<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 19, 2000
NOVELLUS SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 000-17157 77-0024666
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
4000 North First Street, San Jose, CA 95134
(Address of Principal Executive Offices, Including Zip Code)
(408) 943-9700
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 5. Other Events.
On April 19, 2000, Novellus Systems, Inc. (the "Company") priced an
offering of 8,385,744 shares (the "Shares") of its Common Stock (plus
an over-allotment option of 661,635 shares) at $59.625 per share. Attached
as an exhibit to this Current Report on Form 8-K is the Underwriting
Agreement dated April 19, 2000 between the Company and Banc of America
Securities LLC, relating to the issuance and sale of the Shares.
Item 7. Exhibits
1.1 Underwriting Agreement
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
April 20, 2000
NOVELLUS SYSTEMS, INC.
By: /s/ ROBERT H. SMITH
---------------------------------
Robert H. Smith
Executive Vice President,
Finance and Administration, Chief
Financial Officer, Secretary
(Principal Financial Officer)
<PAGE> 3
EXHIBIT INDEX
EXHIBIT Description
- ------- -----------
1.1 Underwriting Agreement
<PAGE> 1
EXHIBIT 1.1
8,385,744 SHARES
NOVELLUS SYSTEMS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
DATED APRIL 19, 2000
<PAGE> 2
UNDERWRITING AGREEMENT
April 19, 2000
BANC OF AMERICA SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
INTRODUCTORY. Novellus Systems, Inc., a California corporation
(the "Company), proposes to issue and sell to Banc of America Securities LLC
(the "Underwriter") an aggregate of 8,385,744 shares (the "Firm Common Shares")
of its Common Stock, no par value ("Common Stock"). In addition, the Company has
granted to the Underwriter an option to purchase up to an additional 661,635
shares (the "Optional Common Shares") of Common Stock, as provided in Section 2.
The Firm Common Shares and, if and to the extent such option is exercised, the
Optional Common Shares are collectively called the "Common Shares".
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") two registration statements on Form S-3,
File Nos. 333-48037 and 333-34084, which contain a form of base prospectus to be
used in connection with the public offering and sale of the Common Shares. Such
registration statements, as amended, including the financial statements,
exhibits and schedules thereto, in the form in which each was declared effective
by the Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including all
documents incorporated or deemed to be incorporated by reference therein and any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A or Rule 434 under the Securities Act or the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder (collectively, the
"Exchange Act"), are collectively called the "Registration Statement." Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement", and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such base prospectus prepared pursuant to Rule 429 under the
Securities Act and the related prospectus supplement, in the form first
delivered by the Company to the Underwriter for use to confirm sales of the
Common Shares is called the "Prospectus." All references in this Agreement to
(i) the Registration Statement, the Rule 462(b) Registration Statement, a
preliminary prospectus or the Prospectus, or any amendments or supplements to
any of the foregoing, shall include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System
("EDGAR") and (ii) the Prospectus shall be deemed to include the "electronic
Prospectus" provided for use in connection with the offering of the Common
Shares as contemplated by Section 3(j) of this Agreement.
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" in
the Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and
1
<PAGE> 3
include the filing of any document under the Exchange Act which is or is deemed
to be incorporated by reference in the Registration Statement or the Prospectus,
as the case may be.
The Company hereby confirms its agreements with the Underwriter
as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to the
Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has
complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated or threatened by the Commission.
The Prospectus, as of its date, complied in all material respects
with the Securities Act and the version thereof filed, or to be filed,
by electronic transmission pursuant to EDGAR (except as may be permitted
by Regulation S-T under the Securities Act) was, or will be, as
applicable, identical to the copy thereof delivered to the Underwriter
for use in connection with the offer and sale of the Common Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement
and any post-effective amendment thereto, at the time it became
effective and at all subsequent times, complied and will comply in all
material respects with the Securities Act and did not and will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, as amended or
supplemented, as of its date and at all subsequent times, did not and
will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The representations and warranties set forth in the two
immediately preceding sentences do not apply to statements in or
omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus,
or any amendments or supplements thereto, made in reliance upon and in
conformity with information relating to the Underwriter furnished to the
Company in writing by the Underwriter expressly for use therein. There
are no contracts or other documents required to be described in the
Prospectus or to be filed as exhibits to the Registration Statement
which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriter. The Company has
delivered or shall deliver to the Underwriter one copy of the manually
signed Registration Statement and of each consent and certificate of
experts filed as a part thereof, and conformed copies of the
Registration Statement (without exhibits) and the Prospectus, as amended
or supplemented, in such quantities and at such places as the
Underwriter has reasonably requested.
(c) Distribution of Offering Material by the Company. The Company
has not distributed and will not distribute, prior to the later of the
Second Closing Date (as defined below) and the completion of the
Underwriter's distribution of the Common Shares, any offering material
in connection with the offering and sale of the Common Shares other than
the Prospectus or the Registration Statement.
2
<PAGE> 4
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Common Shares. The Common Shares to be
purchased by the Underwriter from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are
no persons with registration or other similar rights to have any equity
or debt securities registered for sale under the Registration Statement
or included in the offering contemplated by this Agreement, except for
such rights as have been duly waived.
(g) No Material Adverse Change. Except as otherwise disclosed in
the Prospectus, subsequent to the respective dates as of which
information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects,
whether or not arising from transactions in the ordinary course of
business, of the Company and its subsidiaries, considered as one entity
(any such change is called a "Material Adverse Change"); (ii) the
Company and its subsidiaries, considered as one entity, have not
incurred any material liability or obligation, indirect, direct or
contingent, not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of
business; and (iii) there has been no dividend or distribution of any
kind declared, paid or made by the Company or, except for dividends paid
to the Company or other subsidiaries, any of its subsidiaries on any
class of capital stock or repurchase or redemption by the Company or any
of its subsidiaries of any class of capital stock.
(h) Independent Accountants. Ernst & Young LLP (the
"Accountants"), who have expressed their opinion with respect to the
financial statements (which term as used in this Agreement includes the
related notes thereto) and supporting schedules filed with the
Commission by the Company and included (or incorporated by reference) in
the Registration Statement and the Prospectus, are independent public or
certified public accountants as required by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(i) Preparation of the Financial Statements. The financial
statements filed with the Commission by the Company and included (or
incorporated by reference) in the Registration Statement and the
Prospectus present fairly the consolidated financial position of the
Company and its subsidiaries as of and at the dates indicated and the
results of their operations and cash flows for the periods specified.
The supporting schedules filed with the Commission by the Company and
included (or incorporated by reference) in the Registration Statement
and the Prospectus present fairly the information required to be stated
therein. Such financial statements and supporting schedules have been
prepared in conformity with generally accepted accounting principles as
applied in the United States applied on a consistent basis throughout
the periods involved, except as may be expressly stated in the related
notes thereto. No other financial statements or supporting schedules are
required to be included (or incorporated by reference) in the
Registration Statement. The financial information included under the
caption "Selected
3
<PAGE> 5
Consolidated Financial Data" in the Company's 1999 Annual Report to
Shareholders, which information is incorporated by reference in the
Prospectus, fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in
the Registration Statement.
