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EXHIBIT 1.1
. Shares
ValiCert, Inc.
Common Stock
($.001 Par Value)
UNDERWRITING AGREEMENT
----------------------
., 2000
Deutsche Bank Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Wit SoundView Corporation
As Representatives of the Several Underwriters
c/o Deutsche Bank Securities Inc.
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
ValiCert, Inc., a Delaware corporation (the "Company"), proposes to sell to
the several underwriters (the "Underwriters") named in Schedule I hereto for
whom you are acting as representatives (the "Representatives") an aggregate of
. shares (the "Firm Shares") of the Company's common stock, $.001 par value (the
"Common Stock"). The respective amounts of the Firm Shares to be so purchased
by the several Underwriters are set forth opposite their names in Schedule I
hereto. The Company also proposes to sell at the Underwriters' option an
aggregate of up to . additional shares of the Company's Common Stock (the
"Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares".
Deutsche Bank Securities Inc. ("DBSI") has agreed to reserve up to . of the
Shares to be purchased by it under this Agreement for sale to . (collectively,
"Participants"), as set forth in
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the Prospectus (as defined below) under the heading "Underwriting" (the
"Directed Share Program"). The Shares to be sold by DBSI and its affiliates
pursuant to the Directed Share Program are referred to hereinafter as the
"Directed Shares." Any Directed Shares not orally confirmed for purchase by any
Participants by the end of the business day (as hereinafter defined) on which
this Agreement is executed will be offered to the public by the Underwriters as
set forth in the Prospectus.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
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The Company represents and warrants to each of the Underwriters as of
the date of this Agreement, as of the Closing Date (as defined below) and as of
Option Closing Date (as defined below), if any, and agrees with each
Underwriter, as follows:
(a) A registration statement on Form S-1 (File No. 33-37020) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, is herein
referred to as the "Registration Statement", which term shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means the form of prospectus
first delivered by the Company to the Underwriters for use in confirming sales
of the Shares. Each preliminary prospectus included in the Registration
Statement prior to the time it becomes effective and each preliminary prospectus
delivered by the Company to the Underwriters for use in connection with the
marketing of the Shares is herein referred to as a "Preliminary Prospectus". Any
reference herein to the Registration Statement, any Preliminary Prospectus or to
the Prospectus or any amendment or supplement to any of the foregoing documents
shall be deemed to refer to and include the copy thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR"), and, in the case of any reference herein to any Prospectus,
also shall be deemed to include any supplements or amendments thereto filed with
the Commission after the date of filing of the Prospectus under Rules 424(b) or
430A, and prior to the termination of the offering of the Shares by the
Underwriters.
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. The only subsidiaries of
the Company (collectively, the "Subsidiaries") are Receipt.com, Inc., a
California corporation ("Receipt.com"), ValiCert Japan K.K., a Japanese
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corporation, and ValiCert B.V., a . corporation; none of the Subsidiaries is,
and in the aggregate the Subsidiaries would not be, a "significant subsidiary"
as defined in paragraph (w) of Rule 1-02 of Regulation S-X promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); and each of
the Subsidiaries has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement. The
Subsidiaries are the only subsidiaries, direct or indirect, of the Company and
all of the Subsidiaries are corporations. The Company is duly qualified to
transact business in the State of California; and, without limitation to the
foregoing, the Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of their business
requires such qualification, except where the failure to qualify would not have
a material adverse effect on the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole. The outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and are owned by the Company or
another Subsidiary, free and clear of all liens, encumbrances, equities and
claims; and no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any obligations into
shares of capital stock of or ownership interests in the Subsidiaries are
outstanding.
(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable, and
none of those shares was issued in violation of any preemptive rights, rights of
first refusal or other similar rights; the Shares have been duly authorized and,
when issued and paid for as contemplated herein, will be validly issued, fully
paid and non-assessable; and no preemptive rights of stockholders, rights of
first refusal or other similar rights exist with respect to any of the Shares or
the issue and sale thereof. Neither the filing of the Registration Statement nor
the offering or sale of the Shares as contemplated by this Agreement gives rise
to any rights, other than those which have been waived or satisfied, for or
relating to the registration under the Act of any shares of Common Stock or
other securities of the Company. The Company has not granted, or entered into
any agreement providing for, any registration rights or other similar rights
entitling any person to require the registration under the Act of any shares of
Common Stock or other securities of the Company or the inclusion of any such
shares or other securities in a public offering, except pursuant to the Rights
Agreement (as defined below); and Exhibit B hereto sets forth a true, complete
and correct list of all persons who are entitled to any registration rights
under the Rights Agreement.
(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the description
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the Company's
incorporation.
(e) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform to, the
requirements of the Act and the Rules and Regulations. The Registration
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Statement and any amendments thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representatives specifically for use in the
preparation thereof.
(f) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules, set forth in the
Registration Statement and the Prospectus present fairly the financial position
and the results of operations and cash flows of the Company and the consolidated
Subsidiaries at the indicated dates and for the indicated periods; and the
consolidated financial statements of Receipt, together with the related notes
and schedules, set forth in the Registration Statement present fairly the
results of operations and cash flows of Receipt for the indicated periods. All
such financial statements and related schedules have been prepared in accordance
with generally accepted principles of accounting, consistently applied
throughout the periods involved, except as disclosed therein, and all
adjustments necessary for a fair presentation of results for such periods have
been made. The summary financial and statistical data included in the
Registration Statement and the Prospectus presents fairly the information shown
therein and such data has been compiled on a basis consistent with the financial
statements presented therein and the books and records of the Company or
Receipt, as the case may be. The pro forma financial statements and other pro
forma financial information included in the Registration Statement and the
Prospectus present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro forma
financial statements, have been properly compiled on the pro forma bases
described therein, and, in the opinion of the Company, the assumptions used in
the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(g) Deloitte & Touche LLP and PricewaterhouseCoopers LLP, who have
certified certain of the financial statements filed with the Commission as part
of the Registration Statement, are independent public accountants as required by
the Act and the Rules and Regulations.
(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole or prevent the consummation of
the transactions contemplated hereby.
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(i) Except as disclosed in the Registration Statement, the Company
and the Subsidiaries have good and marketable title to all of the properties and
assets reflected in the financial statements (or as described in the
Registration Statement) hereinabove described, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except those reflected in such
financial statements (or described in the Registration Statement) or which are
not material in amount. Except as disclosed in the Registration Statement, the
Company and the Subsidiaries occupy their leased properties under valid and
binding leases conforming in all material respects to the description thereof
set forth in the Registration Statement.
