including particularly the
portions of the Registration Statement and the Prospectus under the
captions "Risk Factors--We are involved from time to time in litigation
over intellectual property rights, which may adversely affect our ability
to manufacture and sell our products," "Business--Intellectual Property
Rights" and "Business--Legal Proceedings" (the "Patent Information"). Such
counsel has considered the statements contained therein, although such
counsel has not independently verified the accuracy, completeness
18
<PAGE>
and fairness of such statements. Based upon and subject to the foregoing,
nothing has come to such counsel's attention, as of the date of the
Prospectus and the date hereof, that leads such counsel to believe that the
Patent Information contains an untrue statement of a material fact or omits
to state a material fact in light of the circumstances in which they are
made. As of the date of the Prospectus and the date hereof, such counsel
has no reason to believe that the Patent Information is not in all material
respects a fair and accurate summary of the legal matters, documents and
proceedings relating thereto;
(ii) Attached as Schedule A to such opinion is a list of the Company's
U.S. patents and pending U.S. Patent applications (the "U.S. Patent
Rights") which, to the best of such counsel's knowledge, are owned by the
Company, as indicated on such Schedule A. To the best of such counsel's
knowledge, where the Company is listed on Schedule A to such opinion as the
owner of any U.S. Patent Right, either (A) an assignment from the
inventor(s) to the Company has been recorded in the United States Patent
and Trademark Office, or (b) the inventor(s) are under obligation of
assignment to the Company, and an assignment will be recorded in the Untied
States Patent and Trademark Office. To the best of such counsel's
knowledge, there are no claims to any ownership interests or liens on any
of the U.S. Patent Rights by any party other than the Company. The Company
has no non-U.S. patents or pending non-U.S. patent applications and has not
licensed the rights to use any patents;
(iii) Such counsel has reviewed portions of certain patent estates, as
set forth in Schedule A of such opinion, and is unaware of any facts that
would lead it to believe that: (a) any of the patents are invalid, (b) any
patent issued in respect of a patent application would be invalid, or (c)
any material defects exist in respect of form in the preparation of filing
of any of the patent applications;
(iv) To the best of such counsel's knowledge, for each of the U.S.
patent applications filed and prosecuted by such counsel reflected in
Schedule B to such opinion, the Company has disclosed or intends to
disclose to the United States Patent and Trademark Office all information
known and believed to be material to patentability under the extant 37
C.F.R. Section 1.56;
(v) Other than the disclosures set forth in the Prospectus, to the
best of such counsel's knowledge, the Company has not received any claim of
infringement of any patents held by others, and to the best of such
counsel's knowledge, there is no pending or threatened action, suit,
proceeding or claim by others that the Company is infringing a patent.
Except as described in the Prospectus, nothing has come to such counsel's
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<PAGE>
attention that has led such counsel to believe that any patents of others
are infringed by the present or future business of the Company as described
in the Prospectus under the caption "Business"; and
(vi) To the best of such counsel's knowledge, except as set forth in
the Prospectus, there are no pending or threatened legal or governmental
proceedings relating to the U.S. patents and pending U.S. patent
applications reflected in Schedule A to such opinion, other than
proceedings before the United States Patent and Trademark Office that are
carried out during the course of prosecution.
In rendering such opinion, such counsel may assume the genuineness of
all signatures on original, certified or facsimile copies, the authenticity
of all items submitted to such counsel as originals and the conformity with
originals of all items submitted to such counsel as reproduction or
certified copies. In examining documents executed by entities other than
the Company, such counsel may assume that each other entity has the power
and authority to execute and deliver, and to perform and observe the
provisions of such documents, and the due authorization by each such entity
of all requisite action and the due execution and delivery of such
documents by each such entity. Such counsel need not express any opinion
with regard to the enforceability of any license agreements or assignments
nor with regard to intervening assignments.
(f) L. Douglas Brown of Ezer Williamson Fischbach & Brown LLP, shall
have furnished to the Representatives his written opinion, as litigation
counsel to the Company, in connection with the litigation described in the
Prospectus under the captions "Risk Factors--Success by Interactive Flight
Technologies and Avnet in their lawsuit against us relating to our sale of
allegedly defective products would harm our business" and "Business--Legal
Proceedings--Interactive Flight Technologies, Inc.," in the form attached
hereto as Exhibit C.