(j) Incorporation and Good Standing of the Company and Its
Subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation under the laws of
the jurisdiction of its incorporation and each of the Company and each
of its subsidiaries incorporated under the laws of one of the states of
the United States is in good standing under the laws of its state of
formation. Each of the Company and each of its subsidiaries has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and, in the
case of the Company, to enter into and perform its obligations under
this Agreement. Each of the Company and each subsidiary is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct
of business, except for such jurisdictions where the failure to so
qualify or to be in good standing would not, individually or in the
aggregate, result in a Material Adverse Change. All of the issued and
outstanding capital stock of each subsidiary has been duly authorized
and validly issued, is fully paid and nonassessable and is owned by the
Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance or claim. The
Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries
listed in Exhibit 21.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
(k) Capitalization and Other Capital Stock Matters. The
authorized, issued and outstanding capital stock of the Company consists
of 10,000,000 shares of preferred stock, none of which are outstanding,
and 240,000,000 shares of Common Stock, 121,164,891 of which were
outstanding on March 20, 2000. The Common Stock (including the Common
Shares) conforms in all material respects to the description thereof
contained in the Prospectus. All of the issued and outstanding shares of
Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable and have been issued in compliance with federal
and state securities laws. None of the outstanding shares of Common
Stock were issued in violation of any preemptive rights, rights of first
refusal or other similar rights to subscribe for or purchase securities
of the Company. There are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable
or exercisable for, any capital stock of the Company or any of its
subsidiaries other than those accurately described in the Prospectus.
The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted
thereunder, set forth in the Prospectus accurately and fairly describes
such plans, arrangements, options and rights.
(l) Stock Exchange Listing. The Common Stock (including the
Common Shares) is registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act") and is listed on the Nasdaq
National Market, and the Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act or delisting the Common Stock from the
Nasdaq National Market, nor has the Company received any notification
that the Commission or the National Association of Securities Dealers,
Inc. (together with its regulatory subsidiary, NASD Regulation, Inc.,
the "NASD") is contemplating terminating such registration or listing.
4
<PAGE> 6
(m) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement,
note, contract, franchise, lease or other instrument to which the
Company or any of its subsidiaries is a party or by which it or any of
them may be bound, or to which any of the property or assets of the
Company or any of its subsidiaries is subject (each, an "Existing
Instrument"), except for such Defaults as would not, individually or in
the aggregate, result in a Material Adverse Change. The Company's
execution, delivery and performance of this Agreement and consummation
of the transactions contemplated hereby and by the Prospectus (i) have
been duly authorized by all necessary corporate action and will not
result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary, (ii) will not conflict with or constitute
a breach of, or Default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, or require the consent
of any other party to, any Existing Instrument, except for such
conflicts, breaches, Defaults, liens, charges or encumbrances as would
not, individually or in the aggregate, result in a Material Adverse
Change and (iii) will not result in any violation of any law,
administrative regulation or administrative or court decree applicable
to the Company or any subsidiary. No consent, approval, authorization or
other order of, or registration or filing with, any court or other
governmental or regulatory authority or agency, is required for the
Company's execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby and by the
Prospectus, except such as have been obtained or made by the Company and
are in full force and effect under the Securities Act and applicable
state securities or blue sky laws.
(n) No Material Actions or Proceedings. Except as otherwise
disclosed in the Prospectus, there is no legal or governmental action,
suit or proceeding pending or, to the best of the Company's knowledge,
threatened (i) against or affecting the Company or any of its
subsidiaries, (ii) which has as the subject thereof any officer or
director of, or property owned or leased by, the Company or any of its
subsidiaries or (iii) relating to environmental or discrimination
matters, where in any such case (A) there is a reasonable possibility
that such action, suit or proceeding might be determined adversely to
the Company or such subsidiary and (B) any such action, suit or
proceeding, if so determined adversely, would reasonably be expected to
result in a Material Adverse Change or adversely affect the consummation
of the transactions contemplated by this Agreement. Except as otherwise
disclosed in the Prospectus, no material labor dispute with the
employees of the Company or any of its subsidiaries, or with the
employees of any principal supplier of the Company, exists or, to the
best of the Company's knowledge, is threatened or imminent.
(o) Intellectual Property Rights. Except as otherwise disclosed
in the Prospectus, the Company and its subsidiaries own or possess
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
businesses as now conducted; and the expected expiration of any of such
Intellectual Property Rights would not result in a Material Adverse
Change. Neither the Company nor any of its subsidiaries has received any
notice of infringement or conflict with asserted Intellectual Property
Rights of others, which infringement or conflict, if the subject of an
unfavorable decision, would result in a Material Adverse Change.
(p) All Necessary Permits, etc. Except as otherwise disclosed in
the Prospectus, (i) the Company and each subsidiary possess such valid
and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct their respective businesses, except for such
certificates, authorizations and permits as
5
<PAGE> 7
the failure of which to obtain, singly or in the aggregate, will not
result in a Material Adverse Change, and (ii) neither the Company nor
any subsidiary has received any notice of proceedings relating to the
revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, could
result in a Material Adverse Change.
(q) Title to Properties. Except as otherwise disclosed in the
Prospectus, the Company and each of its subsidiaries has good and
marketable title to all the properties and assets reflected as owned in
the financial statements referred to in Section 1(i) above (or elsewhere
in the Prospectus), in each case free and clear of any security
interests, mortgages, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value
of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or such subsidiary.
The real property, improvements, equipment and personal property held
under lease by the Company or any subsidiary are held under valid and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such
real property, improvements, equipment or personal property by the
Company or such subsidiary.
(r) Tax Law Compliance. The Company and its consolidated
subsidiaries have filed all necessary federal, state and foreign income
and franchise tax returns or have properly requested extensions thereof
and have paid all taxes required to be paid by any of them and, if due
and payable, any related or similar assessment, fine or penalty levied
against any of them except as may be being contested in good faith and
by appropriate proceedings. The Company has made adequate charges,
accruals and reserves in the applicable financial statements referred to
in Section 1(i) above in respect of all federal, state and foreign
income and franchise taxes for all periods as to which the tax liability
of the Company or any of its consolidated subsidiaries has not been
finally determined.
(s) Company Not an "Investment Company". The Company has been
advised of the rules and requirements under the Investment Company Act
of 1940, as amended (the "Investment Company Act"). The Company is not,
and after receipt of payment for the Common Shares will not be, an
"investment company" within the meaning of Investment Company Act and
will conduct its business in a manner so that it will not become subject
to the Investment Company Act.
(t) Insurance. Except as otherwise disclosed in the Prospectus,
each of the Company and each of its subsidiaries is insured by
recognized, financially sound and reputable institutions with policies
in such amounts and with such deductibles and covering such risks as are
generally deemed adequate and customary for their businesses including,
but not limited to, policies covering real and personal property owned
or leased by the Company and its subsidiaries against theft, damage,
destruction, acts of vandalism and earthquakes. The Company has no
reason to believe that it or any subsidiary will not be able (i) to
renew its existing insurance coverage as and when such policies expire
or (ii) to obtain comparable coverage from similar institutions as may
be necessary or appropriate to conduct its business as now conducted and
at a cost that would not result in a Material Adverse Change. Neither of
the Company nor any subsidiary has been denied any insurance coverage
which it has sought or for which it has applied.