(j) The Company and the Subsidiaries have filed all Federal, State,
local and foreign tax returns which have been required to be filed and have paid
all taxes indicated by said returns and all assessments received by them or any
of them to the extent that such taxes have become due. All tax liabilities have
been adequately provided for in the financial statements of the Company, and the
Company does not know of any actual or proposed additional material tax
assessments.
(k) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries taken as a whole, whether or not occurring in the
ordinary course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being entered into
by the Company or the Subsidiaries, other than transactions in the ordinary
course of business and transactions described in the Registration Statement. The
Company and the Subsidiaries have no material contingent obligations which are
not disclosed in the Company's financial statements which are included in the
Registration Statement.
(l) Neither the Company nor any of the Subsidiaries is or, with the
giving of notice or lapse of time or both, will be in violation of or in default
under (i) its charter or by-laws or any Credit Agreement or Investor Agreement
(as such terms are defined below) or (ii) any other agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound, except (solely in the case of clause
(ii) of this sentence) for such violations or defaults which would not have a
material adverse effect on the business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
the Subsidiaries taken as a whole. The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated and the fulfillment
of the terms hereof will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, (i) any Credit Agreement
or Investor Agreement, (ii) any other indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any of the Subsidiaries or any of their respective
properties is bound, (iii) the charter or by-laws of the Company or (iv) any
law, order, rule, regulation, judgment, order, writ or decree applicable to the
Company or any Subsidiary of any court or of any government, regulatory body or
administrative agency or other governmental body having jurisdiction, except,
solely in the case of clause (ii) above, for such conflicts, breaches or
defaults which would not have a material adverse effect on the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or
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prospects of the Company and the Subsidiaries taken as a whole or on the
consummation of the transactions contemplated by this Agreement. The Credit
Agreements are the only instruments and agreements pursuant to which the Company
or any of the Subsidiaries has incurred or is permitted to incur any
indebtedness or capital lease obligations. As used in this Agreement, "Credit
Agreements" means (i) the Amended and Restated Loan Agreement dated as of April
18, 2000 between the Company and Imperial Bank, (ii) the Amended and Restated
Security Agreement dated as of April 18, 2000 between the Company and Imperial
Bank, (iii) the Collateral Assignment, Patent Mortgage and Security Agreement
dated as of April 18, 2000 between the Company and Imperial Bank, (iv) the
Master Lease Agreement dated as of November 17, 1998 between Comdisco, Inc. and
the Company, (v) the Master Loan and Security Agreement dated as of December 21,
1999, as amended by the First Amendment thereto dated as of February 28, 2000,
each between the Company and Transamerica Business Credit Corporation, and (vi)
the Amended and Restated Convertible Debenture, original issue date January 23,
1997, restatement date December 1, 1997, payable to the order of Unison
Software, Inc. (the "Unison Debenture"), in each case including all amendments
thereto and restatements thereof and all guarantees, security agreements, pledge
agreements, promissory notes and other instruments or agreements entered into in
connection therewith; "Rights Agreement" means the Amended and Restated
Investors' Rights Agreement dated as of July 21, 1999, as amended by Amendment
No. 1 thereto dated December 30, 1999, among the Company and the investors
described therein; "Co-Sale Agreement" means the Amended and Restated Right of
First Refusal and Co-Sale Agreement dated as of July 21, 1999, among the
Company, August Capital L.P., Intel Corporation and the other parties thereto;
"Voting Agreement" means the Second Amended and Restated Voting Agreement dated
as of July 21, 1999, as amended by Amendment No. 1 thereto dated December 30,
1999, among the Company and the other parties thereto; and "Investor Agreements"
means the Rights Agreement, the Co-Sale Agreement and the Voting Agreement.
(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission
or the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(n) The Company and each of the Subsidiaries hold all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses; the Company and the Subsidiaries
each own or possess the right to use all patents, patent rights, trademarks,
trade names, service marks, service names, copyrights, license rights, know-how
(including trade secrets and other unpatented and unpatentable proprietary or
confidential information, systems or procedures) and other intellectual property
rights ("Intellectual Property") necessary to carry on their business; and
neither the Company nor any of the Subsidiaries has infringed, and none of the
Company or the Subsidiaries have received notice of conflict with, any
Intellectual Property of any other person or entity. The Company has taken all
reasonable steps necessary to secure interests in such Intellectual Property
from its contractors. There are no outstanding options, licenses or agreements
of any kind relating to the
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Intellectual Property of the Company that are required to be described in the
Prospectus and are not described in all material respects. The Company is not a
party to or bound by any options, licenses or agreements with respect to the
Intellectual Property of any other person or entity that are required to be set
forth in the Prospectus and are not described in all material respects. None of
the technology employed by the Company has been obtained or is being used by the
Company in violation of any contractual obligation binding on the Company or any
of its officers, directors or employees or otherwise in violation of the rights
of any persons; the Company has not received any written or oral communications
alleging that the Company has violated, infringed or conflicted with, or, by
conducting its business as set forth in the Prospectus, would violate, infringe
or conflict with, any of the Intellectual Property of any other person or
entity. The Company knows of no infringement by others of Intellectual Property
owned by or licensed to the Company.
(o) Neither the Company nor, to the Company's knowledge, any of its
affiliates, has taken or may take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
shares of Common Stock to facilitate the sale or resale of the Shares.
(p) Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations of the Commission
thereunder.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses.
(s) 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 have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects
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and nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
(t) To the Company's knowledge, there are no affiliations or
associations between any member of the NASD and any of the Company's officers,
directors or securityholders, except as disclosed in writing to the
Representatives.
(u) No consent, approval, authorization or order of, or qualification
with, any governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered.
