Underwriting Agreement

 

Statement” includes the Abbreviated Registration Statement.

 

The term “Base Prospectus” as used in this Agreement means the base prospectus, dated as of December 4, 2006, included in the Registration Statement at the time it was declared effective by the Commission or in the form in which it has been most recently filed with the Commission on or prior to the date of this Agreement. The term “Prospectus Supplement” as used in this Agreement means the final prospectus supplement specifically relating to the Shares in the form that is first filed with the Commission pursuant to Rule 424 under the Securities Act after the date and time this Agreement is executed and delivered by the parties hereto. The term “Prospectus” as used in this Agreement means the Base Prospectus as amended or supplemented by the Company prior to the date of the filing of the Prospectus Supplement together with the Prospectus Supplement. “Preliminary Prospectus” means any preliminary form of the Prospectus.

 

“Permitted Free Writing Prospectuses,” as used herein, means the documents listed on Schedule II hereto and each “road show” (as defined in Rule 433 under the Securities Act), if any, related to the offering of the Shares contemplated hereby that is a “written communication” (as defined in Rule 405 under the Securities Act) (each such road show, a “Road Show”). “Issuer Free Writing Prospectus” as used herein means issuer free writing prospectus as defined in Rule 433 of the Securities Act. “Disclosure Package,” as used herein, means the Preliminary Prospectus and the Permitted Free Writing Prospectuses, if any, all considered together.

 

Any reference herein to the registration statement, the Registration Statement, the Base Prospectus, the Prospectus Supplement or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act. Any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Base Prospectus, the Prospectus Supplement or the Prospectus shall be deemed to refer to and include the filing of any document under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (collectively, the “Exchange Act”) after the effective date of the Registration Statement, or the date of such Base Prospectus, or the Prospectus Supplement, as the case may be, deemed to be incorporated therein by reference (the “Incorporated Documents”).

 

The Company and the Selling Stockholder hereby confirm their respective agreements with the Underwriters as follows:

 

SECTION 1.           Representations and Warranties of the Company and the Selling Stockholder .

 

A.            Representations and Warranties of the Company . The Company hereby represents, warrants and covenants to each Underwriter as follows:

 

(a)           Registration Statement. The Registration Statement has been declared effective under the Securities Act; no stop order of the Commission preventing or suspending the use of the Base Prospectus, the Prospectus Supplement or the Prospectus or the effectiveness of the Registration Statement has been issued and no proceedings for such purpose have been

 

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instituted or, to the Company’s knowledge, threatened by the Commission; the Registration Statement complied when it became effective, complies and will comply, at the time of purchase, in all material respects with the requirements of the Securities Act and the Base Prospectus complied, as of its date and at the time of purchase, in all material respects, with the requirements of the Securities Act; the conditions to the use of Form S-3 in connection with the offering and sale of the Shares as contemplated hereby have been satisfied; the Registration Statement meets, and the offering and sale of the Shares as contemplated hereby complies with, the requirements of Rule 415(a)(1)(i) and (x) under the Securities Act; the Registration Statement did not, as of the time such Registration Statement became effective, and at the time of purchase, 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; at all times during the period beginning with the execution of this Agreement and ending at the time of purchase, the Disclosure Package does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; the Prospectus will comply, as of the date that it is filed with the Commission, the date of the Prospectus Supplement and, as amended or supplemented, at all times during the period beginning with the execution of this Agreement and ending on the Closing Date (as defined below) or any Subsequent Closing Date (as defined below), in all material respects, with the requirements of the Securities Act (including, without limitation, Section 10(a) of the Securities Act); the Prospectus, as of the date that it is filed with the Commission, the date of the Prospectus Supplement and, as amended or supplemented, at the time of purchase did not or will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however , that the Company makes no representation or warranty with respect to any statement contained in or omitted from the Registration Statement, the Disclosure Package or the Prospectus in reliance upon and in conformity with information concerning the Underwriters and furnished in writing by or on behalf of the Underwriters to the Company expressly for use therein; provided, further, that if, at any time after the time of purchase, the Company is obligated to prepare and furnish to the Underwriters an amendment or supplement to the Prospectus under Section 3(A)(e) of this Agreement and so furnishes such amendment or supplement, then from and after the time that such Prospectus as amended or supplemented is furnished to the Underwriters in accordance with Section 3(A)(e), the term “Prospectus” shall be deemed to mean the Prospectus as so amended or supplemented.