(u) No Price Stabilization or Manipulation. The Company has not
taken and will not take, directly or indirectly, any action designed to
or that might be reasonably expected to cause
6
<PAGE> 8
or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Common Shares.
(v) Related Party Transactions. There are no business
relationships or related-party transactions involving the Company or any
subsidiary or any other person required to be described in the
Prospectus which have not been described as required.
(w) No Unlawful Contributions or Other Payments. Except as
otherwise disclosed in the Prospectus, neither the Company nor any of
its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(x) Company's Accounting System. The Company maintains a system
of accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(y) Exchange Act Compliance. The documents incorporated or deemed
to be incorporated by reference in the Prospectus, at the time they were
or hereafter are filed with the Commission, complied and will comply in
all material respects with the requirements of the Exchange Act, and,
when read together with the other information in the Prospectus, at the
time the Registration Statement and any amendments thereto become
effective and at the First Closing Date and the Second Closing Date, as
the case may be, will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the 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.
(z) Compliance with Environmental Laws. Except as otherwise
disclosed in the Prospectus or as would not, individually or in the
aggregate, result in a Material Adverse Change (i) neither the Company
nor any of its subsidiaries is in violation of any federal, state, local
or foreign law or regulation relating to pollution or protection of
human health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum and petroleum products (collectively, "Materials
of Environmental Concern"), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Materials of Environment Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or its
subsidiaries under applicable Environmental Laws, or noncompliance with
the terms and conditions thereof, nor has the Company or any of its
subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that
alleges that the Company or any of its subsidiaries is in violation of
any Environmental Law; (ii) there is no claim, action or cause of action
filed with a court or governmental authority, no investigation with
respect to which the Company has received written notice, and no written
notice by any person or entity alleging potential liability
7
<PAGE> 9
for investigatory costs, cleanup costs, governmental responses costs,
natural resources damages, property damages, personal injuries,
attorneys' fees or penalties arising out of, based on or resulting from
the presence, or release into the environment, of any Material of
Environmental Concern at any location owned, leased or operated by the
Company or any of its subsidiaries, now or in the past (collectively,
"Environmental Claims"), pending or, to the best of the Company's
knowledge, threatened against the Company or any of its subsidiaries or
any person or entity whose liability for any Environmental Claim the
Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law; and (iii) to the best of the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law.
(aa) Periodic Review of Costs of Environmental Compliance. From
time to time the Company monitors the effect of Environmental Laws on
the business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license
or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review and
the amount of its established reserves, the Company has reasonably
concluded that such associated costs and liabilities would not,
individually or in the aggregate, result in a Material Adverse Change.
(bb) ERISA Compliance. Except as otherwise disclosed in the
Prospectus, the Company and its subsidiaries and any "employee benefit
plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations
thereunder (collectively, "ERISA")) established or maintained by the
Company, its subsidiaries or their "ERISA Affiliates" (as defined below)
are in compliance in all material respects with ERISA. "ERISA Affiliate"
means, with respect to the Company or a subsidiary, any member of any
group of organizations described in Sections 414(b),(c),(m) or (o) of
the Internal Revenue Code of 1986, as amended, and the regulations and
published interpretations thereunder (the "Code") of which the Company
or such subsidiary is a member. No "reportable event" (as defined under
ERISA) has occurred or is reasonably expected to occur with respect to
any "employee benefit plan" established or maintained by the Company,
its subsidiaries or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its subsidiaries or any
of their ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfunded benefit liabilities" (as
defined under ERISA). Neither the Company, its subsidiaries nor any of
their ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each "employee benefit plan" established or
maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or
failure to act, which would cause the loss of such qualification.
(cc) Year 2000. There are no Year 2000 issues related to the
Company or its subsidiaries that (i) are of a character required to be
described or referred to in the Registration Statement or Prospectus by
the Securities Act which have not been accurately described in the
8
<PAGE> 10
Registration Statement or Prospectus or (ii) might reasonably be
expected to result in any Material Adverse Change or that might
materially affect their properties, assets or rights.
Any certificate signed by an officer of the Company and delivered
to the Underwriter or to counsel for the Underwriter shall be deemed to be a
representation and warranty by the Company to the Underwriter as to the matters
set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
(a) The Firm Common Shares. The Company agrees to issue and sell
the Firm Common Shares to the Underwriter upon the terms set forth in
this Agreement. On the basis of the representations, warranties and
agreements contained in this Agreement, and upon the terms but subject
to the conditions set forth in this Agreement, the Underwriter agrees to
purchase the Firm Common Shares from the Company. The purchase price per
Firm Common Share to be paid by the Underwriter to the Company shall be
$58.20 per share.
(b) The First Closing Date. Delivery of the Firm Common Shares to
be purchased by the Underwriter and payment therefor shall be made at
the offices of the Underwriter, 600 Montgomery Street, San Francisco,
California (or such other place as may be agreed to by the Company and
the Underwriter) at 6:00 a.m. San Francisco time, on Tuesday, April 25,
2000 (the time and date of such closing are called the "First Closing
Date").
(c) The Optional Common Shares; the Second Closing Date. In
addition, on the basis of the representations, warranties and agreements
herein contained, and upon the terms but subject to the conditions
herein set forth, the Company hereby grants an option to the Underwriter
to purchase up to an aggregate of 661,635 Optional Common Shares from
the Company at the purchase price per share to be paid by the
Underwriter for the Firm Common Shares. The option granted hereunder is
for use by the Underwriter solely in covering any over-allotments in
connection with the sale and distribution of the Firm Common Shares. The
option granted hereunder may be exercised at any time (but not more than
once) upon notice by the Underwriter to the Company, which notice may be
given at any time within 30 days from the date of this Agreement. Such
notice shall set forth (i) the aggregate number of Optional Common
Shares as to which the Underwriter is exercising the option, (ii) the
names and denominations in which the Optional Common Shares are to be
registered and (iii) the time, date and place at which such certificates
will be delivered (which time and date may be simultaneous with, but not
earlier than, the First Closing Date; and in such case the term "First
Closing Date" shall refer to the time and date of delivery of the Firm
Common Shares and the Optional Common Shares). Such time and date of
delivery, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Underwriter and shall not
be earlier than three nor later than five full business days after
delivery of such notice of exercise. If any Optional Common Shares are
to be purchased, (a) the Underwriter agrees to purchase the number of
Optional Common Shares specified in the notice of exercise and (b) the
Company agrees to sell such number of Optional Common Shares. The
Underwriter may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
(d) Public Offering of the Common Shares. The Underwriter hereby
advises the Company that the Underwriter intends to offer the Common
Shares for sale to the public, as described in the Prospectus, as soon
after this Agreement has been executed and the Registration Statement
has been declared effective as the Underwriter, in its sole judgment,
has determined is advisable and practicable.
9
<PAGE> 11
(e) Payment for the Common Shares. Payment for the Common Shares
shall be made at the First Closing Date (and, if applicable, at the
Second Closing Date) by wire transfer of immediately available funds to
the order of the Company.