(v) The Company has not offered, or caused DBSI or its affiliates to
offer, Shares to any person pursuant to the Directed Share Program with the
specific intent to unlawfully influence (i) a customer or supplier of the
Company to alter the customer's or supplier's level or type of business with the
Company, or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
(w) There are no outstanding rights (including, without limitation,
rights under any contract or other instrument or agreement), options, warrants
or other securities that are convertible into, or exercisable or exchangeable
for, Common Stock (collectively, "Rights") other than shares of preferred stock,
$.001 par value ("Preferred Stock"), of the Company outstanding on the date of
this Agreement, options issued under employee benefit plans, warrants to
purchase Common Stock and Preferred Stock and the Unison Debenture, all of
which, including the number of shares issuable upon conversion or exercise
thereof, are accurately described in the Registration Statement; effective upon
the issuance and sale of the Firm Shares to the Underwriters on the Closing
Date, all Rights which were convertible into, or exercisable or exchangeable
for, any class or series of Preferred Stock will thereafter be convertible into,
or exchangeable or exercisable for, Common Stock instead of such Preferred
Stock; all outstanding warrants issued by the Company have been appropriately
adjusted to reflect the reverse stock split effected in connection with this
offering by increasing the exercise price by a factor of and reducing the number
of shares issuable upon exercise by a factor of ; and the conversion price,
conversion ratio, exercise price, exchange ratio or other similar price or ratio
of all other Rights, as well as the number of shares of stock issuable upon
conversion, exercise or exchange thereof, as the case may be, have been
similarly adjusted to reflect such reverse stock split.
(x) Each Preliminary Prospectus delivered to the Underwriters and the
Prospectus, and each amendment or supplement to any Preliminary Prospectus or
the Prospectus, is and will be identical to the electronically transmitted copy
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T under the Act.
(y) This Agreement has been duly authorized, executed and delivered
by the Company.
(z) No labor dispute with employees of the Company or any Subsidiary
exists or, to the knowledge of the Company, is imminent, and the Company is not
aware of any existing or imminent labor disturbance by the employees or any of
its or any Subsidiary's principal suppliers, customers or contractors.
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(aa) The Shares have been approved for listing, subject to notice of
issuance, on The Nasdaq Stock Market National Market System (the "Nasdaq NMS").
(bb) The Company has heretofore provided to the Representatives true,
complete and correct copies of the following documents of the Company: (i) a
Certificate of Amendment of Third Amended and Restated Certificate of
Incorporation (the "Amendment"), (ii) a Certificate of Elimination of Series A
Junior, Series A Senior, Series B and Series C Preferred Stock (the "Certificate
of Elimination")], (iii) the Fourth Amended and Restated Certificate of
Incorporation (the "Restated Charter"; the Amendment, Certificate of Elimination
and Restated Charter are referred to, collectively, as the "New Charter
Documents"), and (iv) the Amended and Restated By-laws (the "Restated By-laws").
Each of the New Charter Documents and the Restated By-laws has been duly
approved by written consent of holders of the requisite percentage of the
Company's outstanding capital stock (including, if applicable, by holders of the
requisite percentage of each class or series of the Company's outstanding
capital stock) and in accordance with applicable law and the applicable
provisions of the Company's charter and by-laws and any instrument or agreement
to which the Company is a party or by which it is bound. The Amendment has been
duly filed with the Delaware Secretary of State (the "Secretary of State");
prior to the Closing Date, the Certificate of Elimination and [the Restated
Charter] will be duly filed with the Secretary of State; [contemporaneously with
the issuance and sale of the Firm Shares to the Underwriters on the Closing
Date, the Restated Charter will be filed with the Secretary of State;] and the
Restated Charter and Restated By-Laws will become effective [on/immediately
after the issuance and sale of the Firm Shares to the Underwriters on] the
Closing Date. Each of the New Charter Documents complies with all applicable
requirements of the laws of the State of Delaware and the State of California.
(cc) [This paragraph moved from covenants.] The Company has caused
each officer and director of the Company, each holder of shares of any class or
series of the Company's capital stock, and each holder of any Rights to furnish
to you, prior to the date of this Agreement, a signed letter or letters, in form
and substance satisfactory to you, substantially in the form attached hereto as
Exhibit A (collectively, "Lockup Agreements"). Without limitation to the
foregoing, a Lock-Up Agreement has been signed by each director and officer of
the Company and each person who is or, assuming the conversion of all shares of
Preferred Stock into Common Stock, would be the record or beneficial owner of 1%
or more of the outstanding shares of Common Stock (computed as of the date of
this Agreement on an as converted basis). To the extent that any holder of
Common Stock or other capital stock of the Company or Rights is prohibited or,
upon notice from the Company or the Representatives, would be prohibited from
offering, selling or otherwise disposing of any such shares or Rights pursuant
to an agreement or instrument (including, without limitation, any employee
benefit plan, the Rights Agreement or any instrument or agreement evidencing any
Rights) other than a Lock-Up Agreement, the Company has given such notice in
accordance with the terms of such agreement or instrument prior to the date of
this Agreement (or, in any case where such notice cannot be given until the
issuance of shares of Common Stock or other capital stock upon the exercise of
options or other Rights, the Company will give such notice in accordance with
the terms of such agreement or instrument prior to the issuance of such shares)
and will not waive or otherwise release any such prohibition prior to the date
which is 180 days after the date of this Agreement without the prior written
consent of both DBSI and Merrill Lynch. Without limitation to the foregoing,
each stock
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option plan, employee stock purchase plan or other similar benefit plan under
which the Company has issued or may issue options, rights, warrants or shares of
capital stock expressly provides, either in the documents creating such plan or
in a written agreement or instrument to be signed by each holder of rights,
warrants, options or shares issued pursuant thereto, that such holder will not
sell, transfer or otherwise dispose of any shares of capital stock issued
pursuant to such plan for a period of 180 days after the effective date of the
Registration Statement upon notice from the Company; and the Company has given
and will give all such notices as are or may be required to effectuate such
restrictions for the period of 180 days after the date of this Agreement. The
Company has given stop transfer instructions with respect to all of its shares
of Common Stock and Preferred Stock and all of its Rights which were outstanding
immediately on the date of this Agreement and will not cause or permit the sale,
transfer or other disposition of any of such shares or Rights prior to the date
which is 180 days after the date of this Agreement without the prior written
consent of both DBSI and Merrill Lynch.
2. Purchase, Sale and Delivery of the Firm Shares.
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(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company agrees to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $. per share, the number
of Firm Shares set forth opposite the name of each Underwriter in Schedule I
hereof, subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made by
wire transfer of same day funds against delivery of certificates therefor to the
Representatives for the several accounts of the Underwriters. Such payment and
delivery are to be made through the facilities of The Depository Trust Company
in New York City at 10:00 a.m., New York time, on the third business day after
the date of this Agreement or at such other time and date not later than five
business days thereafter as you and the Company shall agree upon, such time and
date being herein referred to as the "Closing Date." (As used herein, "business
day" means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business and are not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will be
delivered in such denominations and in such registrations as the Representatives
request in writing not later than the second full business day prior to the
Closing Date, and will be made available for inspection by the Representatives
at least one business day prior to the Closing Date.
