EXHIBIT 1.1
CAPSTONE TURBINE CORPORATION
7,000,000 SHARES
COMMON STOCK
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UNDERWRITING AGREEMENT
November , 2000
Goldman, Sachs & Co.,
Credit Suisse First Boston Corporation,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Morgan Stanley & Co. Incorporated,
As representatives of the several Underwriters
named in Schedule I hereto,
Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Capstone Turbine Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 1,000,000 shares and, at the election of the Underwriters, up to 150,000
additional shares of common stock, par value $0.001 per share (the "Stock") of
the Company and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 6,000,000 shares and, at the
election of the Underwriters, up to 900,000 additional shares of Stock. The
aggregate of 7,000,000 shares to be sold by the Company and the Selling
Stockholders is herein called the "Firm Shares" and the aggregate of 1,050,000
additional shares to be sold by the Company and the Selling Stockholders is
herein called the "Optional Shares". The Firm Shares and the Optional Shares
that the Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-48524)
(the "Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange
Commission (the "Commission"); the Initial Registration Statement and
any post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each of
the other Underwriters, have been declared effective by the Commission
in such form; other than a registration statement, if any, increasing
the size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other document with
respect to the Initial Registration Statement has heretofore been filed
with the Commission; and no stop order suspending the effectiveness of
the Initial Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, has been issued and
no proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to
be part of the Initial Registration Statement at the time it was
declared effective, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective,
are hereinafter collectively called the "Registration Statement"; and
such final prospectus, in the form first filed pursuant to Rule 424(b)
under the Act, is hereinafter called the "Prospectus");
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did 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 statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply
to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein or by a Selling
Stockholder expressly for use in the preparation of the answers therein
to Items 7 and 11(m) of Form S-1;
(iii) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto and as of the
applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein or by a Selling Stockholder
expressly for use in the preparation of the answers therein to Items 7
and 11(m) of Form S-1;
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(iv) The Company has not sustained since the date of the latest
audited financial statements included in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than
as set forth or contemplated in the Prospectus or would not be
reasonably likely to have a material adverse effect or prospective
material adverse effect on the business, financial position,
stockholders' equity or results of operations of the Company (a
"Material Adverse Effect"); and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock (other than exercises
of warrants and options that are granted as of the date hereof and are
set forth in the Prospectus) or long-term debt of the Company or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company, otherwise than as set forth or contemplated
in the Prospectus;
(v) The Company has good and marketable title in fee simple to
all real property and good and marketable title to all personal property
owned by it, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company;
and any real property and buildings held under lease by the Company are
held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company;
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction, except where the failure to be so qualified as a foreign
corporation would not have a Material Adverse Effect;
(vii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description of the Stock contained
in the Prospectus;
(viii)The unissued Shares to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein,
will be duly and validly issued and fully paid and non-assessable and
will conform to the description of the Stock contained in the
Prospectus;
(ix) The issue and sale of the Shares to be sold by the Company
and the compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
to which the Company is a party or by which the Company is bound or to
which any of the property or assets of the Company is subject, nor will
such action result in any violation of the provisions of the Certificate
of
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Incorporation or By-laws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the issue
and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(x) The Company is not in violation of its Certificate of
Incorporation or By-laws or in default in the performance or observance
of any material obligation, agreement, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or
any of its properties may be bound;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair in all material respects;
(xii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company is a
party or of which any property of the Company is the subject which, if
determined adversely to the Company, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(xiii)Other than as set forth in the Prospectus, the Company
owns or possesses, or can acquire on reasonable terms, adequate patents,
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now operated
by it, and, except as would not have a Material Adverse Effect, the
Company has not received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect
to any Intellectual Property or of any facts or circumstances which
would render any Intellectual Property invalid or inadequate to protect
the interest of the Company therein, and which infringement, conflict,
invalidity, individually, or in the aggregate, is subject to any
unfavorable decision, ruling or finding;
(xiv) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company", as
such term is defined in the Investment Company Act of 1940, as amended
(the "Investment Company Act"); and
(xv) Deloitte & Touche LLP and Ernst & Young LLP, who have
certified certain financial statements of the Company, are independent
public accountants as required by the Act and the rules and regulations
of the Commission thereunder.