(g) The Representatives shall have received from Latham & Watkins,
counsel for the Underwriters, such opinion or opinions, dated such Delivery
Date, with respect to the issuance and sale of the Stock, the Registration
Statement, the Prospectus and other related matters as the Representatives
may reasonably require, and the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(h) At the time of execution of this Agreement, the Representatives
shall have received from PricewaterhouseCoopers LLP a letter, in form and
substance satisfactory to the Representatives, addressed to the
Underwriters and dated the date hereof (i) confirming that they are
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<PAGE>
independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission and (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information and other
matters ordinarily covered by accountants' "comfort letters" to
underwriters in connection with registered public offerings.
(i) With respect to the letter of PricewaterhouseCoopers LLP referred
to in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial letter"),
the Company shall have furnished to the Representatives a letter (the
"bring-down letter") of such accountants, addressed to the Underwriters and
dated such Delivery Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance
with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, (ii)
stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and findings set forth
in the initial letter.
(j) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its Chairman of the Board, its
President or a Vice President and its chief financial officer stating that:
(i) The representations, warranties and agreements of the Company in
Section 1 are true and correct as of such Delivery Date; the Company has
complied with all its agreements contained herein; and the conditions set
forth in Sections 8(a) and 8(k) have been fulfilled; and
(ii) They have carefully examined the Registration Statement and the
Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue statement
of a material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and (B) since the Effective Date no event has occurred
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<PAGE>
which should have been set forth in a supplement or amendment to the
Registration Statement or the Prospectus.
(k) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus or
(ii) since such date there shall not have been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, shareholders' equity
or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of which,
in any such case described in clause (i) or (ii), is, in the judgment of
the Representatives, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Stock being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
(l) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or
in the over-the-counter market, or trading in any securities of the Company
on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by Federal or New York State
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred
such a material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the judgment
of the Representatives, impracticable or inadvisable to proceed with the
public offering or delivery of the Stock being delivered on such Delivery
Date on the terms and in the manner contemplated in the Prospectus.
(m) The National Market System shall have approved the Stock for
inclusion, subject only to official notice of issuance and evidence of
satisfactory distribution.
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(n) On the Closing Date, the Company shall have consummated each
of the Transactions and the Underwriters shall have been provided
evidence, to their satisfaction, of the consummation thereof.
(o) On the Closing Date, the Tax Indemnity Agreement, in
substantially the form included as an exhibit to the Registration
Statement at the time the Registration Statement was declared
effective by the Commission, or in such other form satisfactory to the
Underwriters and counsel to the Underwriters, shall have been executed
and delivered by the parties thereto.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) Each of the Company and, subject to the last sentence of this
paragraph (a), the Principal Shareholders shall 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, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Stock), to which that Underwriter, officer,
employee or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any
Preliminary Prospectus, the Registration Statement or the Prospectus or
in any amendment or supplement thereto, (B) in any blue sky application
or other document prepared or executed by the Company (or based upon any
written information furnished by the Company) specifically for the
purpose of qualifying any or all of the Stock under the securities laws
of any state or other jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application"), or (C)
in any materials or information provided to investors by, or with the
approval of, the Company in connection with the marketing of the
offering of the Stock ("Marketing Materials"), including any roadshow or
investor presentations made to investors by the Company (whether in
person or electronically), (ii) the omission or alleged omission to
state in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, or in any Blue
Sky Application or Marketing Materials, any material fact required to be
stated therein or necessary to
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<PAGE>
make the statements therein 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 Stock 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 matters covered by
clause (i) or (ii) above (PROVIDED that the Company and the Principal
Shareholders shall not be liable under this clause (iii) to the extent that
it is determined in a final judgment by a court of competent jurisdiction
that such loss, claim, damage, liability or action resulted directly from
any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct), and shall
reimburse each Underwriter and each such officer, employee or controlling
person promptly upon demand for any legal or other expenses reasonably
incurred by that Underwriter, officer, employee or controlling person in
connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred; PROVIDED, HOWEVER, that the Company and the Principal
Shareholders shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based
upon, any untrue statement or alleged untrue statement or omission or
alleged omission made (i) in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any such amendment or supplement, or in
any Blue Sky Application or Marketing Materials, in reliance upon and in
conformity with written information concerning such Underwriter furnished
to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein which information consists
solely of the information specified in Section 9(e) or (ii) in any