(f) Delivery of the Common Shares. The Company shall deliver, or
cause to be delivered, a credit representing the Firm Common Shares and,
if applicable the Optional Common Shares, to an account or accounts at
The Depository Trust Company as designated by the Underwriter at the
First Closing Date and, if applicable, the Second Closing Date, against
the irrevocable release of a wire transfer of immediately available
funds for the amount of the purchase price therefor. Notwithstanding the
foregoing, to the extent the Underwriter so elects at least three full
business days prior to the First Closing Date or the Second Closing
Date, as the case may be, the Company shall deliver, or cause to be
delivered, to the Underwriter certificates for the Common Shares to be
sold to it on such Closing Date, against the irrevocable release of a
wire transfer of immediately available funds for the amount of the
purchase price therefor. In such case, the certificates for the Common
Shares shall be in definitive form and registered in such names and
denominations as the Underwriter shall have requested at least two full
business days prior to the First Closing Date (or the Second Closing
Date, as the case may be) and shall be made available for inspection on
the business day preceding the First Closing Date (or the Second Closing
Date, as the case may be) at a location in New York City or San
Francisco, California, as the Underwriter may designate.
(g) Time of the Essence. Time shall be of the essence, and
delivery at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
(h) Delivery of Prospectus to the Underwriter. Not later than
12:00 p.m. on the second business day following the date the Common
Shares are first released by the Underwriter for sale to the public, the
Company shall deliver or cause to be delivered, copies of the Prospectus
in such quantities and at such places as the Underwriter shall request.
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY.
The Company further covenants and agrees with each Underwriter as
follows:
(a) Underwriter's Review of Proposed Amendments and Supplements.
During such period beginning on the date hereof and ending on the later
of the First Closing Date or such date, as in the opinion of counsel for
the Underwriter, the Prospectus is no longer required by law to be
delivered in connection with sales by an Underwriter or dealer (the
"Prospectus Delivery Period"), prior to amending or supplementing the
Registration Statement (including any registration statement filed under
Rule 462(b) under the Securities Act) or the Prospectus (including any
amendment or supplement through incorporation by reference of any report
filed under the Exchange Act), the Company shall furnish to the
Underwriter for review a copy of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment
or supplement to which the Underwriter reasonably objects.
(b) Securities Act Compliance. After the date of this Agreement,
the Company shall promptly advise the Underwriter in writing (i) of the
receipt of any comments of, or requests for additional or supplemental
information from, the Commission, (ii) of the time and date of any
filing of any post-effective amendment to the Registration Statement or
any amendment or supplement to any preliminary prospectus or the
Prospectus, (iii) of the time and date that any post-effective amendment
to the Registration Statement becomes effective and (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration
10
<PAGE> 12
Statement or any post-effective amendment thereto or of any order
preventing or suspending the use of any preliminary prospectus or the
Prospectus, or of any proceedings to remove, suspend or terminate from
listing or quotation the Common Stock from any securities exchange upon
which it is listed for trading or included or designated for quotation,
or of the threatening or initiation of any proceedings for any of such
purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such
order at the earliest possible moment. Additionally, the Company agrees
that it shall comply with the provisions of Rules 424(b), 430A and 434,
as applicable, under the Securities Act and will use its reasonable
efforts to confirm that any filings made by the Company under such Rule
424(b) were received in a timely manner by the Commission.
(c) Amendments and Supplements to the Prospectus and Other
Securities Act Matters. If, during the Prospectus Delivery Period, any
event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if in the
opinion of the Underwriter or counsel for the Underwriter it is
otherwise necessary to amend or supplement the Prospectus to comply with
law, the Company agrees to promptly prepare (subject to Section 3(a)
hereof), file with the Commission and furnish at its own expense to the
Underwriter and to dealers, amendments or supplements to the Prospectus
so that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus, as
amended or supplemented, will comply with law.
(d) Copies of Any Amendments and Supplements to the Prospectus.
The Company agrees to furnish the Underwriter, without charge, during
the Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto (including any documents incorporated
or deemed incorporated by reference therein) as the Underwriter may
request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Underwriter and counsel for the Underwriter to qualify or register the
Common Shares for sale under (or obtain exemptions from the application
of) the state securities or blue sky laws or Canadian provincial
securities laws of those jurisdictions designated by the Underwriter,
shall comply with such laws and shall continue such qualifications,
registrations and exemptions in effect so long as required for the
distribution of the Common Shares. The Company shall not be required to
qualify as a foreign corporation or to take any action that would
subject it to general service of process in any such jurisdiction where
it is not presently qualified or where it would be subject to taxation
as a foreign corporation. The Company will advise the Underwriter
promptly of the suspension of the qualification or registration of (or
any such exemption relating to) the Common Shares for offering, sale or
trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of any
order suspending such qualification, registration or exemption, the
Company shall use its best efforts to obtain the withdrawal thereof at
the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds
from the sale of the Common Shares sold by it in the manner described
under the caption "Use of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at
its expense, a registrar and transfer agent for the Common Stock.
11
<PAGE> 13
(h) Earnings Statement. As soon as practicable, the Company will
make generally available to its security holders and to the Underwriter
an earnings statement (which need not be audited) covering the
twelve-month period ending on the final day of the quarter that includes
the one year anniversary of the "effective date of the Registration
Statement" (as defined in Rule 158(c) under the Securities Act), in
satisfaction of Section 11(c) of the Securities Act.
(i) Periodic Reporting Obligations. During the Prospectus
Delivery Period the Company shall file, on a timely basis, with the
Commission and the Nasdaq National Market all reports and documents
required to be filed under the Exchange Act.
(j) Company to Provide Copy of the Prospectus in Form That May Be
Downloaded from the Internet. Upon the Underwriter's request, the
Company shall cause to be prepared and delivered, at its expense, within
one business day from the effective date of this Agreement, to the
Underwriter an "electronic Prospectus" to be used by the Underwriter in
connection with the offering and sale of the Common Shares. As used
herein, the term "electronic Prospectus" means a form of Prospectus, and
any amendment or supplement thereto, that meets each of the following
conditions: (i) it shall be encoded in an electronic format,
satisfactory to the Underwriter, that may be posted on the Internet;
(ii) it shall disclose the same information as the paper Prospectus and
Prospectus filed pursuant to EDGAR, except to the extent that graphic
and image material cannot be disseminated electronically, in which case
such graphic and image material shall be replaced in the electronic
Prospectus with a fair and accurate narrative description or tabular
representation of such material, as appropriate; and (iii) it shall be
in or convertible into a paper format or an electronic format,
satisfactory to the Underwriter, that will allow investors to store and
have continuously ready access to the Prospectus at any future time,
without charge to investors (other than any fee charged for subscription
to the Internet as a whole and for on-line time). The Company hereby
confirms that it has included or will include in the Prospectus filed
pursuant to EDGAR or otherwise with the Commission an undertaking that,
upon receipt of a request by an investor or his or her Underwriter
within the Prospectus Delivery Period, the Company shall transmit or
cause to be transmitted promptly, without charge, a paper copy of the
Prospectus.