(b) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement and the Power-of-Attorney and
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Custody Agreement hereinafter referred to, and for the sale and delivery
of the Shares to be sold by such Selling Stockholder hereunder, have
been obtained; and such Selling Stockholder has full right, power and
authority to enter into this Agreement, the Power-of-Attorney and
Custody Agreement and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling Stockholder
with all of the provisions of this Agreement, the Power- of-Attorney and
Custody Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder is bound or to which any of
the property or assets of such Selling Stockholder is subject, nor will
such action result in any violation of the provisions of the Certificate
of Incorporation or By-laws of such Selling Stockholder if such Selling
Stockholder is a corporation, the constitutive documents of such Selling
Stockholder if such Selling Stockholder is an entity other than a
corporation or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to
each Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, good and valid title to the Shares to be sold by
such Selling Stockholder hereunder, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such Shares and
payment therefor pursuant hereto, good and valid title to such Shares,
free and clear of all liens, encumbrances, equities or claims, will pass
to the several Underwriters;
(iv) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option plans existing
on, or upon the conversion or exchange of convertible or exchangeable
securities outstanding as of, the date of this Agreement), without your
prior written consent;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement and
the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects to
the requirements of the Act and the rules and regulations of the
Commission thereunder and
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will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading;
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(viii)Certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder have been placed
in custody under a Custody Agreement and Irrevocable Power of Attorney,
in the form heretofore furnished to you (the "Power-of-Attorney and
Custody Agreement"), duly executed and delivered by such Selling
Stockholder to ChaseMellon Shareholder Services LLC, as custodian (the
"Custodian") and appointing the persons indicated in Schedule II hereto,
and each of them, as such Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this
Agreement on behalf of such Selling Stockholder, to determine the
purchase price to be paid by the Underwriters to the Selling
Stockholders as provided in Section 2 hereof, to authorize the delivery
of the Shares to be sold by such Selling Stockholder hereunder and
otherwise to act on behalf of such Selling Stockholder in connection
with the transactions contemplated by this Agreement and the
Power-of-Attorney and Custody Agreement; and
(ix) The Shares represented by the certificates held in custody
for such Selling Stockholder under the Power-of-Attorney and Custody
Agreement are subject to the interests of the Underwriters hereunder;
the arrangements made by such Selling Stockholder for such custody, and
the appointment by such Selling Stockholder of the Attorneys-in-Fact by
the Power-of-Attorney and Custody Agreement, are to that extent
irrevocable; the obligations of the Selling Stockholders hereunder shall
not be terminated by operation of law, whether by the death or
incapacity of any individual Selling Stockholder or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee
or the termination of such estate or trust, or in the case of a
partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event; if any individual
Selling Stockholder or any such executor or trustee should die or become
incapacitated, or if any such estate or trust should be terminated, or
if any such partnership or corporation should be dissolved, or if any
other such event should occur, before the delivery of the Shares
hereunder, certificates representing the Shares shall be delivered by or
on behalf of the Selling Stockholders in accordance with the terms and
conditions of this Agreement and of the Power-of-Attorney and Custody
Agreements; and actions taken by the Attorneys-in-Fact pursuant to the
Power-of-Attorney and Custody Agreements shall be as valid as if such
death, incapacity, termination, dissolution or other event had not
occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $ , the number of Firm Shares (to be adjusted
by you so as to eliminate fractional shares) determined by multiplying the
aggregate number of Shares to be sold by the Company and each of the Selling
Stockholders as set forth opposite their
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respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from the Company and all of the Selling Stockholders
hereunder and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided below, the Company
and each of the Selling Stockholders agree, severally and not jointly, to issue
and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and each of the Selling
Stockholders, at the purchase price per share set forth in clause (a) of this
Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares by a
fraction, the numerator of which is the maximum number of Optional Shares which
such Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company and the Selling Stockholders, as and to the extent indicated
in Schedule II hereto, hereby grant, severally and not jointly, to the
Underwriters the right to purchase at their election up to 1,050,000 Optional
Shares, at the purchase price per share set forth in the paragraph above, for
the sole purpose of covering sales of shares in excess of the number of Firm
Shares. Any such election to purchase Optional Shares shall be made in
proportion to the maximum number of Optional Shares to be sold by the Company
and each Selling Stockholder as set forth in Schedule II hereto. Any such
election to purchase Optional Shares may be exercised only by written notice
from Goldman, Sachs & Co. to the Company, given within a period of 30 calendar
days after the date of this Agreement, setting forth the aggregate number of
Optional Shares to be purchased and the date on which such Optional Shares are
to be delivered, as determined by you but in no event earlier than the First
Time of Delivery (as defined in Section 4 hereof) or, unless you and the Company
and the Attorneys-in-Fact otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Custodian shall be delivered by or on behalf of
the Company and the Custodian to Goldman, Sachs & Co., through the facilities of
The Depository Trust Company ("DTC"), for the account of such Underwriter,
against payment by or on behalf of such Underwriter of the purchase price
therefor by wire transfer of Federal (same-day) funds to the accounts specified
by the Company and the Custodian, as their interests may appear, to Goldman,
Sachs & Co. at least forty-eight hours in advance. The Company will cause the
certificates representing the Shares to be made available for checking and
packaging at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City time, on November
, 2000 or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New
York City time, on the date specified by Goldman, Sachs & Co. in the written
notice given by Goldman, Sachs & Co. of the Underwriters'
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election to purchase such Optional Shares, or such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the cross
receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(l) hereof, will be delivered at the offices
of Sullivan & Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at 2:00
p.m., New York City time, on the New York Business Day next preceding such Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you with copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or
of any request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional information;
and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use its