Preliminary Prospectus if a copy of the Prospectus (or the Prospectus as
then amended or supplemented) was not sent or given by or on behalf of the
Underwriters to the person asserting such loss, claim, damage, liability or
action at or prior to the written confirmation of the sale of Stock to such
person in any case where such delivery is required by the Act, such untrue
statement contained in or omission from such Preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as so amended or
supplemented) and the Company had previously furnished copies of such
corrected Prospectus to the Underwriters. The foregoing indemnity agreement
is in addition to any liability which the Company may otherwise have to any
Underwriter or to any officer, employee or controlling person of that
Underwriter. Notwithstanding the foregoing or anything else to the contrary
herein, the liability of each Principal Shareholder under the foregoing
indemnity agreement and under such Principal Shareholder's representations
and warranties contained in Section 1 of this Agreement shall be limited to
an amount equal to the sum of (i) the aggregate principal amount of the
Undistributed Earnings Notes payable by the Company to the Shareholder
Trusts established for the
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<PAGE>
benefit of such Principal Shareholder and members of such Principal
Shareholder's family (other than another Principal Shareholder) as
described in the Prospectus under the heading "S Corporation Status and
Conversion" and (ii) the amount of all distributions made to such
Shareholder Trusts representing additional paid-in capital originally
invested by such Principal Shareholder or such Shareholder Trusts.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its
directors (including any person who, with his or her consent, is named in
the Registration Statement as about to become a director of the Company),
and each person who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the Company or
any such director, officer or controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, the Registration Statement or the Prospectus or
in any amendment or supplement thereto, (B) in any Blue Sky Application or
(c) in any Marketing Materials, or (ii) the omission or alleged omission to
state in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application or Marketing Materials any material fact required to be stated
therein or necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Underwriter furnished
to the Company through the Representatives by or on behalf of that
Underwriter specifically for inclusion therein, and shall reimburse the
Company and any such director, officer or controlling person for any legal
or other expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating or defending
or preparing to defend against any such loss, claim, damage, liability or
action as such expenses are incurred. The foregoing indemnity agreement is
in addition to any liability which any Underwriter may otherwise have to
the Company or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER,
that the failure to notify the indemnifying party shall not relieve
25
<PAGE>
it from any liability which it may have under this Section 9 except to the
extent it has been materially prejudiced by such failure and, PROVIDED
FURTHER, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 9. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 9 for any legal or other
expenses subsequently incurred by the indemnified party in connection with
the defense thereof other than reasonable costs of investigation; PROVIDED,
HOWEVER, that the Representatives shall have the right to employ counsel to
represent jointly the Representatives and those other Underwriters and
their respective officers, employees and controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity
may be sought by the Underwriters against the Company or any Principal
Shareholder under this Section 9 if, in the reasonable judgment of the
Representatives, it is advisable for the Representatives and those
Underwriters, officers, employees and controlling persons to be jointly
represented by separate counsel, and in that event the fees and expenses of
such separate counsel shall be paid by the Company or any Principal
Shareholder. Notwithstanding anything contained herein to the contrary, if
indemnity may be sought pursuant to Section 9(a) hereof in respect of such
claim or action, then in addition to such separate firm for the indemnified
parties, the indemnifying party shall be liable for the fees and expenses
of not more than one separate firm (in addition to any local counsel) for
Lehman Brothers Inc. for the defense of any loss, claim, damage, liability
or action arising out of the Directed Share Program. No indemnifying party
shall (i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the
consent of the indemnifying party or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify
and hold
26
<PAGE>
harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 9 shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 9(a) or 9(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate
to reflect the relative benefits received by the Company and the Principal
Shareholders on the one hand and the Underwriters on the other from the
offering of the Stock or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company and the Principal
Shareholders on the one hand and the Underwriters on the other with respect
to the statements or omissions which resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Principal Shareholders on the one hand and the Underwriters on the
other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Stock
purchased under this Agreement (before deducting expenses) received by the
Company and the Principal Shareholders, on the one hand, and the total
underwriting discounts and commissions received by the Underwriters with
respect to the shares of the Stock purchased under this Agreement, on the
other hand, bear to the total gross proceeds from the offering of the
shares of the Stock under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company, the Principal Shareholders
or the Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Principal Shareholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section were to be determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section shall be
deemed to include, for purposes of this Section 9(d), any legal or other
expenses reasonably incurred by
27
<PAGE>
such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 9(d),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Stock underwritten by it and
distributed to the public was offered to the public exceeds the amount of
any damages which such Underwriter has otherwise paid or become liable to
pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided
in this Section 9(d) are several in proportion to their respective
underwriting obligations and not joint.