(k) Agreement Not to Offer or Sell Additional Securities. During
the period of 30 days following the date of the Prospectus, the Company
will not, without the prior written consent of the Underwriter (which
consent may be withheld at the sole discretion of the Underwriter),
directly or indirectly, sell, offer, contract or grant any option to
sell, pledge, transfer or establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise
dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act in respect of, any
shares of Common Stock, options or warrants to acquire shares of the
Common Stock or securities exchangeable or exercisable for or
convertible into shares of Common Stock (other than as contemplated by
this Agreement with respect to the Common Shares); provided, however,
that the Company may issue shares of its Common Stock or options to
purchase its Common Stock, or Common Stock upon exercise of options,
pursuant to any stock option, stock bonus or other stock plan or
arrangement described in the Prospectus, but only if the holders of such
shares, options, or shares issued upon exercise of such options, agree
in writing not to sell, offer, dispose of or otherwise transfer any such
shares or options during such 30 day period without the prior written
consent of the Underwriter (which consent may be withheld at the sole
discretion of the the Underwriter).
(l) Future Reports to the Underwriter. During the period of five
years hereafter the Company will furnish to the Underwriter at 600
Montgomery Street, San Francisco, CA 94111, Attention: Rex Sherry: (i)
as soon as practicable after the end of each fiscal year, copies of the
12
<PAGE> 14
Annual Report of the Company containing the balance sheet of the Company
as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public or certified public
accountants; (ii) as soon as practicable after the filing thereof,
copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by
the Company with the Commission, the NASD or any securities exchange;
and (iii) as soon as available, copies of any report or communication of
the Company mailed generally to holders of its capital stock.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Common Shares to the Underwriter, (iv) all fees and expenses of
the Company's counsel, independent public or certified public accountants and
other advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriter in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the state securities or blue sky laws or the provincial
securities laws of Canada, and, if requested by the Underwriter, preparing and
printing a "Blue Sky Survey" or memorandum, and any supplements thereto,
advising the Underwriter of such qualifications, registrations and exemptions,
(vii) the fees and expenses associated with including the Common Shares on the
Nasdaq National Market, and (viii) all other fees, costs and expenses referred
to in Item 14 of Part II of the Registration Statement. Except as provided in
this Section 4, Section 6, Section 8 and Section 9 hereof, the Underwriter shall
pay its own expenses, including the fees and disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITER. The
obligations of the Underwriter to purchase and pay for the Common Shares as
provided herein on the First Closing Date and, with respect to the Optional
Common Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Optional Common Shares, as of the Second Closing
Date as though then made, to the timely performance by the Company of its
covenants and other obligations hereunder, and to each of the following
additional conditions:
(a) Accountants' Comfort Letter. On the First Closing Date, the
Underwriter shall have received from the Accountants a letter dated as
of such date addressed to the Underwriter, in form and substance
satisfactory to the Underwriter, containing statements and information
of the type ordinarily included in accountant's "comfort letters" to
Underwriter, delivered according to Statement of Auditing Standards
("SAS") No. 72 (or any successor bulletin), with respect to the audited
and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus.
(b) Compliance with Registration Requirements; No Stop Order; No
Objection from NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date:
13
<PAGE> 15
(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under
the Securities Act) in the manner and within the time period
required by Rule 424(b) under the Securities Act; or the Company
shall have filed a post-effective amendment to the Registration
Statement containing the information required by such Rule 430A,
and such post-effective amendment shall have become effective;
(ii) no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement,
or any post-effective amendment to the Registration Statement,
shall be in effect and no proceedings for such purpose shall have
been instituted or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the
fairness and reasonableness of the underwriting terms and
arrangements.
(c) No Material Adverse Change. For the period from and after the
date of this Agreement and prior to the First Closing Date and, with
respect to the Optional Common Shares, the Second Closing Date, in the
judgment of the Underwriter there shall not have occurred any Material
Adverse Change.
(d) Opinion of Counsel for the Company. On each of the First
Closing Date and the Second Closing Date the Underwriter shall have
received the favorable opinion of Morrison and Forrester LLP, counsel
for the Company, dated as of such Closing Date, the form of which is
attached as Exhibit A.
(e) Opinion of Intellectual Property Counsel for the Company. On
each of the First Closing Date and the Second Closing Date the
Underwriter shall have received the favorable opinion of _____________,
intellectual property counsel for the Company, dated as of such Closing
Date, the form of which is attached as Exhibit B.
(f) Opinion of Counsel for the Underwriter. On each of the First
Closing Date and the Second Closing Date the Underwriter shall have
received the favorable opinion of O'Melveny & Myers LLP, counsel for the
Underwriter, dated as of such Closing Date, in form and substance
satisfactory to the Underwriter, with respect to the sufficiency of all
such corporate proceedings and other legal matters relating to this
Agreement and the transactions contemplated hereby as the Underwriter
may reasonably require (and the Underwriter shall have received such
additional number of conformed copies of such counsel's legal opinion as
the Underwriter may reasonably request for each of the several
Underwriter). The Company shall have furnished to such counsel such
documents as they may have reasonably requested for the purpose of
enabling them to pass upon such matters.
(g) Officers' Certificate. On each of the First Closing Date and
the Second Closing Date the Underwriter shall have received a written
certificate executed by the Chairman of the Board, Chief Executive
Officer or President of the Company and the Chief Financial Officer or
Chief Accounting Officer of the Company, dated as of such Closing Date,
to the effect set forth in subsections (b)(ii) of this Section 5, and
further to the effect that:
(i) for the period from and after the date of this
Agreement and prior to such Closing Date, there has not occurred
any Material Adverse Change;
14
<PAGE> 16
(ii) the representations, warranties and covenants of the
Company set forth in Section 1 of this Agreement are true and
correct with the same force and effect as though expressly made
on and as of such Closing Date; and
(iii) the Company has complied with all the agreements
hereunder and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to such Closing
Date.
(h) Bring-down Comfort Letter. On the Second Closing Date the
Underwriter shall have received from the Accountants a letter dated such
date, in form and substance satisfactory to the Underwriter, to the
effect that they reaffirm the statements made in the letter furnished by
them pursuant to subsection (a) of this Section 5, except that the
specified date referred to therein for the carrying out of procedures
shall be no more than five business days prior to the First Closing Date
or Second Closing Date, as the case may be.
(i) Lock-Up Agreement from Certain Securityholders of the
Company. On the First Closing Date, the Company shall have furnished to
the Underwriter an agreement in the form of Exhibit C hereto from each
executive officer of the Company and such agreements shall be in full
force and effect.
(j) Additional Documents. On or before each of the First Closing
Date and the Second Closing Date, the Underwriter and counsel for the
Underwriter shall have received such information, documents and opinions
as they may reasonably require for the purposes of enabling them to pass
upon the issuance and sale of the Common Shares as contemplated herein,
or in order to evidence the accuracy of any of the representations and
warranties, or the satisfaction of any of the conditions or agreements,
herein contained.
If any condition specified in this Section 5 is not satisfied
when and as required to be satisfied, this Agreement may be terminated by the
Underwriter by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Common Shares, at any time prior
to the Second Closing Date, which termination shall be without liability on the
part of any party to any other party, except that Section 4, Section 6, Section
8 and Section 9 shall at all times be effective and shall survive such
termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITER'S EXPENSES.