 

Each copy of the Preliminary Prospectus and the Prospectus, delivered  to the Underwriters for use in connection with the offer and sale of the Shares was identical to the copies thereof filed by electronic transmission pursuant to EDGAR (except as may be permitted by Regulation S-T under the Securities Act).

 

There are no contracts or other documents required to be described in the Prospectus or to be filed as exhibits to the Registration Statement which have not been described or filed as required.

 

(b)           Incorporated Documents. The Incorporated Documents, when they became effective or at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Securities Act and the Exchange Act,

 

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as applicable, and, when read together with the other information in the Prospectus and Disclosure Package, (a) at the time the Registration Statement became effective, (b) at the time this Agreement is executed and delivered by the parties and (c) at the Closing Date (as defined below) or any Subsequent Closing Date (as defined below) did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

(c)           Company Not Ineligible Issuer . (i) At the time of filing the Registration Statement and (ii) as of the date of the execution and delivery of this Agreement (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405 of the Securities Act), without taking account of any determination by the Commission pursuant to Rule 405 of the Securities Act that it is not necessary that the Company be considered an Ineligible Issuer.

 

(d)           Issuer Free Writing Prospectuses . Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Shares or until any earlier date on which the Company notified or notifies the Representative as described in Section 3A(e), (i) did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including any document incorporated by reference therein that has not been superseded or modified, and (ii) when taken together with the preliminary prospectus preceding or accompanying such Issuer Free Writing Prospectus, did not, does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(e)           Distribution of Offering Material By the Company . The Company has not distributed and will not distribute, prior to the later of the last Subsequent Closing Date (as defined below) and the completion of the Underwriters’ distribution of the Shares, any offering material in connection with the offering and sale of the Shares other than the Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus reviewed and consented to in writing by the Representative or the Registration Statement.

 

(f)            The Underwriting Agreement . This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable against the Company in accordance with its terms.

 

(g)           Authorization of the Shares . The Shares to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company to the Underwriters pursuant to this Agreement on the Closing Date or any Subsequent Closing Date, will be validly issued, fully paid and nonassessable.

 

(h)           No Transfer Taxes . There are no transfer taxes or other similar fees or charges under federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance by the Company or sale by the Company of the Shares.

 

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(i)            No Applicable Registration or Other Similar Rights . There are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this Agreement, except for such persons whose securities are included in the shares of Common Stock registered under the Registration Statement or for such rights as have been duly waived.

 

(j)            No Material Adverse Change . Except as otherwise disclosed in the Disclosure Package, subsequent to the respective dates as of which information is given in the Disclosure Package: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, properties, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as one entity (any such change is called a “Material Adverse Change”); (ii) the Company and its subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, nor entered into any material transaction or agreement; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any class of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock.

 

(k)           Independent Accountants . KPMG LLP, who has expressed its opinion with respect to the annual financial statements (which term as used in this Agreement includes the related notes thereto) filed with the Commission as a part of the Registration Statement and included in the Disclosure Package and the Prospectus, are independent registered public accountants as required by the Securities Act. Vitale, Caturano & Company, LTD., who has expressed its opinion with respect to the consolidated balance sheets of FastChannel Network, Inc. and its subsidiaries (“FastChannel”) as of December 31, 2005 and 2004 and the consolidated statements of operations, changes in redeemable preferred stock and stockholders deficit, and cash flows for each of the two years in the period ended December 31, 2005 of FastChannel filed with the Commission as a part of the Registration Statement and included in the Disclosure Package and the Prospectus, are independent registered public accountants as required by the Securities Act. PricewaterhouseCoopers LLP, who has expressed its opinion with respect to the consolidated statement of operations data for the years ended December 31, 2003, 2002 and 2001 of FastChannel and the consolidated balance sheet data at December 31, 2003, 2002 and 2001 of FastChannel filed with the Commission as a part of the Registration Statement and included in the Disclosure Package and the Prospectus, are independent registered public accountants as required by the Securities Act.