(e) The Underwriters severally confirm and the Company acknowledges
that the statements with respect to the public offering of the Stock by the
Underwriters set forth on the cover page of, the legend concerning
over-allotments on the inside front cover page of and the concession and
reallowance figures, the identification of and share allocation among the
underwriting syndicate members and the paragraph concerning the role of
Fidelity Capital Markets with respect to electronic distribution appearing
under the caption "Underwriting" in, the Prospectus are correct and
constitute the only information concerning such Underwriters furnished in
writing to the Company by or on behalf of the Underwriters specifically for
inclusion in the Registration Statement, the Prospectus, any Blue Sky
Application and the Marketing Materials.
10. DIRECTED SHARE PROGRAM.
(a) It is understood that approximately ________ shares of the Firm
Stock ("Directed Shares") will initially be reserved by the Underwriters
for offer and sale to employees and persons having business relationships
with the Company and its subsidiaries ("Directed Share Participants") upon
the terms and conditions set forth in the Prospectus and in accordance with
the rules and regulations of the National Association of Securities
Dealers, Inc. (the "Directed Share Program"). Under no circumstances will
Lehman Brothers Inc. or any 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 such Directed Share Program. To the extent
that any Directed Shares are not affirmatively reconfirmed for purchase by
any Directed Share Participant on or immediately after the date of this
Agreement, such Directed Shares may be offered to the public as part of the
public offering contemplated hereby.
28
<PAGE>
(b) 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.
(c) 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 Inc. and the other Underwriters from and against
any loss, claim, damage, expense, liability or action which (i) arises out
of, or is based upon, any untrue statement or alleged untrue statement of a
material fact regarding the Company contained in any material prepared by
or with the prior written 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
regarding the Company 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 agreed to purchase, (iii) arises
out of the failure of any Directed Share Participant that is also an
employee of the Company to pay for and accept delivery by the end of the
first day after the date of this Agreement any Directed Shares that were
allocated to such employee Directed Share Participant, (iv) arises out of,
or is based upon, the violation of any applicable laws or regulations of
foreign jurisdictions where Directed Shares have been offered, or (v) 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 the bad faith or gross
negligence of Lehman Brothers Inc. or such Underwriter.