If this Agreement is terminated by the Underwriter pursuant to
Section 5, Section 7 or Section 11, or if the sale to the Underwriter of the
Common Shares on the First Closing Date is not consummated because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse the Underwriter upon demand for all out-of-pocket expenses that shall
have been reasonably incurred by the Underwriter in connection with the proposed
purchase and the offering and sale of the Common Shares, including but not
limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, facsimile and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of (i)
the execution of this Agreement by the parties hereto and (ii) notification by
the Commission to the Company and the Underwriter of the effectiveness of the
Registration Statement under the Securities Act.
15
<PAGE> 17
Prior to such effectiveness, this Agreement may be terminated by
any party by notice to each of the other parties hereto, and any such
termination shall be without liability on the part of (a) the Company to the
Underwriter, except that the Company shall be obligated to reimburse the
expenses of the Underwriter pursuant to Sections 4 and 6 hereof, or (b) the
Underwriter to the Company, except that the provisions of Section 8 and Section
9 shall at all times be effective and shall survive such termination.
SECTION 8. INDEMNIFICATION.
(a) Indemnification of the Underwriter. The Company agrees to
indemnify and hold harmless the Underwriter, its officers and employees,
and each person, if any, who controls the Underwriter within the meaning
of the Securities Act and the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which the Underwriter or
such controlling person may become subject, under the Securities Act,
the Exchange Act or other federal or state statutory law or regulation,
or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of
the Company), insofar as such loss, claim, damage, liability or expense
(or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, or any amendment
thereto, including any information deemed to be a part thereof pursuant
to Rule 430A or Rule 434 under the Securities Act, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading; or
(ii) upon any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iv)
in whole or in part upon any failure of the Company to perform its
obligations hereunder or under law; or (v) any act or failure to act or
any alleged act or failure to act by the Underwriter in connection with,
or relating in any manner to, the Common Stock or the offering
contemplated hereby, and which is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based
upon any matter covered by clause (i) or (ii) above, provided that the
Company shall not be liable under this clause (v) to the extent that a
court of competent jurisdiction shall have determined by a final
judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to
be taken by the Underwriter through its bad faith or willful misconduct;
and to reimburse the Underwriter and each such controlling person for
any and all expenses (including the fees and disbursements of counsel
chosen by the Underwriter) as such expenses are reasonably incurred by
the Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such
loss, claim, damage, liability, expense or action; provided, however,
that the foregoing indemnity agreement shall not apply to any loss,
claim, damage, liability or expense to the extent, but only to the
extent, that such loss, claim, damage, liability or expense arises out
of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity
with written information furnished to the Company by the Underwriter
expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto);
and provided, further, that with respect to any preliminary prospectus,
the foregoing indemnity agreement shall not inure to the benefit of the
Underwriter or any person controlling such Underwriter, if copies of the
Prospectus were timely delivered to the Underwriter pursuant to Section
2 and a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of the Underwriter to the person
asserting the loss, claim, damage, liability or expense, if required by
law so to have been delivered, at or prior to the
16
<PAGE> 18
written confirmation of the sale of the Common Shares to such person,
and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage, liability or
expense. The indemnity agreement set forth in this Section 8(a) shall be
in addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, Its Directors and Officers.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, each of its directors, each of its officers
who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer or
controlling person may become subject, under the Securities Act, the
Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation,
if such settlement is effected with the written consent of such
Underwriter), insofar as such loss, claim, damage, liability or expense
(or actions in respect thereof as contemplated below) arises out of or
is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or arises out
of or is based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, any
preliminary prospectus, the Prospectus (or any amendment or supplement
thereto), in reliance upon and in conformity with written information
furnished to the Company by the Underwriter expressly for use therein;
and to reimburse the Company, or any such director, officer or
controlling person for any legal and other expense reasonably incurred
by the Company, or any such director, officer or controlling person in
connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The
Company hereby acknowledges that the only information that the
Underwriter furnished to the Company expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) are the statements set forth in the
third and ninth paragraphs under the caption "Underwriting" in the
Prospectus; and the Underwriter confirms that such statements are
correct. The indemnity agreement set forth in this Section 8(b) shall be
in addition to any liabilities that each Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 8 of notice of
the commencement of any action, such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party under
this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying
party shall not relieve it from any liability hereunder to the extent it
is not materially prejudiced as a proximate result of such failure and
in any event shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. In case any such
action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the
extent that it shall elect, jointly with all other indemnifying parties
similarly notified, by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense
of any such action or that there may be legal defenses available to it
17
<PAGE> 19
and/or other indemnified parties which are different from or additional
to those available to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of
notice from the indemnifying party to such indemnified party of such
indemnifying party's election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for
any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof unless (i) the indemnified
party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more
than one separate counsel (together with local counsel), approved by the
indemnifying party (the Underwriter in the case of Section 8(b) and
Section 9), representing the indemnified parties who are parties to such
action) or (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, in
each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8
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 against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by
Section 8(c) hereof, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party
in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement, compromise or consent to the
entry of judgment in any pending or threatened action, suit or
proceeding in respect of which any indemnified party is or could have
been a party and indemnity was or could have been sought hereunder by
such indemnified party, unless such settlement, compromise or consent
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding.
SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 is for any
reason held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriter, on the
other hand, from the offering of the Common Shares pursuant to this Agreement or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Underwriter, on the other hand, in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Underwriter, on the other hand, in connection with the offering of the
Common Shares pursuant to this Agreement shall be deemed to be in the same
respective proportions as
18
<PAGE> 20
the total net proceeds from the offering of the Common Shares pursuant to this
Agreement (before deducting expenses) received by the Company, and the total
underwriting discount received by the Underwriter, in each case as set forth in
the Prospectus bear to the aggregate initial public offering price of the Common
Shares as set forth in the Prospectus cover. The relative fault of the Company,
on the one hand, and the Underwriter, on the other hand, shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact or any such inaccurate or alleged inaccurate representation or warranty
relates to information supplied by the Company, on the one hand, or the
Underwriter, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriter agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Underwriter 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 in this Section 9.
Notwithstanding the provisions of this Section 9, the Underwriter
shall not be required to contribute any amount in excess of the underwriting
commissions received by it in connection with the Common Shares underwritten by
it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9, each officer and
employee of the Underwriter and each person, if any, who controls the
Underwriter within the meaning of the Securities Act and the Exchange Act shall
have the same rights to contribution as the Underwriter, and each director of
the Company, each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company with the meaning of the
Securities Act and the Exchange Act shall have the same rights to contribution
as the Company.