best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, to furnish the Underwriters with copies of the Prospectus in New
York City in such quantities as you may reasonably request,
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and, if the delivery of a prospectus is required at any time prior to
the expiration of nine months after the time of issue of the Prospectus
in connection with the offering or sale of the Shares and if at such
time any event shall have occurred as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to
amend or supplement the Prospectus in order to comply with the Act, to
notify you and upon your request to prepare and furnish without charge
to each Underwriter and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended Prospectus or
a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter, to
prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company (which need
not be audited) complying with Section 11(a) of the Act and the rules
and regulations of the Commission thereunder (including, at the option
of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock and director option
plans or stock purchase plans and issuances to employees in connection
with certain intellectual property matters existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior
written consent;
(f) To furnish to its stockholders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the
Company certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), to make available to its
stockholders consolidated summary financial information of the Company
for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or
any national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a
consolidated basis to
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the extent the accounts of the Company are consolidated in reports
furnished to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on
the National Association of Securities Dealers Automated Quotations
National Market System ("NASDAQ");
(j) To file with the Commission such information on Form 10-Q or
Form 10-K as may be required by Rule 463 under the Act;
(k) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the
date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act; and
(l) Upon request of any Underwriter, to furnish, or cause to be
furnished, to such Underwriter an electronic version of the Company's
trademarks, servicemarks and corporate logo for use on the website, if
any, operated by such Underwriter for the purpose of facilitating the
on-line offering of the Shares (the "License"); provided, however, that
the License shall be used solely for the purpose described above, is
granted without any fee and may not be assigned or transferred.
6. The Company and each of the Selling Stockholders covenant and agree
with one another and with the several Underwriters that (a) the Company will pay
or cause to be paid the following: (i) the fees, disbursements and expenses of
the Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey, which fees of counsel shall not exceed $15,000; (iv) all fees
and expenses in connection with listing the Shares on the NASDAQ; (v) the filing
fees incident to, and the fees and disbursements of counsel for the Underwriters
in connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares, which fees of
counsel shall not exceed $15,000; (vi) the cost of preparing stock certificates;
(vii) the cost and charges of any transfer agent or registrar; and (viii) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section; and
(b) such Selling Stockholder will pay or cause to be paid all costs and expenses
incident to the performance of such Selling Stockholder's obligations hereunder
which are not otherwise specifically provided for in this Section, including (i)
any fees and expenses of counsel for such Selling Stockholder, (ii) such Selling
Stockholder's pro rata share of the fees and expenses of the Attorneys-in-Fact
and the Custodian, and (iii) all expenses and taxes incident to the sale and
delivery of the Shares to be sold by such Selling Stockholder to the
Underwriters hereunder. In connection
10
with clause (b) (iii), Goldman, Sachs & Co. agrees to pay New York State stock
transfer tax, and the Selling Stockholder agrees to reimburse Goldman, Sachs &
Co. for associated carrying costs if such tax payment is not rebated on the day
of payment and for any portion of such tax payment not rebated. It is
understood, however, that the Company shall bear, and the Selling Stockholders
shall not be required to pay or to reimburse the Company for, the cost of any
other matters not directly relating to the sale and purchase of the Shares
pursuant to this Agreement, and that, except as provided in this Section, and
Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel, stock transfer taxes on resale of
any of the Shares by them, and any advertising expenses connected with any
offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become
effective by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by
the Commission; and all requests for additional information on the part
of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall
have furnished to you such written opinion or opinions, dated such Time
of Delivery, with respect to the incorporation of the Company, the
validity of the Shares, the Registration Statement, the Prospectus and
such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Latham & Watkins, counsel for the Company, shall have
furnished to you their written opinion, dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing under the laws of the State of
Delaware, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable. The Shares to be
issued and sold by the Company pursuant to this Agreement have
been duly authorized and, when issued to and paid for by you and
the other Underwriters in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable
and, to the best of our knowledge, free of preemptive rights;
11
(iii) Based solely on certificates from public officials, we
confirm that the Company is qualified to do business in
California;
(iv) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a
party;
(v) This Agreement has been duly authorized, executed and
delivered by the Company;
(vi) The issuance and sale of the Shares by the Company will
not result in any violation by the Company of its Certificate of
Incorporation or By-laws or any federal or Delaware or
California statute, rule or regulation known to such counsel to
be applicable to the Company (other than federal or state
securities laws, which are specifically addressed elsewhere in
such opinion) or in the breach of or default under any agreement
identified on Schedule III hereto;
(vii) No consent, approval, authorization or order of, or
filing with, any federal, Delaware or California court or
governmental agency or body is required for the consummation of
the issuance and sale of the Shares by the Company pursuant to
this Agreement, except such as have been obtained under the Act,
and such as may be required under state securities laws in
connection with the purchase and distribution of the Shares by
the Underwriters;
(viii) The statements set forth in the Prospectus under the
caption "Description of Capital Stock" and under the caption
"Underwriting", insofar as such statements constitute a summary
of legal matters and documents referred to therein, are an
accurate summary in all material respects;
(ix) The Company is not an "investment company", as such
term is defined in the Investment Company Act; and
(x) The Registration Statement and the Prospectus comply as
to form in all material respects with the requirements for
registration statements on Form S-1 under the Act and the rules
and regulations of the Commission thereunder; it being
understood, however, that such counsel expresses no opinion with
respect to the financial statements, schedules or other
financial data included in, or omitted from, the Registration
Statement or the Prospectus. In passing upon the compliance as
to form of the Registration Statement and the Prospectus, we
have assumed that the statements made therein are correct and
complete.