(c) (c) In addition, on the basis of the representations, warranties
and covenants herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the several Underwriters to
purchase the Option Shares at the price per share as set forth in Section 2(a)
above, less an amount per share equal to any dividends or distributions declared
by the Company and payable on the Firm Shares but not payable on the Option
Shares. The option granted hereby may be exercised in whole or in part by giving
written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date
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at which certificates for Option Shares are to be delivered shall be determined
by the Representatives but shall not be earlier than three nor later than 10
full business days after the exercise of such option, nor in any event prior to
the Closing Date (such time and date being herein referred to as the "Option
Closing Date"). If the date of exercise of the option is three or more days
before the Closing Date, the notice of exercise shall set the Closing Date as
the Option Closing Date. The number of Option Shares to be purchased by each
Underwriter shall be in the same proportion to the total number of Option Shares
being purchased as the number of Firm Shares being purchased by such Underwriter
bears to ., adjusted by you in such manner as you may in your sole discretion
determine so as to avoid fractional shares. The option with respect to the
Option Shares granted hereunder may be exercised only to cover over-allotments
in the sale of the Firm Shares by the Underwriters. You, as Representatives of
the several Underwriters, may cancel such option at any time prior to its
expiration by giving written notice of such cancellation to the Company. To the
extent, if any, that the option is exercised, payment for the Option Shares
shall be made on the Option Closing Date by wire transfer of same day funds
against delivery of certificates therefor to the Representatives for the several
accounts of the Underwriters, such payment and delivery to be made through the
facilities of The Depository Trust Company in New York, New York at 10:00 a.m.,
New York time. The certificates for the Option Shares, if any, will be delivered
in such denominations and in such registrations as the Representatives request
in writing, not later than the second business day prior to the Option Closing
Date, and will be made available for inspection by the Representatives at least
one business day prior to the Option Closing Date.
3. Offering by the Underwriters.
----------------------------
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company.
------------------------
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations and (B) not file or use any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representatives shall not previously
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have been advised and furnished with a copy or to which the Representatives
shall have reasonably objected in writing or which is not in compliance with the
Rules and Regulations.
(b) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required to be delivered under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representatives such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), and of all amendments thereto, as
the Representatives may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Shares as contemplated in this Agreement and the Prospectus. If during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Underwriters, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus so that
the Prospectus as so amended or
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<PAGE>
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earnings
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(g) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim financial statements of the Company for
any period subsequent to the period covered by the most recent financial
statements appearing in the Registration Statement and the Prospectus.
(h) The Company will not, directly or indirectly, issue, offer, sell,
pledge, contract to sell (including, without limitation, any short sale), grant
any option to purchase, enter into any contract to sell or otherwise dispose of
any shares of Common Stock (or any derivative of Common Stock) or Rights or
enter into any Hedging Transaction (as defined in Exhibit A hereto) relating to
the Common Stock (or any derivative of Common Stock) or Rights for a period of
180 days after the date of this Agreement without the prior written consent of
both DBSI and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), except for the issuance of the Shares sold to the Underwriters pursuant
to this Agreement, and except that the Company may issue shares of Common Stock
upon the exercise of stock options and warrants outstanding as of the date of
this Agreement, grant options to purchase Common Stock and issue shares of
Common Stock pursuant to its 1998 Stock Plan and 2000 Employee Stock Purchase
Plan (as such terms are defined in the Registration Statement), and issue shares
of Common Stock in connection with mergers and acquisitions so long as, in the
case of any shares of Common Stock issued in connection with mergers and
acquisitions, each recipient of any such shares shall have executed and
delivered to the Representatives, prior to the issuance of such shares, an
agreement substantially in the form of Exhibit A hereto.
(i) The Company will use its best efforts to list the Shares on the
Nasdaq NMS.
(j) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(k) The Company shall not invest or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the 1940 Act.
(l) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
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<PAGE>
(m) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(n) The Company will comply with all applicable securities and other
applicable laws, rules and regulations in each jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program.
5. Costs and Expenses.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Selling Memorandum, if any, the Underwriters'
Invitation Letter, the listing application relating to the listing of the Shares
on the Nasdaq NMS, the Blue Sky Survey and any supplements or amendments
thereto; the filing fees of the Commission; the filing fees and expenses
(including legal fees and disbursements of counsel to the Underwriters) incident
to securing any review and approval by the NASD of the terms of the sale of the
Shares; the listing fee of The Nasdaq Stock Market; and the expenses, including
the fees and disbursements of counsel for the Underwriters, incurred in
connection with the qualification of the Shares under State securities or Blue
Sky laws. The Company agrees to pay all costs and expenses of the Underwriters,
including the fees and disbursements of counsel for the Underwriters, incident
to the offer and sale of Directed Shares by the Underwriters to employees and
persons having business relationships with the Company and its Subsidiaries.
The Company shall not, however, be required to pay for any of the Underwriters'
expenses (other than those related to securing the review and approval by the
NASD and in connection with qualification under State securities or Blue Sky
laws) except that, if this Agreement shall not be consummated because the
conditions in Section 6 hereof are not satisfied, or because this Agreement is
terminated by the Representatives pursuant to Section 11 hereof, or by reason of
any failure, refusal or inability on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on its part to be performed, satisfied or complied with, then,
unless such failure to satisfy said condition or to comply with said terms be
due to the default or omission of any Underwriter, the Company shall reimburse
the several Underwriters for reasonable out-of-pocket expenses, including fees
and disbursements of counsel, reasonably incurred in connection with
investigating, marketing and proposing to market the Shares or in contemplation
of performing their obligations hereunder; but the Company shall not in any
event be liable to any of the several Underwriters for damages on account of
loss of anticipated profits from the sale by them of the Shares.
6. Conditions of Obligations of the Underwriters.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the
14
<PAGE>
representations and warranties of the Company contained herein and to the
performance by the Company of its covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made within the
periods of time specified by and otherwise in compliance with such Rules, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company, shall be contemplated
or threatened by the Commission and no injunction, restraining order or order of
any nature by a Federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date and,
if applicable, on the Option Closing Date the opinion of Gray Cary Ware &
Freidenrich LLP, counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters to the effect
that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; each of the Subsidiaries
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification, or in which the
failure to qualify would have a material adverse effect upon the business of the
Company and the Subsidiaries taken as a whole; and the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable and are owned by the Company or a
Subsidiary; and, to the best of such counsel's knowledge, the outstanding shares
of capital stock of each of the Subsidiaries is owned free and clear of all
liens, encumbrances, equities and claims, and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other rights to
convert any obligations into any shares of capital stock of or ownership
interests in the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Company's Common Stock have been duly authorized; and the
outstanding shares of the Company's Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable and none of such shares was
issued in violation of any preemptive rights, rights of first refusal or other
similar rights arising under the charter or by-laws of the Company, any Investor
Agreement or, to the knowledge of such counsel, any other instrument or
agreement.