SECTION 10. [RESERVED]
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date this Agreement may be terminated by the Underwriter by notice given to the
Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq National Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal, New York or
California authorities; (iii) there shall have occurred any outbreak or
escalation of national or international hostilities or any crisis or calamity,
or any change in the United States or international financial markets, or any
substantial change or development involving a prospective substantial change in
United States' or international political, financial or economic conditions, as
in the judgment of the Underwriter is material and adverse and makes it
impracticable to market the Common Shares in the manner and on the terms
described in the Prospectus or to enforce contracts for the sale of securities;
(iv) in the judgment of the Underwriter there shall have occurred any Material
Adverse Change; or (v) the
19
<PAGE> 21
Company shall have sustained a loss by strike, fire, flood, earthquake, accident
or other calamity of such character as in the judgment of the Underwriter may
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured. Any
termination pursuant to this Section 11 shall be without liability on the part
of (a) the Company to the Underwriter, except that the Company shall be
obligated to reimburse the expenses of the Underwriter pursuant to Sections 4
and 6 hereof, or (b) the Underwriter to the Company, except that the provisions
of Section 8 and Section 9 shall at all times be effective and shall survive
such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the Underwriter set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Underwriter or the
Company or any of their partners, officers or directors or any controlling
person, as the case may be, and will survive delivery of and payment for the
Common Shares sold hereunder and any termination of this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Underwriter:
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-913-5558
Attention: Richard A. Smith
with a copy to:
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 913-5553
Attention: Jeffrey R. Lapic, Esq.
with a copy to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111-3305
Facsimile: (415) 984-8701
Attention: Peter T. Healy, Esq.
If to the Company:
Novellus Systems, Inc.
3970 North First Street,
San Jose, California 95134
Facsimile: (408) 943-2277
Attention: Robert H. Smith,
20
<PAGE> 22
with a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
Facsimile: (650) 494-0792
Attention: William D. Sherman, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 8 and Section 9,
and in each case their respective successors, and no other person will have any
right or obligation hereunder. The term "successors" shall not include any
purchaser of the Common Shares as such from any of the Underwriter merely by
reason of such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 16. GOVERNING LAW PROVISIONS.
(a) Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH
STATE.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions
contemplated hereby ("Related Proceedings") may be instituted in the
federal courts of the United States of America located in the City and
County of San Francisco or the courts of the State of California in each
case located in the City and County of San Francisco (collectively, the
"Specified Courts"), and each party irrevocably submits to the exclusive
jurisdiction (except for proceedings instituted in regard to the
enforcement of a judgment of any such court (a "Related Judgment"), as
to which such jurisdiction is non-exclusive) of such courts in any such
suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be
effective service of process for any suit, action or other proceeding
brought in any such court. The parties irrevocably and unconditionally
waive any objection to the laying of venue of any suit, action or other
proceeding in the Specified Courts and irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such
suit, action or other proceeding brought in any such court has been
brought in an inconvenient forum.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or
21
<PAGE> 23
implied) may be waived unless waived in writing by each party whom the condition
is meant to benefit. The Section headings herein are for the convenience of the
parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a
sophisticated business person who was adequately represented by counsel during
negotiations regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
22
<PAGE> 24
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
NOVELLUS SYSTEMS, INC.
By:
----------------------------------
Robert H. Smith
Executive Vice President and
Chief Financial Officer
The foregoing Underwriting Agreement is hereby confirmed and
accepted by the Underwriter in San Francisco, California as of the date first
above written.
BANC OF AMERICA SECURITIES LLC
By:
------------------------------------
Rex Sherry
Managing Director
S-1
<PAGE> 25
EXHIBIT A
MATTERS TO BE COVERED IN THE OPINION OF
COUNSEL FOR THE COMPANY
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
California.
(ii) The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Prospectus and to enter into and perform its obligations under the
Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change.
(iv) Nippon Novellus Systems, KK has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
Japan, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus
and, to the best knowledge of such counsel, is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except for such jurisdictions where the failure to so qualify or to be in
good standing would not, individually or in the aggregate, result in a
Material Adverse Change.
(v) All of the issued and outstanding capital stock of Nippon
Novellus Systems, KK has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance or, to the best knowledge of such counsel, any
pending or threatened claim.
(vi) The authorized, issued and outstanding capital stock of the
Company (including the Common Stock) conform to the descriptions thereof
set forth or incorporated by reference in the Prospectus. All of the
outstanding shares of Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and, to the best of such
counsel's knowledge, have been issued in compliance with the registration
and qualification requirements of federal and state securities laws. The
form of certificate used to evidence the Common Stock is in due and
proper form and complies with all applicable requirements of the charter
and by-laws of the Company and the General Corporation Law of the State
of California.
(vii) No stockholder of the Company or any other person has any
preemptive right, right of first refusal or other similar right to
subscribe for or purchase securities of the Company arising (i) by
operation of the charter or by-laws of the Company or the General
Corporation Law of the State of California or (ii) to the best knowledge
of such counsel, otherwise.
(viii) The Underwriting Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except
A-1
<PAGE> 26
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles.
(ix) The Common Shares to be purchased by the Underwriter from
the Company have been duly authorized for issuance and sale pursuant to
the Underwriting Agreement and, when issued and delivered by the Company
pursuant to the Underwriting Agreement against payment of the
consideration set forth therein, will be validly issued, fully paid and
nonassessable.
(x) Each of the Registration Statement and the Rule 462(b)
Registration Statement, if any, has been declared effective by the
Commission under the Securities Act. To the best knowledge of such
counsel, no stop order suspending the effectiveness of either of the
Registration Statement or the Rule 462(b) Registration Statement, if any,
has been issued under the Securities Act and no proceedings for such
purpose have been instituted or are pending or are contemplated or
threatened by the Commission. Any required filing of the Prospectus and
any supplement thereto pursuant to Rule 424(b) under the Securities Act
has been made in the manner and within the time period required by such
Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus including any document
incorporated by reference therein, and each amendment or supplement to
the Registration Statement and the Prospectus including any document
incorporated by reference therein, as of their respective effective or
issue dates (other than the financial statements and supporting schedules
included or incorporated by reference therein or in exhibits to or
excluded from the Registration Statement, as to which no opinion need be
rendered) comply as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act.
(xii) The Common Shares have been included in the Nasdaq
National Market.
(xiii) Such counsel has reviewed the statements (i) in the
Prospectus under the caption "Description of Securities," (ii) in Item 15
(Indemnification of Directors and Officers) of the Registration
Statement, (iii) in the Prospectus under the caption "Risk Factors--Our
pending litigation and other potential litigation may harm our operating
results," and (iv) in the Annual Report on Form 10-K for the Year Ended
December 31, 1999 (the "Form 10-K") under the caption "Item 3. Legal
Proceeding." Insofar as such statements constitute matters of law,
summaries of legal matters, the Company's charter or by-law provisions,
documents or legal proceedings, or legal conclusions, (a) the statements
in (i) and (ii) above fairly present and summarize, in all material
respects, the matters referred to therein; and (b) nothing has come to
such counsel's attention which would lead them to believe that the
statements in (iii) and (iv) above do not also fairly present and
summarize, in all material respects, the matters referred to therein.
(xiv) To the best knowledge of such counsel, there are no legal
or governmental actions, suits or proceedings pending or threatened which
are required to be disclosed in the Registration Statement, other than
those disclosed (or incorporated by reference) therein.
(xv) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described
or referred to therein or filed or incorporated by reference as exhibits
thereto; and the descriptions thereof and references thereto are correct
in all material respects.
A-2
<PAGE> 27
(xvi) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance
of the Underwriting Agreement and consummation of the transactions
contemplated thereby and by the Prospectus, except as may be required
under the Securities Act and applicable state securities or blue sky
laws.