Such counsel shall state that, in addition, such counsel
has participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants for the Company
and representatives of the Underwriters, at which the contents of the
Registration Statement and the Prospectus 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 and the Prospectus and has not made any
independent check or verification thereof, during the course of such
participation, no facts came to such counsel's attention that caused such
counsel to believe that the Registration Statement, at the time it 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, as of its date or as
of the Closing Date,
12
contained an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; it being understood that such
counsel expresses no belief with respect to the financial statements, schedules
and other financial data included in, or omitted from, the Registration
Statement or the Prospectus;
(d) Latham & Watkins, shall have furnished to you their written
opinion with respect to Dr. Ake Almgren, Jeffrey Watts and Benjamin
Rosen, to the extent that each is a Selling Stockholder, dated such Time
of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Power-of-Attorney and Custody Agreement constitutes
a legally valid and binding obligation of such Selling
Stockholder, enforceable against such Selling Stockholder in
accordance with its terms, and this Agreement has been duly
executed and delivered by each Attorney-in-Fact under the
Power-of-Attorney and Custody Agreement on behalf of such
Selling Stockholder. In rendering their opinion in the foregoing
sentence, Latham & Watkins shall be entitled to assume that the
Power-of-Attorney and Custody Agreement and this Agreement do
not violate any law, rule or regulation applicable to such
Selling Stockholder, and do not require any consent, approval or
authorization to be obtained or filing, registration or
declaration to be made by or on behalf of such Selling
Stockholder which has not been duly obtained or made; and
(ii) Upon the (A) payment for the Shares listed on Schedule
II of this Agreement in accordance with the terms of this
Agreement, (B) physical delivery of the Shares to ChaseMellon
Shareholder Services LLC (in its capacity as transfer agent, the
"Transfer Agent") with the stock powers duly endorsed to the
Underwriters by an effective endorsement, (C) physical delivery
of the certificates for Shares, registered in the names of DTC
to DTC by the Transfer Agent in the State of New York and (D)
registration by book-entry by the Transfer Agent of the credit
to each Underwriters' securities accounts with DTC of such
Shares purchased by such Underwriter in the records of DTC, then
the Underwriters will become the "entitlement holders" (as
defined in Section 8-102(a)(7) of the New York UCC) of the
Shares, free of any "adverse claims" (as defined in Section
8-102(a)(1) of the New York UCC). In rendering their opinion in
the foregoing sentence, Latham & Watkins shall be entitled to
assume that the Underwriters do not have any notice of any
adverse claim to such Shares and the representations of the
Selling Stockholder as to their ownership of Shares in this
Agreement are correct;
(e) Latham & Watkins, shall have furnished to you their written
opinion with respect to each of the Selling Stockholders, other than
those Selling Stockholders referred to in Section 7(d) hereof, dated
such Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The Power-of-Attorney and Custody Agreement constitutes
a legally valid and binding obligation of such Selling
Stockholder, enforceable against such Selling Stockholder in
accordance with its terms, and this Agreement has been duly
executed and delivered by each Attorney-in-Fact under the
Power-of-Attorney and Custody Agreement on behalf of such
Selling Stockholder. In rendering their opinion in the foregoing
sentence, Latham & Watkins shall be entitled to assume that (A)
each Selling Stockholder has the capacity, power and authority,
as applicable, to execute, deliver and perform the
Power-of-Attorney and Custody Agreement and this Agreement, (B)
each Selling Stockholder, as applicable, has duly authorized the
execution, delivery and
13
performance of the Power-of-Attorney and Custody Agreement, and
this Agreement, (C) each Selling Stockholder has duly executed
and delivered the Power-of-Attorney and Custody Agreement, and
(D) such execution, delivery and performance of the
Power-of-Attorney and Custody Agreement and this Agreement do
not violate any law, rule or regulation applicable to such
Selling Stockholder, and do not require any consent, approval or
authorization to be obtained or filing, registration or
declaration to be made by or on behalf of such Selling
Stockholder which has not been duly obtained or made; and
(ii) Upon the (A) payment for the Shares listed on Schedule
II of this Agreement in accordance with the terms of this
Agreement, (B) physical delivery of the Shares to the Transfer
Agent with the stock powers duly endorsed to the Underwriters by
an effective endorsement, (C) physical delivery of the
certificates for such Shares, registered in the names of DTC to
DTC by the Transfer Agent in the State of New York and (D)
registration by book-entry by the Transfer Agent of the credit
to each Underwriters' securities accounts with DTC of such
Shares purchased by such Underwriter in the records of DTC, then
the Underwriters will become the "entitlement holders" (as
defined in Section 8-102(a)(7) of the New York UCC) of the
Shares, free of any "adverse claims" (as defined in Section
8-102(a)(1) of the New York UCC). In rendering their opinion in
the foregoing sentence, Latham & Watkins shall be entitled to
assume that the Underwriters do not have any notice of any
adverse claim to such Shares and the representations of the
Selling Stockholder as to their ownership of Shares in this
Agreement, are correct;
(f) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Deloitte & Touche LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in Annex
I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft
of the form of letter to be delivered on the effective date of any
post-effective amendment to the Registration Statement and as of each
Time of Delivery is attached as Annex I(b) hereto);
(g)(i) The Company shall not have sustained since the date of
the latest audited financial statements included in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than
as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital stock or long-term
debt of the Company or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company, otherwise than as set forth or contemplated in the Prospectus,