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<PAGE>
(iii) (A) the certificate evidencing the Common Stock complies
as to form in all material respects with the applicable requirements of the
General Corporation Law of the State of Delaware (the "DGCL") and the Company's
charter and by-laws; (B) the shares of Common Stock, including the Option
Shares, if any, to be sold by the Company pursuant to this Agreement have been
duly authorized and, when issued, paid for and delivered as contemplated by this
Agreement, will be validly issued, fully paid and non-assessable; and (C) no
preemptive rights, rights of first refusal or other similar rights arising under
the DGCL, the charter or by-laws of the Company, any Investor Agreement or, to
the knowledge of such counsel, any other instrument or agreement exist with
respect to any of the Shares or the issue or sale thereof.
(iv) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities of the
Company convertible into, exchangeable or exercisable for, or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible into, exchangeable or exercisable for, or evidencing the
right to purchase or subscribe for any shares of such stock; and except as
described in the Prospectus, to the knowledge of such counsel, no holder of any
securities of the Company or any other person has the right, contractual or
otherwise, which has not been satisfied or effectively waived, to cause the
Company to sell or otherwise issue to them, or to permit them to underwrite the
sale of, any of the Shares or the right to have any Common Stock or other
securities of the Company included in the Registration Statement or the right,
as a result of the filing of the Registration Statement, to require registration
under the Act of any shares of Common Stock or other securities of the Company.
(v) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.
(vi) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the applicable requirements of the Act and the Rules and Regulations (except
that such counsel need express no opinion as to the financial statements and
related schedules therein).
(vii) The statements under the captions "Risk Factors-The
covenants and restrictions in our existing and future debt instruments could
have a negative effect on our business," "Business-Legal Proceedings,"
"Management-Employment, Termination of Employment and Change-in-Control
Arrangements," "Management-Stock Option Plans," "Management-2000 Employee Stock
Purchase Plan," "Management-401k Plan," "Management-Limitations of Liability and
Indemnification Matters," "Related Party Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such
statements constitute a summary of the Company's charter or by-laws or other
documents referred to therein or matters of law, fairly summarize in all
material respects the information called for with respect to the Company's
charter and by-laws, and such documents and matters.
16
<PAGE>
(viii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(ix) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.
(x) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, (i) the charter or by-laws of the Company, (ii) any
Credit Agreement or Investor Agreement, or (iii) any other material agreement or
instrument known to such counsel to which the Company or any of the Subsidiaries
is a party or by which the Company or any of the Subsidiaries may be bound
except, solely in the case of clause (iii) of this subparagraph, for such
conflicts, breaches or defaults which would not have a material adverse effect
on the Company and the Subsidiaries taken as a whole or on the consummation of
the transactions contemplated by this Agreement.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement or the consummation of the transactions herein contemplated
(other than as may be required by the NASD or under State securities and Blue
Sky laws, as to which such counsel need express no opinion).
(xiii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
(xiv) Each of the New Charter Documents and the Restated By-
laws has been duly approved by written consent of the holders of the requisite
percentage of the Company's outstanding capital stock (including, if applicable,
by holders of the requisite percentage of each class or series of the Company's
outstanding capital stock) and in accordance with the applicable provisions of
the DGCL and California General Corporation Law (the "CGCL"), the Company's
charter and by-laws and, to the knowledge of such counsel, any other instrument
or agreement to which the Company is a party or by which it is bound; the
Amendment, Certificate of Elimination and the Restated Charter have been duly
filed with the Secretary of State; each of the New Charter Documents complies
with all applicable requirements of the DGCL and the CGCL; and the Restated
Charter and Restated By-laws [became/will become] effective on ..
17
<PAGE>
(xv) Effective upon the issuance and sale of the Firm Shares to
the Underwriters on the Closing Date, all Rights which were convertible into, or
exercisable or exchangeable for, any class or series of Preferred Stock will
thereafter be convertible into, or exchangeable or exercisable for, Common Stock
instead of such Preferred Stock; all outstanding warrants issued by the Company
have been appropriately adjusted to reflect the reverse stock split effected in
connection with the offering contemplated by this Agreement by increasing the
exercise price by a factor of . and reducing the number of shares issuable upon
exercise by a factor of .; and the conversion price, conversion ratio, exercise
price, exchange ratio or other similar price or ratio of all other Rights, as
well as the number of shares of stock issuable upon conversion, exercise or
exchange, as the case may be, have been similarly adjusted to reflect such
reverse stock split.
In rendering such opinion Gray Cary Ware & Freidenrich LLP may rely as
to matters governed by the laws of jurisdictions other than the laws of the
State of California, the DGCL or Federal laws on local counsel in such
jurisdictions, provided that in each case Gray Cary Ware & Freidenrich LLP shall
state that they believe that they and the Underwriters are justified in relying
on such local counsel, and provided, further, that each such opinion of local
counsel shall be dated as of the Closing Date or the Option Closing Date, as the
case may be, shall be addressed to the Underwriters or shall expressly state
that the Underwriters may rely on such opinion as if it were addressed to them
and shall be delivered to the Representatives on the Closing Date. In addition
to the matters set forth above, such opinion shall also include a statement to
the effect that nothing has come to the attention of such counsel which leads
them to believe that (i) the Registration Statement (including the information,
if any, deemed to be a part of the Registration Statement at the time it became
effective pursuant to paragraph (b) of Rule 430A under the Act), at the time it
became effective under the Act or as of the Closing Date or the Option Closing
Date, as the case may be, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations or as of the Closing Date or the Option Closing Date, as
the case may be, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except that such counsel need express no view as to
financial statements, schedules and other financial data therein). With respect
to such statement, Gray Cary Ware & Freidenrich LLP may state that their belief
is based upon the procedures set forth therein, but is without independent check
and verification except as set forth in subparagraph . above.