(xvii) The execution and delivery of the Underwriting Agreement by
the Company and the performance by the Company of its obligations
thereunder (other than performance by the Company of its obligations
under the indemnification section of the Underwriting Agreement, as to
which no opinion need be rendered) (i) have been duly authorized by all
necessary corporate action on the part of the Company; (ii) will not
result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary; (iii) will not constitute a breach of, or
Default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
of its subsidiaries pursuant to, (A) any of the Company's agreements
included (or incorporated by reference) as exhibits to the Form 10-K, or
(B) to the best knowledge of such counsel, any other material Existing
Instrument; or (iv) to the best knowledge of such counsel, will not
result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any
subsidiary.
(xviii) The Company is not, and after receipt of payment for the
Common Shares will not be, an "investment company" within the meaning of
Investment Company Act.
(xix) To the best knowledge of such counsel, there are no persons
with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or
included in the offering contemplated by the Underwriting Agreement,
except for such rights as have been duly waived.
(xx) To the best knowledge of such counsel, the Company is not in
violation of its charter or by-laws or any law, administrative regulation
or administrative or court decree applicable to the Company or is in
Default in the performance or observance of any obligation, agreement,
covenant or condition contained in any material Existing Instrument,
except in each such case for such violations or Defaults as would not,
individually or in the aggregate, result in a Material Adverse Change.
(xxi) To the best knowledge of such counsel, Nippon Novellus
Systems, KK is not in violation of its charter or by-laws or any law,
administrative regulation or administrative or court decree applicable
Nippon Novellus Systems, KK nor is it in default in the performance or
observance of any obligation, agreement, covenant or condition contained
in any material existing instrument, except in each such case for such
violations or defaults as would not, individually or in the aggregate,
result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether
or not arising from transactions in the ordinary course of business, of
the Company and its subsidiaries, considered as one entity.
In addition, such counsel shall state that they have participated
in conferences with officers of the Company and representatives of the
independent public or certified public accountants for the Company at
which the contents of the Registration Statement and the Prospectus, and
any supplements or amendments thereto, and related matters were discussed
and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus
(other than as specified above), and any supplements or amendments
thereto, on the basis of the foregoing, nothing has come to their
attention which would lead them to believe that
A-3
<PAGE> 28
either the Registration Statement (including the information incorporated
therein by reference), or any amendments thereto, at the time the
Registration Statement or such amendments became effective, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus (including the information
incorporated therein by reference), as of its date or at the First
Closing Date or the Second Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted 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 (it being
understood that such counsel need express no belief as to the financial
statements or schedules or other financial or statistical data derived
therefrom, included or incorporated by reference in the Registration
Statement or the Prospectus or any amendments or supplements thereto).
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates of responsible officers of
the Company and public officials.
A-4
<PAGE> 29
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF
INTELLECTUAL PROPERTY COUNSEL FOR THE COMPANY
Such counsel shall state that they are familiar with the
technology used by the Company in its business and the manner of its use thereof
and have read the Registration Statement and the Prospectus, including
particularly the portions of the Registration Statement and the Prospectus
referring to patents, trade secrets, trademarks, service marks or other
proprietary information or materials and:
(i) As to the statements (a) in the Prospectus under the captions
"Risk Factors--Because our intellectual property is critical to the
success of our business, our operating results would suffer if we are
unable to adequately protect our intellectual property" and (b) in the
Form 10-K under the caption "Item 1. Business--Patents And Proprietary
Rights" nothing has come to the attention of such counsel which caused
them to believe that the above-mentioned sections which are included or
incorporated by reference in the Registration Statement and any
amendment or supplement thereto made available and reviewed by such
counsel, at the time the Registration Statement became effective and at
all times subsequent thereto up to and on the Closing Date contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(ii) Such counsel knows of no material action, suit, claim or
proceeding relating to patents, patent rights or licenses, trademarks or
trademark rights, copyrights, collaborative research, licenses or
royalty arrangements or agreements or trade secrets, know-how or
proprietary techniques, including processes and substances, owned by or
affecting the business or operations of the Company which are pending or
threatened against the Company or any of its officers or directors.
(iii) The Company is listed in the records of the United States
Patent and Trademark Office as the holder of record of the patents
listed on a schedule to such opinion (the "Patents") and each of the
applications listed on a schedule to such opinion (the "Applications").
To the knowledge of such counsel, there are no claims of third parties
to any ownership interest or lien with respect to any of the Patents or
Applications. Such counsel is not aware of any material defect in form
in the preparation or filing of the Applications on behalf of the
Company. To the knowledge of such counsel, the Applications are being
pursued by the Company. To the knowledge of such counsel, the Company
owns as its sole property the Patents and pending Applications;
(iv) The Company is listed in the records of the appropriate
foreign offices as the sole holder of record of the foreign patents
listed on a schedule to such opinion (the "Foreign Patents") and each of
the applications listed on a schedule to such opinion (the "Foreign
Applications"). Such counsel knows of no claims of third parties to any
ownership interest or lien with respect to the Foreign Patents or
Foreign Applications. Such counsel is not aware of any material defect
of form in the preparation or filing of the Foreign Applications on
behalf of the Company. To the knowledge of such counsel, the Foreign
Applications are being pursued by the Company. To the knowledge of such
counsel, the Company owns as its sole property the Foreign Patents and
pending Foreign Applications; and
B-1
<PAGE> 30
(v) Such counsel knows of no reason why the Patents or Foreign
Patents are not valid as issued. Such counsel has no knowledge of any
reason why any patent to be issued as a result of any Application or
Foreign Application would not be valid or would not afford the Company
useful patent protection with respect thereto.
B-2
<PAGE> 31
EXHIBIT C
LOCK-UP AGREEMENT
April 19, 2000
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 94111
RE: Novellus Systems, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of Common Stock (the "Offering") for which you will act as the
Underwriter. The undersigned recognizes that the Offering will be of benefit to
the undersigned and will benefit the Company by, among other things, raising
additional capital for its operations. The undersigned acknowledges that you are
relying on the representations and agreements of the undersigned contained in
this letter in carrying out the Offering and in entering into underwriting
arrangements with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without you prior written consent (which consent may be
withheld in your sole discretion), directly or indirectly, sell, offer, contract
or grant any option to sell (including without limitation any short sale),
pledge, transfer, establish an open "put equivalent position" within the meaning
of Rule 16a-1(h) under the Securities Exchange Act of 1934, or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock, or securities exchangeable or exercisable for or convertible into shares
of Common Stock currently or hereafter owned either of record or beneficially
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended)
by the undersigned, or publicly announce the undersigned's intention to do any
of the foregoing, for a period commencing on the date hereof and continuing
through the close of trading on the date 30 days after the date of the
Prospectus. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock held by the undersigned except in
compliance with the foregoing restrictions.
C-1
<PAGE> 32
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal Underwriter, and assigns of the
undersigned.
------------------------------
Printed Name of Holder
By:
---------------------------
Signature
------------------------------
Printed Name of Person Signing
(and indicate capacity of
person signing if signing as
custodian, trustee, or on
behalf of an entity)
C-2