the effect of which, in any such case described in clause (i) or (ii),
is in the judgment of the Representatives so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering
or the delivery of the Shares being delivered at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus;
(h) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading
in securities generally on the New York Stock Exchange or on NASDAQ;
(ii) a suspension or material limitation in trading in the Company's
14
securities on NASDAQ; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency
or war, if the effect of any such event specified in this clause (iv) in
the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(i) The Shares to be sold at such Time of Delivery shall have
been duly listed for quotation on NASDAQ;
(j) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from the selling stockholders specified
by the Underwriters, substantially to the effect set forth in Subsection
1(b)(iv) hereof in form and substance satisfactory to you;
(k) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
(l) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery
certificates of officers of the Company and of the Selling Stockholders,
respectively, satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Selling
Stockholders, respectively, herein at and as of such Time of Delivery,
as to the performance by the Company and the Selling Stockholders of all
of their respective obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a)
and (g) of this Section; and
(m) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Ernst & Young LLP shall have furnished to you a
letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in Annex
II hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex II(a) hereto and a
draft of the form of letter to be delivered on the effective date of any
post-effective amendment to the Registration Statement and as of each
Time of Delivery is attached as Annex II(b) hereto).
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are 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, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the
15
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each of the Selling Stockholders will indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are 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 any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that such Selling
Stockholder shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs &
Co. expressly for use therein; provided, further, that the liability of a
Selling Stockholder pursuant to this subsection 8(b) shall not exceed the amount
of net proceeds received by such Selling Stockholder from the sale of its Shares
including any Optional Shares pursuant to this Agreement.
(c) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities to
which the Company or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are 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 any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
16
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, 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 which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each party that would have
been required to pay such indemnity shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other from the offering
of the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (d) above, then each party that
would have been required to pay such indemnity shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Selling Stockholders on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Stockholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just
17
and equitable if contributions pursuant to this subsection (e) were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission and no Selling Stockholder shall be required to contribute any amount
in excess of the amount of net proceeds received by such Selling Stockholder
from the sale of its Shares including any Optional Shares pursuant to this
Agreement. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under
this Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company or any Selling Stockholder within the meaning of
the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not
18
exceed one-eleventh of the aggregate number of all the Shares to be purchased at
such Time of Delivery, then the Company and the Selling Stockholders shall have
the right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company and the Selling Stockholder to sell
the Optional Shares) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or the Selling Stockholders,
except for the expenses to be borne by the Company and the Selling Stockholders
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Stockholders shall then be under no further liability to any Underwriter in
respect of the Shares not so delivered except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
19
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(d) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Stockholders by you on request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and each of the Representatives plus one
for each counsel and the Custodian, if any counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this letter and
such acceptance hereof shall constitute a binding agreement among each of the
Underwriters, the Company and each of the Selling Stockholders. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters,
the form of which shall be submitted to the Company and the Selling Stockholders
for examination, upon request, but without warranty on your part as to the
authority of the signers thereof.
20
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power-of-Attorney and Custody Agreement which authorizes such
Attorney-in-Fact to take such action.
Very truly yours,
Capstone Turbine Corporation
By:
---------------------------------------------
Name:
Title:
The Selling Stockholders named in Schedule
II
By:
---------------------------------------------
Name: Dr. Ake Almgren
Title: President and Chief Executive Officer
As Attorney-in-Fact acting on behalf of each
of the Selling Stockholders named in
Schedule II to this Agreement.
Accepted as of the date
hereof at November___, 2000
Goldman, Sachs & Co. By:
-------------------------------------------
Credit Suisse First Boston
Corporation Name: Jeffrey Watts
Title: Senior Vice President, Finance &
Merrill Lynch, Pierce, Administration, Chief Financial Officer
Fenner & Smith Incorporated and Secretary
As Attorney-in-Fact acting on behalf of each
Morgan Stanley & Co. of the Selling Stockholders named in
Incorporated Schedule II to this Agreement.