(c) The Representatives shall have received on the Closing Date and,
if applicable, the Option Closing Date the opinion of Blakely, Sokoloff, Taylor
& Zafman, patent counsel for the Company, dated the Closing Date and, if
applicable, the Option Closing Date addressed to the Underwriters to the effect
that:
(i) The statements in the Prospectus under the captions "Risk
Factors - Our business will suffer if we are unable to protect our intellectual
property", "Risk Factors - Any claim of infringement by third parties could be
costly to defend, and if we are found to be infringing upon intellectual
property rights of third parties, we may be required to pay substantial
licensing fees" and "Business - Intellectual Property" (collectively the
"Intellectual Property
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<PAGE>
Portion") are accurate statements or summaries of the matters therein set forth
in all material respects, and nothing has come to our attention that causes us
to believe that the Intellectual Property Portion of the Registration Statement,
as of the date the Registration Statement was declared effective, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, or that the Intellectual Property Portion of the Prospectus, as of
the date of the Prospectus or as of the date of this opinion, contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(ii) There are no legal or governmental proceedings pending
relating to patent rights, trade secrets, trademarks, service marks or other
proprietary information or materials of the Company which, if determined
adversely to the Company, might have a material adverse effect on the business,
financial position or results of the operations of the Company and to the best
of our knowledge, no such proceedings are threatened or contemplated by
governmental authorities or others;
(iii) To our knowledge, after due inquiry, there are no
contracts or other documents, relating to the Company's patents, trade secrets,
trademarks, service marks or other proprietary information or materials of a
character required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the Prospectus that
are not filed or described as required;
(iv) To our knowledge, the Company is not infringing or
otherwise violating any patents, trade secrets, trademarks, service marks or
other proprietary information or materials of others; and
(v) To our knowledge, the Company owns or possesses sufficient
licenses or other rights to use all patents, trade secrets, trademarks, service
marks or other proprietary information or materials necessary to conduct the
business now being or proposed to be conducted by the Company as described in
the Prospectus.
In rendering such opinion, Blakely, Sokoloff, Taylor & Zafman shall
state that such opinion is limited to matters governed by the laws of the State
of California and Federal laws.
(d) The Representatives shall have received from Brown & Wood LLP,
counsel for the Underwriters, an opinion dated the Closing Date and, if
applicable, the Option Closing Date substantially to the effect specified in
subparagraphs (iii) (limited, in the case of clause (C) of subparagraph (iii),
to preemptive rights arising under DGCL or the Company's charter or by-laws),
(v), (vi), (vii) (solely as to the statements under the caption "Description of
Capital Stock--Common Stock") and (xi) of Paragraph (b) of this Section 6, and
that the Company has been duly organized and is validly existing as a
corporation under the laws of the State of Delaware. In addition to the matters
set forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that (i) the Registration Statement (including the information, if any, deemed
to be a part
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<PAGE>
of the Registration Statement at the time it became effective pursuant to
paragraph (b) of Rule 430A under the Act), at the time it became effective under
the Act or as of the Closing Date or the Option Closing Date, as the case may
be, contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations or as of the Closing Date or the Option Closing Date, as the case
may be, contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and other financial data therein). With respect to such
statement, Brown & Wood llp may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification
except as set forth in subparagraph . of Paragraph (b) of this Section 6.
(e) The Representatives shall have received at or prior to the
Closing Date from Brown & Wood llp a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the State
securities or Blue Sky laws of such jurisdictions as the Representatives may
reasonably have designated.
(f) You shall have received, on the date hereof, on the Closing
Date and, if applicable, on the Option Closing Date a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Deloitte & Touche LLP confirming that they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in their
opinion the financial statements and schedules examined by them and included in
the Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(g) The Representatives shall have received on the Closing Date
and, if applicable, the Option Closing Date a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under
the Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his or her knowledge, contemplated or threatened by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
20
<PAGE>
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made as and when required by such Rules;
(iv) He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion, as of the effective
date of the Registration Statement, the statements contained in the Registration
Statement were true and correct, and the Registration Statement and Prospectus
did not omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business.
(h) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.
(i) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq Stock Market.
(j) The Lockup Agreements described in Section 3 . shall have been
delivered to the Underwriters prior to the date of this Agreement and shall be
in full force and effect.
(k) The Representatives shall have received, prior to the Closing
Date, a letter from the NASD to the effect that the NASD will raise no objection
with respect to the underwriting terms and arrangements relating to the offering
of the Shares.
(l) The New Charter Documents shall be in form and substance
satisfactory to the Representatives; the Amendment, the Certificate of
Elimination and the Restated Charter shall have been duly filed with the
Secretary of State and, prior to the Closing Date, the Representatives shall
have received a copy of the Amendment, the Certificate of Elimination and the
Restated Charter, certified by the Secretary of State; contemporaneously with
the issuance and sale of the Firm Shares of the Underwriters, the
Representatives shall have received evidence, satisfactory to them, that the
Restated Charter shall have been duly filed with the Secretary of State; and the
Restated By-laws shall have become effective on ..
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Brown & Wood LLP,
counsel for the Underwriters.
21
<PAGE>
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing or
by telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be. In such event, the Company and the Underwriters shall not be under
any obligation to each other (except to the extent provided in Sections 5 and 14
hereof).
7. Conditions of the Obligations of the Company.
--------------------------------------------
The obligation of the Company to sell and deliver the Shares required
to be delivered as and when specified in this Agreement is subject to the
conditions that at the Closing Date or the Option Closing Date, as the case may
be, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and in effect or proceedings therefor initiated or
threatened.
8. Indemnification.
---------------
(a) The Company agrees:
(1) to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter within the meaning of the Act from and
against any and all losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or (iii)
any act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Shares or
the offering contemplated hereby and which is included as part of or
referred to in any loss, claim, damage, liability, action or proceeding
arising out of or based upon matters covered by clause (i) or (ii) above
(provided, that the Company 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, action or
proceeding 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); provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof; and
(2) to reimburse each Underwriter and each such controlling person
upon demand for any legal or other out-of-pocket expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any
22
<PAGE>
such loss, claim, damage, liability, action or proceeding or in responding
to a subpoena or governmental inquiry related to the offering of the
Shares, whether or not such Underwriter or controlling person is a party to
any action or proceeding. In the event that it is finally judicially
determined that the Underwriters were not entitled to receive payments for
legal and other expenses pursuant to this subparagraph, the Underwriters
will promptly return all sums that had been advanced pursuant hereto.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act from and against any losses, claims,
damages or liabilities to which the Company or any such director, officer, or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading and will reimburse any legal or other out-of-
pocket expenses reasonably incurred by the Company or any such director,
officer, or controlling person in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; provided, however,
that each Underwriter will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by or
through the Representatives specifically for use in the preparation thereof.
This indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or 8(b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or 8(b), as the case
may be. In case any such proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own
23
<PAGE>
counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred (or within 30 days of presentation) the fees and
expenses of the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties. Such firm shall be designated in writing by you in the case
of parties indemnified pursuant to Section 8(a) and by the Company in the case
of parties indemnified pursuant to Section 8(b). Except as otherwise provided in
the next succeeding sentence, the indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any and all loss or liability by reason of such settlement or judgment. If at
any time an indemnified party shall have requested an indemnifying party to pay
the fees and expenses of counsel retained by such indemnified party as
contemplated by the fifth sentence of this Section 8(c), such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
the immediately preceding sentence effected without its written consent if (x)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (y) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (z) such indemnifying party shall not
have paid the fees and expenses of counsel in accordance with such request prior
to the date of such settlement. The indemnifying party will not, without the
prior written consent of the indemnified party, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action or
proceeding as to which indemnification or contribution may be sought hereunder
(whether or not any indemnified party is an actual or potential party to such
claim, action or proceeding) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action or proceeding.
(d) The Company agrees to indemnify and hold harmless DBSI and each
person, if any, who controls DBSI within the meaning of the Act from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) (i) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
material prepared by or with the consent of the Company for distribution to
Participants in connection with the Directed Share Program, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; (ii)
caused by the failure of any Participant to pay for and accept delivery of
Directed Shares that the Participant has agreed to purchase; or (iii) related
to, arising out of or in connection with the Directed Share Program, other than
losses, claims, damages or liabilities (or expenses relating thereto) that are
finally judicially determined to have resulted from the bad faith or gross
negligence of DBSI.
24
<PAGE>
(e) To the extent the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or 8(b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(e) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(e). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him, her or it by any other contributing party and consents to the service
of such process and agrees that any other contributing party may join him, her
or it as an additional defendant in any such proceeding in which such other
contributing party is a party.
25
<PAGE>
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. A successor
to any Underwriter or any person controlling any Underwriter, or to the Company,
its directors or officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 8.
9. Default by Underwriters.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company, in such amounts as may be agreed upon and
upon the terms set forth herein, the Shares which the defaulting Underwriter or
Underwriters failed to purchase. If during such 36 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the Shares agreed to be purchased by the defaulting Underwriter or
Underwriters on such date, then (a) if the aggregate number of Shares with
respect to which such default shall occur does not exceed 10% of the total
number of Shares which the Underwriters were obligated to purchase hereunder on
such date, the other Underwriters shall be obligated, severally, in proportion
to the respective numbers of Shares which they were obligated to purchase
hereunder on such date, to purchase the Shares which such defaulting Underwriter
or Underwriters failed to purchase, or (b) if the aggregate number of Shares
with respect to which such default shall occur exceeds 10% of the total number
of Shares which the Underwriters were obligated to purchase hereunder on such
date, the Company or you, as the Representatives of the Underwriters, will have
the right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company except to the extent provided
in Sections 5 and 14 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. Notices.
-------
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to Deutsche Bank Securities
Inc., One South Street, Baltimore, Maryland 21202, Attention: Michael Ott, and
to Merrill Lynch, Pierce, Fenner & Smith Incorporated, 3300 Hillview Avenue,
Suite 150, Palo Alto, California 94304-1203, Attention: Venkat Badinehal, with
a copy to Deutsche Bank Securities Inc., 31 West 52nd Street, New York, New
26
<PAGE>
York 10019, Attention: General Counsel; and if to the Company, to ValiCert,
Inc., 1215 Terra Bella Avenue, Mountain View, California 94043, Attention:
Joseph (Yosi) Amram.
11. Termination.
-----------
(a) This Agreement may be terminated by you by notice to the Company
at any time prior to the Closing Date or any Option Closing Date if any of the
following has occurred: (i) since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change in or
affecting the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business, (ii) any outbreak or escalation of hostilities or declaration of
war or national emergency or other national or international calamity or crisis
or change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable or inadvisable to market the Shares or to enforce contracts for
the sale of the Shares, (iii) suspension of trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or The Nasdaq Stock
Market or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on either such Exchange or on such market, (iv)
the enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects or may materially and adversely
affect the business or operations of the Company, (v) the declaration of a
banking moratorium by United States or New York State authorities, (vi) any
downgrading, or placement on any watch list for possible downgrading, in the
rating of any of the Company's securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Exchange Act), (vii) the suspension of trading of the Company's Common Stock
by The Nasdaq Stock Market, the Commission, or any other governmental authority,
or (viii) the taking of any action by any governmental body or agency in respect
of its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(b) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
----------
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
13. Information Provided by Underwriters.
------------------------------------
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Preliminary Prospectus, the Prospectus, the Registration
Statement or any amendment or
27
<PAGE>
supplement to any of the foregoing consists of the information set forth in the
third, ninth and tenth paragraphs under the caption "Underwriting" in the
Prospectus.
14. Miscellaneous.
-------------
The reimbursement, indemnification and contribution agreements
contained in Section 8 of this Agreement, the provisions of Section 5 of this
Agreement and the representations, warranties and covenants in this Agreement
shall remain operative and in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
any of its directors or officers or any person controlling the Company and (c)
delivery of and payment for any Shares under this Agreement.
DBSI hereby agrees, for the sole and exclusive benefit of Merrill
Lynch, that it will not waive any provisions of any Lock-Up Agreement without
the prior or concurrent written consent of Merrill Lynch.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
ValiCert, Inc.
By_______________________________________
Joseph (Yosi) Amram
President and Chief Executive Officer
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
Deutsche Bank Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
28
<PAGE>
Wit SoundView Corporation
As Representatives of the several Underwriters
listed on Schedule I
By: Deutsche Bank Securities Inc.
By ______________________________
Authorized Officer
29
<PAGE>
SCHEDULE I
Schedule of Underwriters
Number of Firm
Underwriter Shares to be Purchased
---------------------------------------------- ----------------------
Deutsche Bank Securities Inc..................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................
Donaldson, Lufkin & Jenrette
Securities Corporation...................
Wit SoundView Corporation.....................
Total.........................................
<PAGE>
EXHIBIT A
Form of Lock-Up Agreement
-------------------------
<PAGE>
April 25, 2000
ValiCert, Inc.
339 North Bernardo Ave.
Mountain View, CA 94043
Deutsche Bank Securities Inc.