11. DEFAULTING UNDERWRITERS.
If, on either Delivery Date, any Underwriter defaults in the performance of
its obligations under this Agreement, the remaining non-defaulting Underwriters
shall be obligated to purchase the Stock which the defaulting Underwriter agreed
but failed to purchase on such Delivery Date in the respective proportions which
the number of shares of the Firm Stock set opposite the name of each remaining
non-defaulting Underwriter in Schedule 1 hereto bears to the total number of
shares of the Firm Stock set opposite the names of all the remaining
non-defaulting Underwriters in Schedule 1 hereto; PROVIDED, HOWEVER, that the
remaining non-defaulting Underwriters shall not be obligated to purchase any of
the Stock on such Delivery Date if the total number of shares of the Stock which
the defaulting Underwriter or Underwriters agreed but failed to purchase on such
date exceeds 9.09% of the total number of shares of the Stock to be purchased on
such Delivery Date, and any remaining non-defaulting Underwriter shall not be
obligated
29
<PAGE>
to purchase more than 110% of the number of shares of the Stock which it agreed
to purchase on such Delivery Date pursuant to the terms of Section 3. If the
foregoing maximums are exceeded, the remaining non-defaulting Underwriters, or
those other underwriters satisfactory to the Representatives who so agree, shall
have the right, but shall not be obligated, to purchase, in such proportion as
may be agreed upon among them, all the Stock to be purchased on such Delivery
Date. If the remaining Underwriters or other underwriters satisfactory to the
Representatives do not elect to purchase the shares which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such Delivery Date,
this Agreement (or, with respect to the Second Delivery Date, the obligation of
the Underwriters to purchase, and of the Company to sell, the Option Stock)
shall terminate without liability on the part of any non-defaulting Underwriter
or the Company, except that the Company will continue to be liable for the
payment of expenses to the extent set forth in Sections 7, 10 and 13. As used in
this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 11, purchases Firm Stock which a
defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If other
underwriters are obligated or agree to purchase the Stock of a defaulting or
withdrawing Underwriter, either the Representatives or the Company may postpone
the Delivery Date for up to seven full business days in order to effect any
changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
12. TERMINATION. The obligations of the Underwriters hereunder may be
terminated by the Representatives by notice given to and received by the Company
prior to delivery of and payment for the Firm Stock if, prior to that time, any
of the events described in Sections 8(k), 8(l) or 8(m), shall have occurred or
if the Underwriters shall decline to purchase the Stock for any reason permitted
under this Agreement.
13. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company shall fail to
tender the Stock for delivery to the Underwriters by reason of any failure,
refusal or inability on the part of the Company to perform any agreement on its
part to be performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled by the Company (including,
without limitation, with respect to the Transactions) is not fulfilled, the
Company will reimburse the Underwriters for all reasonable documented
out-of-pocket expenses (including reasonable documented fees and disbursements
of counsel) incurred by the Underwriters in connection with this Agreement and
the proposed purchase of the Stock, and upon demand the Company shall pay the
full amount thereof to the Representatives. If this Agreement is terminated
pursuant to Section 11 by reason of the default of one or more Underwriters, the
Company shall not be obligated to reimburse any defaulting Underwriter on
account of those expenses.
30
<PAGE>
14. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to Lehman Brothers Inc., Three World Financial
Center, New York, New York 10285, Attention: Syndicate Department (Fax:
212-526-6588), with a copy, in the case of any notice pursuant to Section
9(c), to the Director of Litigation, Office of the General Counsel, Lehman
Brothers Inc., 3 World Financial Center, 10th Floor, New York, NY 10285;
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Manouch Moshayedi, Chief Executive
Officer (Fax: 949-851-2706), with a copy to Kenneth R. Bender, Esq.,
Brobeck, Phleger & Harrison LLP, 550 South Hope St., Suite 2100, Los
Angeles, CA 90071; and
(c) if to any Principal Shareholder, shall be delivered or sent by
mail, telex or facsimile transmission to such Principal Shareholder at the
address set forth on Schedule 2 hereto;
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 9(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company and the
Principal Shareholders shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Underwriters by
Lehman Brothers Inc. on behalf of the Representatives.
15. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to
the benefit of and be binding upon the Underwriters, the Company, the Principal
Shareholders and their respective personal representatives and successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (A) the representations, warranties, indemnities and
agreements of the Company and the Principal Shareholders contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Underwriter within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Underwriters contained in
Section 9(b) of this Agreement shall be deemed to be for the benefit of
directors of the Company, officers of the Company who have signed the
Registration Statement and any person controlling the Company within the meaning
of Section 15 of the Securities Act. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 15, any
31
<PAGE>
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
16. SURVIVAL. The respective indemnities, representations, warranties and
agreements of the Company, the Principal Shareholders and the Underwriters
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Stock and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
17. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY". For purposes
of this Agreement, (a) "business day" means each Monday, Tuesday, Wednesday,
Thursday or Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to close and (b)
"subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF NEW YORK.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
20. HEADINGS. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[SIGNATURE PAGE FOLLOWS]
32
<PAGE>
If the foregoing correctly sets forth the agreement among the Company, the
Principal Shareholders and the Underwriters, please indicate your acceptance in
the space provided for that purpose below.
Very truly yours,
SIMPLE TECHNOLOGY, INC.