By
-------------------------
(Goldman, Sachs & Co.)
On behalf of each of
the Underwriters
21
SCHEDULE I
Number of
Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- --------------
Goldman, Sachs & Co.....................................
Credit Suisse First Boston Corporation..................
Merrill Lynch, Pierce, Fenner & Smith Incorporated......
Morgan Stanley & Co. Incorporated....................... ---------------- -----------------
Total................................................... 7,000,000 1,050,000
================ =================
22
Schedule II
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares to Maximum Option
be Sold Exercise
--------------- ------------------
THE COMPANY .............................................. 1,000,000 150,000
THE SELLING STOCKHOLDER(s): .............................. 6,000,000 900,000
B.J. Alder ............................................... 27 4
Jennifer Alder ........................................... 109 16
Dr. Ake Almgren .......................................... -- 10,000
Alliant Energy Resources, Inc. ........................... 50,533 7,412
Awatea Holdings Limited (Fletcher Challenge) ............. 1,094,638 160,546
Daniel Bakholdin ......................................... 115 16
Clara Martin Beach ....................................... 27 4
The Beacon Group Energy Investment Fund II LP. ........... 505,334 74,115
Beagle Ltd. .............................................. 4,043 593
James Bennett ............................................ 135 20
James Joseph Berks ....................................... 222 33
Deborah L. Bernard ....................................... 526 77
Paul Berner .............................................. 4,203 616
JM & PJ Blundell ......................................... 256 38
Robert W. Bosley ......................................... 679 100
Raul Bosque .............................................. 40 6
Warwick Bosson ........................................... 40 6
Brian Budzyn ............................................. 443 65
Don Burtis ............................................... 551 81
David A. Calta ........................................... 1,562 230
Canaan Equity II Entrepreneurs LLC ....................... 16,646 2,441
Canaan Equity II L.P. .................................... 209,677 30,752
Canaan Equity II L.P. (QP) ............................... 93,794 13,757
Cascade Investment LLC ................................... 67,378 9,882
Gabriel M. Casillas ...................................... 104 15
Catterton Capstone Partners LLC .......................... 1,348 197
John Cavalier ............................................ 18,852 2,765
Heather Ann Chambers ..................................... 674 99
Murali Chinta ............................................ 40 6
Jonathan Cho ............................................. 657 96
Tom Chung ................................................ 202 30
James L. Clyde ........................................... 6,191 907
Redmon Paul Craig ........................................ 26,951 3,953
William J. Craver ........................................ 2,325 340
Ellen C. Crutcher ........................................ 423 62
Matthew J. Cullinane ..................................... 669 98
Doran G. Dalke ........................................... 657 96
Allen Mattson Davis ...................................... 4,043 593
Anthony DeLuise .......................................... 2,482 364
Robert Delsescaux ........................................ 307 45
Daniel D. DeMore ......................................... 135 20
Brian J. Dickey .......................................... 135 20
23
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares to Maximum Option
be Sold Exercise
--------------- ------------------
DLJ Fund Investment Partners II, L.P.* ................... 27,611 4,049
DLJ Securities Corp.* .................................... 100,987 14,812
DLJ Capital Corporation* ................................. 143 21
DLJ Private Equity Employees Fund, L.P.* ................. 2,527 371
DLJ Private Equity Partners Fund, L.P.* .................. 70,929 10,403
Dominion Fund III ........................................ 7,228 1,060
Albert Echiverri ......................................... 54 8
Ed C. Edelman ............................................ 2,695 395
Matt Elias ............................................... 1,078 158
Bruce Elsea .............................................. 404 60
EnerTech Capital Partners LP. ............................ 216,230 31,714
Dietrich Erdmann ......................................... 47,626 6,985
John Fabry ............................................... 135 20
Robert M. Fick ........................................... 716 105
Angus Fletcher ........................................... 337 49
James C. Furnivall ....................................... 1,011 148
Gas Research Institute ................................... 90,960 13,341
Mark Gilbreth ............................................ 3,328 489
Stephen L. Green ......................................... 2,021 297
Jack Harrington .......................................... 1,588 233
Mary P. Helmer ........................................... 404 60
Debra Hemsey ............................................. 135 20
Hennigan, Bennett & Dorman ............................... 4,043 592
Hillside Capital Incorporated ............................ 5,053 741
Hobbes & Towne, Inc. ..................................... 4,438 651
Ray Hu ................................................... 3,820 560
Russel Hundemer .......................................... 160 23
David Hurwitz ............................................ 1,727 253
Song Kim Huyng ........................................... 54 8
Hydro-Quebec CapiTech Inc. ............................... 13,476 1,976
Anthony D. Hynes ......................................... 117 17
Janice Ingram ............................................ 809 118
Irell & Manella LLP ...................................... 9,298 1,364
Michael D. Irvine ........................................ 2,183 320
Hamilton E. James ........................................ 2,021 297
Deepak Kamra ............................................. 1,314 193
Yungmo Kang .............................................. 726 106
Kenneth W. Keller ........................................ 350 52
Kingdon Offshore N.V.I ................................... 39,982 5,864
Kingdon Family Partnership ............................... 2,102 309
Kingdon Partners ......................................... 5,255 771
Kingdon Associates ....................................... 8,247 1,210
Lloyd G. Kirchner ........................................ 6,628 973
Louis Klevan ............................................. 685 101
Ronald A. Knapp .......................................... 1,162 170
Gregory Kopchinsky ....................................... 2,021 297
Steven W. Lampe .......................................... 943 139
Larry Lavine ............................................. 1,348 197
24
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares to Maximum Option
be Sold Exercise
--------------- ------------------