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
The undersigned understands that Deutsche Bank Securities Inc. ("Deutsche
Bank"), as a representative or sole representative (the "Representative", which
term includes any successor to Deutsche Bank in such capacity) of the several
underwriters (together with the Representative, the "Underwriters"), proposes to
enter into an Underwriting Agreement (the "Underwriting Agreement") with
ValiCert, Inc., a Delaware corporation (the "Company"), providing for the
initial public offering by the Underwriters of common stock (the "Common Stock")
of the Company (the "Initial Public Offering").
In consideration of the Underwriters' agreement to make the Initial Public
Offering and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees that,
without the prior written consent of the Representative, the undersigned will
not, directly or indirectly offer, sell, pledge, contract to sell (including any
short sale), grant any option to purchase, enter into any contract to sell or
otherwise dispose of any shares of Common Stock (including, without limitation,
any shares of Common Stock which may be deemed to be beneficially owned by the
undersigned on the date hereof in accordance with the rules and regulations of
the Securities and Exchange Commission and any shares of Common Stock which may
be issued upon exercise of a stock option or warrant or upon conversion of a
convertible security) or any rights, warrants, options or other securities that
are convertible into, or exercisable or exchangeable for, Common Stock
(collectively, "Rights", which term includes, without limitation, any shares of
preferred stock which are convertible into Common Stock) or enter into any
Hedging Transaction (as defined below) relating to the Common Stock (each of the
foregoing referred to as a "Disposition") for a period of 180 days after the
date of the Underwriting Agreement (the "Lock-Up Period"). The foregoing
restriction is expressly intended to preclude the undersigned from engaging in
any Hedging Transaction or other transaction which is designed to or reasonably
expected to lead to or result in a Disposition during the Lock-Up Period even if
the securities would be disposed of by someone other than the undersigned.
"Hedging Transaction" means any short sale (whether or not against the box) or
any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Common
<PAGE>
Stock or Rights. The foregoing restrictions set forth in this paragraph shall
apply to all shares of Common Stock and all Rights now owned or hereafter
acquired by the undersigned, except that such restrictions shall not apply to
transactions relating to Common Stock acquired in open market transactions after
the date of the Underwriting Agreement.
Notwithstanding the foregoing, the undersigned may transfer any or all of
the undersigned's Common Stock or Rights by gift, will or intestacy; provided,
however, that in any such case it shall be a condition to the transfer that,
prior to or concurrently with such transfer, the transferee executes and
delivers, to the Representative an agreement stating that the transferee is
receiving and holding the Common Stock or Rights, as the case may be, subject to
the provisions of this letter agreement, and there shall be no further transfer
of such Common Stock or Rights, as the case may be, except in accordance with
this letter agreement.
Without limiting the restrictions herein, any Disposition by the
undersigned shall remain at all times subject to applicable securities laws,
including without limitation the resale restrictions imposed by Rule 144
promulgated under the Securities Act of 1933, as amended.
The undersigned agrees that the Company may, and that the undersigned will,
(i) with respect to any shares of Common Stock or Rights for which the
undersigned is the record holder, cause the transfer agent for the Company to
note stop transfer instructions with respect to such shares of Common Stock or
Rights, as the case may be, on the transfer books and records of the Company and
(ii) with respect to any shares of Common Stock or Rights for which the
undersigned is the beneficial owner but not the record holder, cause the record
holder of such shares of Common Stock or Rights, as the case may be, to cause
the transfer agent for the Company to note stop transfer instructions with
respect to such shares of Common Stock or Rights on the transfer books and
records of the Company.
In addition, the undersigned hereby waives any and all notice requirements
and rights with respect to the registration of any securities pursuant to any
agreement, understanding or otherwise, including any registration rights
agreement or similar agreement to which the undersigned is a party or under
which the undersigned is entitled to any right or benefit, provided that such
waiver shall apply only to the Initial Public Offering and any other actions
taken by the Company in connection with the Initial Public Offering.
The undersigned hereby agrees that, to the extent that the terms of this
letter agreement conflict with or are in any way inconsistent with any
registration rights agreement or similar agreement to which the undersigned is
or may be a party or under which the undersigned is or may be entitled to any
right or benefit, this letter agreement supersedes such registration rights
agreement or similar agreement.
The undersigned understands that the Company and the Underwriters will
proceed with the Initial Public Offering in reliance on this letter agreement.
<PAGE>
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this letter agreement and that this
letter agreement has been duly authorized (if applicable), executed and
delivered by the undersigned and is a valid and binding agreement of the
undersigned. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any obligations of the
undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
This letter agreement shall lapse and become null and void if the Lock-Up
Period has not commenced on or before October 31, 2000.
Very truly yours,
_______________________________________
<PAGE>
EXHIBIT B
Persons Entitled to Registration Rights under the Rights Agreement
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2180 Associates Fund V, L.P.
Amram, Joseph (Yosi)
August Capital, L.P.
Bennion, Stephen R.
Bessec Ventures IV L.P.
Bessemer Venture Partners IV L.P.
Brock, James L.
CIBC WMC Inc.
Comdisco
Compagnie de Tayninh
Dekate, Amit
Draper Fisher Associates Fund IV, L.P.
Draper Fisher Partners IV, LLC
Financial Technology Ventures (Q), L.P.
Financial Technology Ventures, L.P.
Freedman, Daniel
Gaitonde Living Trust
Gaitonde, Girish
Hellman, Martin
Innovacom
Intel Corporation
Jeepers Inc.
Jensen, Edmund
Joshi, Milind
Jung, Mark
Kocher, Paul
Korea Technology Banking Corporation
Krishnan, Srinivasan
Loftesness, Scott
Lucent Venture Partners
Malpani, Dr. Ajay
Mitsui & Co., Ltd.
North American Trust Company TTEE FBO
Productivity Fund IV Advisors Fund, L.P.
Productivity Fund IV, L.P.
Schary, Nancy Trustee
Shasha, Itzhak & Natalie
Shaya, Anthony Phillip
Shaya, Dennis D.
Shaya, Greg Kent
Shaya, Shaun Michael
Sidhu, Inder Singh
<PAGE>
Smartfund SA
Taylor, Edwin H.
Thomson - CSF Ventures
Tolmi, L.L.C., A Delaware Limited Liability Company
Triant, Thanos
TZM Investment Fund, A California General Partnership
U.S. Venture Partners, V,L.P.
USVP V Entrepreneur Partners, L.P.
USVP V International, L.P.
VLG Investments 1998
Wad, Rohit
Wiley Trust, Frank E. and Peggy B.