By
------------------------------------------
Manouch Moshayedi
Chief Executive Officer
THE PRINCIPAL SHAREHOLDERS:
-----------------------------------------------
Manouch Moshayedi
-----------------------------------------------
Mark Moshayedi
-----------------------------------------------
Mike Moshayedi
Accepted:
LEHMAN BROTHERS INC.
BANC OF AMERICA SECURITIES LLC
FIDELITY CAPITAL MARKETS, A DIVISION
OF NATIONAL FINANCIAL SERVICES CORPORATION
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
BY LEHMAN BROTHERS INC.
By
------------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Number of
Shares of
Firm Stock
to be
Underwriters Purchased
------------ ----------
<S> <C>
Lehman Brothers Inc........................................
Banc of America Securities LLC.............................
Fidelity Capital Markets, a division of
National Financial Services LLC..........................
Total........................................
----------
6,364,000
==========
</TABLE>
S-1
<PAGE>
SCHEDULE 2
NAME AND ADDRESS OF PRINCIPAL SHAREHOLDERS
Manouch Moshayedi
3001 Daimler Street
Santa Ana, California 92705-5812
Fax: ______________________
Mark Moshayedi
3001 Daimler Street
Santa Ana, California 92705-5812
Fax: ______________________
Mike Moshayedi
3001 Daimler Street
Santa Ana, California 92705-5812
Fax: ______________________
S-2
<PAGE>
EXHIBIT A
LOCK-UP LETTER AGREEMENT
LEHMAN BROTHERS INC.
BANC OF AMERICA SECURITIES LLC
FIDELITY CAPITAL MARKETS, A DIVISION
OF NATIONAL FINANCIAL SERVICES CORPORATION
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and such other firms (the "Underwriters") of shares (the
"Shares") of Common Stock, par value $0.001 per share (the "Common Stock") of
Simple Technology, Inc., a California corporation (the "Company"), and that the
Underwriters propose to reoffer the Shares to the public (the "Offering").
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that, without the prior written consent of Lehman
Brothers Inc., on behalf of the Underwriters, the undersigned will not, directly
or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or
enter into any transaction or device that is designed to, or could be expected
to, result in the disposition by any person at any time in the future of) any
shares of Common Stock (including, without limitation, shares of Common Stock
that may be deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations of the Securities and Exchange Commission and
shares of Common Stock that may be issued upon exercise of any option or
warrant) or securities convertible into or exchangeable for Common Stock (other
than the Shares) owned by the undersigned on the date of execution of this
Lock-Up Letter Agreement or on the date of the completion of the Offering, or
(2) enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of ownership
of such shares of Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, for a period of 180 days after the date of the
final Prospectus relating to the Offering.
A-1
<PAGE>
The foregoing restrictions shall not apply to transfers of Common Stock by
the undersigned (i) as bona fide gifts or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a distribution
to partners or shareholders of such person, provided the distributees thereof
agree in writing to be bound by the terms of this restriction, (iii) with
respect to sales or purchases of Common Stock acquired on the open market or
(iv) with respect to shares received in the Directed Share Program.
In furtherance of the foregoing, the Company and its Transfer Agent are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this Lock-Up Letter Agreement.
It is understood that, if the Company notifies you that it does not intend
to proceed with the Offering, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the Shares, we will be released from our obligations under this
Lock-Up Letter Agreement.
The undersigned understands that the Company and the Underwriters will
proceed with the Offering in reliance on this Lock-Up Letter Agreement.
Whether or not the Offering actually occurs depends on a number of factors,
including market conditions. Any Offering will only be made pursuant to an
Underwriting Agreement, the terms of which are subject to negotiation between
the Company and the Underwriters.
A-2
<PAGE>
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Letter Agreement and that,
upon request, the undersigned will execute any additional documents necessary in
connection with the enforcement hereof. Any obligations of the undersigned shall
be binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
Very truly yours,
By:
--------------------------------
Name:
Title:
Dated: _________________________
A-3
<PAGE>
EXHIBIT B
OPINION OF
BROBECK, PHLEGER & HARRISON, LLP
B-1
<PAGE>
EXHIBIT C
OPINION OF
LITIGATION COUNSEL
C-1