Kelly A. Leisten ......................................... 270 39
Michael Lockitch ......................................... 943 139
Antony Lundy ............................................. 8,591 1,260
Robin Mackay & Valerie Mackay, Trustees UA DTD
06/23/1989 by Mackay Family Trust ........................ 81,662 11,977
Trevor Duncan Mackay ..................................... 674 99
John Clifford Mann ....................................... 910 133
John S. Mansfield ........................................ 641 94
Ann D. Martin ............................................ 40 6
Curtis C. Martin ......................................... 2,291 336
Victor Martin ............................................ 404 60
Pat McCloskey ............................................ 606 89
David McShane ............................................ 2,822 413
Micro Generation Technology Fund LLC ..................... 21,156 3,103
Joseph C. Migliorino ..................................... 404 60
Michael P. Migliorino .................................... 404 60
Robert J. Migliorino ..................................... 202 30
Albert J. Miller ......................................... 4,065 597
Mitsubishi International Corporation ..................... 6,098 894
MC Capital ............................................... 20,339 2,983
Mitsubishi Corporation ................................... 7,412 1,087
Dadjar Modjahedpour ...................................... 244 36
Garrett Moran ............................................ 2,021 297
Heather Nicolau .......................................... 744 109
NIG-Capstone Ltd. ........................................ 20,213 2,965
NJR Energy Corporation ................................... 4,779 701
James C. Noe ............................................. 3,234 474
Nordhoff Investments ..................................... 20,777 3,047
Nth Power Technologies Fund I, LP. ....................... 26,951 3,953
David Overgard ........................................... 67 10
Pachulski, Stang, Siehl, Young, & Jones Professional
Corporation .............................................. 4,043 592
Parnasa Partners ......................................... 31,462 4,614
Niket Patankar ........................................... 202 30
John William Pettit ...................................... 67 10
Kathryn Susan Pettit ..................................... 20 3
Peter Michael Pettit ..................................... 1,011 148
L. Pfaffinger ............................................ 2,395 352
Anne Plechner ............................................ 1,078 158
Leon Plotkin ............................................. 363 53
Guillermo Pont ........................................... 1,742 256
Townes Pressler .......................................... 1,516 222
Nancy Quinn .............................................. 438 64
Rabun Partners ........................................... 2,021 297
Vern Raburn .............................................. 1,225 180
Michael W. Ranger ........................................ 1,348 197
Harry T. Rein ............................................ 2,021 297
RHO Management Trust I ................................... 843,300 123,684
25
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares to Maximum Option
be Sold Exercise
--------------- ------------------
John Rice ................................................ 2,426 355
Kenneth G. Roberts ....................................... 2,681 393
Mark Robson and Lois Robson JT TEN ....................... 61 9
Eric Andrew Rosen Trust .................................. 9,241 1,355
Benjamin Rosen ........................................... 470,650 69,029
Harold A. Rosen .......................................... 34,925 5,122
Jeffrey Mark Rosen Trust ................................. 9,241 1,355
Gregory Rouse ............................................ 809 118
Seymour Rubin ............................................ 214 31
Frederic A. Rubinstein ................................... 15,311 2,246
Carolyn Fay Rudnik ....................................... 505 74
Cassandra Scurlock ....................................... 126 19
Lawrence Scurlock ........................................ 192 28
The L.J. Sevin Trust Fund ................................ 110,756 16,244
Sevin Rosen Funds ........................................ 153,837 22,563
J.D. Sitton III .......................................... 505 74
Octavio Solis ............................................ 135 20
Southern Union Technology Partners, L.P. ................. 561,650 82,376
David A. Stahl ........................................... 687 101
Stapleton Communications ................................. 3,570 524
Matthew J. Stewart ....................................... 404 60
John Lewis Stone ......................................... 283 41
Margaret E. Stone Revocable Living Trust ................. 445 65
Tom Sullivan ............................................. 404 60
Sumitomo Corporation ..................................... 5,390 791
Rubin Tan ................................................ 135 20
Benjamin Toby ............................................ 605 88
Stephen Torres ........................................... 1,213 178
David L. Townley ......................................... 162 23
Utech Climate Challenge Fund, LP. ........................ 10,578 1,552
Vulcan Ventures, Inc. .................................... 477,035 69,965
Phillip B. Vessa ......................................... 1,617 237
Joel B. Wacknov .......................................... 8,085 1,186
Simon Wall ............................................... 1,011 148
Jeffrey Watts ............................................ -- 10,000
The Waubeeka Trust ....................................... 404 60
Cassie Weissert .......................................... 202 29
Dennis H. Weissert ....................................... 2,661 391
Wade P. Welch ............................................ 10,375 1,522
Elizabeth G. Wensley ..................................... 404 60
Kevin Wensley ............................................ 674 99
Paul A. Wensley .......................................... 404 60
R. James Wensley & Germaine Wensley TR Wensley Family
Trust EST DTD 06/19/92 ................................... 46,084 6,759
Roy J. Wensley ........................................... 337 49
Chris Weyant ............................................. 128 19
Kirk J. Wickstrom ........................................ 2,453 353
Williams Distributed Power Services ...................... 50,533 7,412
26
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares to Maximum Option
be Sold Exercise
--------------- ------------------
Jeff Willis .............................................. 2,659 390
Winfield Capital Corp. ................................... 15,160 2,223
Gavin Wolfe .............................................. 1,532 225
Wolfson Equities ......................................... 10,107 1,482
Yellowstone Equity Partners .............................. 24,496 3,593
- --------------------
* Credit Suisse First Boston Corporation and each such DLJ entity are under
common ownership, as of November 3, 2000.
(a) The Selling Stockholders have appointed Ake Almgren and Jeffrey Watts, and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
27
SCHEDULE III
1) Amendment No. 3 to the Investor Rights Agreement, dated October 25,
2000.
2) Amendment No. 2 to the Investor Rights Agreement, dated October 18,
2000.
3) Investor Rights Agreement, dated August 22, 1997.
4) Stockholders Agreement, dated April 9, 1997, as amended.
5) Rights Agreement, among Micro-Generation Technology Fund, LLC, Utech
Climate Challenge Fund, LP, Nth Power Technologies Fund I, LP, Enertech
Capital Partners, LP and the Company, dated March 30, 1999.
6) Rights Agreement, among The Beacon Group Energy Investment Fund II, LP,
Hydro-Quebec Capitech, Inc., Pan Canadian Petroleum Limited, Seligman
New Technologies Fund, Inc. and the Company, dated February, 2000.
7) Rights Agreement, between Alliant Energy Resources, Inc. and the
Company, dated March 16, 2000.
8) Observer Rights Letter Agreement, between PanCanadian Petroleum Limited
and the Company, dated February 23, 2000.
9) Capstone Turbine Corporation 1993 Incentive Stock Option Plan.
10) Capstone Turbine Corporation 2000 Equity Incentive Plan.
11) Capstone Turbine Corporation 2000 Employee Stock Purchase Plan.
12) Distribution Agreement, between the Company and Mitsubishi Corporation,
dated December 27, 1999.
13) Packaging and Distribution Agreement, between the Fakuma Co. Ltd. and
the Company, dated November 30, 1999.
14) Packaging and Distribution Agreement, between Meidensha-Sumitomo Joint
Distribution and the Company, dated January 12, 2000.
15) Distribution Agreement, between the Company and Active Power Corporation
Active Technology Corporation, dated November 11, 1999.
16) Solar Turbine Incorporated Transition Amended and Restated License
Agreements, each dated August 2, 2000.
28
17) Co-Development Agreement between Japan Steel Works, Ltd. and the
Company, dated June 15, 2000.
18) Joint Development Agreement, by and between Capstone and Hyundai Motor
Company, dated October 5, 2000.
19) New Cooperative Agreement No. DE-FC02-00 CH11058 entitled "Advanced
Microturbine System", dated September 29, 2000 (Department of Energy).
20) Lease between Northpark Industrial, Northwest Industrial Center and
Northpark Industrial - Leahy Division LLC and Capstone Turbine
Corporation.
29
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified Public
Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have been
separately furnished to the representatives of the Underwriters (the
"Representatives")
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of which have
been separately furnished to the Representatives and on the basis of
specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements
referred to in paragraph (v)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations, nothing came to their
attention that cause them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the related published rules and regulations;
(iv) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused
them to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301, 302, 402 and
503(d), respectively, of Regulation S-K;
(v) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company, inspection of the minute books of
the Company since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Company
responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of
the Act and the related published rules and regulations, or (ii)
any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows
included in the Prospectus for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in clause (B)
were not determined on a basis substantially consistent with the
basis for the audited consolidated financial statements included
in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Prospectus) or any increase in the consolidated long-term debt
of the Company, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in
the latest balance sheet included in the Prospectus, except in
each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or
per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
the comparable period of the preceding year and with any other
period of corresponding length specified by the Representatives,
except in each case for decreases or increases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(vi) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other
2
procedures referred to in paragraphs (iii) and (v) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives, which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
3
ANNEX II
Pursuant to Section 7(m) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published rules and regulations thereunder; and
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified Public
Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have been
separately furnished to the representatives of the Underwriters (the
"Representatives").