 

(l)            Preparation of the Financial Statements . The financial statements and schedules of the Company included or incorporated by reference in the Registration Statement and the Disclosure Package and the Prospectus present fairly the consolidated financial position of the Company and its subsidiaries and FastChannel as of and at the dates indicated and the results of their operations and cash flows for the periods specified. The supporting schedules included or incorporated by reference in the Registration Statement present fairly the information required to be stated therein. Such financial statements and supporting schedules comply as to form with the applicable accounting requirements of the Securities Act and have been prepared in conformity with generally accepted accounting principles as applied in the United States

 

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applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. No other financial statements or supporting schedules are required to be included the Registration Statement, the Disclosure Package or the Prospectus. The financial data set forth in each of the Base Prospectus and the Prospectus and the Registration Statement under the captions “Summary - Summary Consolidated Financial Statements,” “Capitalization,” and “Interim Financial Statements of FastChannel Network, Inc.” fairly present the information set forth therein on a basis consistent with that of the audited financial statements contained in the Registration Statement. The pro forma combined financial statements of the Company and its subsidiaries and the related notes thereto included or under the captions “Summary - Summary Consolidated Financial Statements - Pro Forma,” “Combined Company Unaudited Pro Forma Condensed Consolidated Statement of Operations” and elsewhere in each of the Base Prospectus and the Prospectus and the Registration Statement present fairly the information contained therein, have been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and have been properly presented on the basis described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.

 

(m)          Incorporation and Good Standing of the Company and its Subsidiaries . Each of the Company and FastChannel Network, Inc., DG Systems Acquisition II Corporation, StarGuide Digital Networks, Inc. and Corporate Computer Systems, Inc. (the “Significant Subsidiaries”) has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation or organization and has the power and authority to own or lease, as the case may be, and operate its properties and to conduct its business as described in the Disclosure Package and the Prospectus and, in the case of the Company, to enter into and perform its obligations under this Agreement. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. All of the issued and outstanding capital stock or other equity or ownership interest of each subsidiary has been duly authorized and validly issued, is fully paid and nonassessable and, except as set forth in each of the Disclosure Package and the Prospectus, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or adverse claim.

 

(n)           Capitalization and Other Capital Stock Matters . The authorized, issued and outstanding capital stock of the Company is as set forth in each of the Disclosure Package and the Prospectus under the caption “Capitalization” (other than upon exercise of outstanding options or warrants described in the Disclosure Package and the Prospectus). The Common Stock (including the Shares) conform in all material respects to the descriptions thereof contained in each of the Disclosure Package and the Prospectus. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive

 

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rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those described or summarized in or incorporated by reference into the Disclosure Package and the Prospectus. The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth in each of the Disclosure Package and the Prospectus accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights.

 

(o)           Company’s Accounting System . The Company makes and keeps books and records and maintains a system of accounting controls sufficient to provide reasonable assurances that:  (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(p)           Stock Exchange Listing . The Shares are registered pursuant to Section 12(b) or 12(g) of the Exchange Act and are listed on the Nasdaq Global Market, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Shares under the Exchange Act or delisting the Shares from the Nasdaq Global Market, nor has the Company received any notification that is still in effect that the Commission or the Nasdaq Global Market is contemplating such deregistration or delisting.

 

(q)           Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required . Neither the Company nor any of its subsidiaries is (i) in violation or in default (or, with the giving of notice or lapse of time, would be in default) (“Default”) under its charter or by-laws, (ii) in Default under any indenture, mortgage, loan or credit agreement, deed of trust, note, contract, franchise, lease or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or by which it may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject (each, an “Existing Instrument”), or (iii) in violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company, such subsidiary or any of their properties, as applicable, except with respect to clauses (ii) and (iii) only, for such Defaults and violations as would not, individually or in the aggregate, have a Material Adverse Change. The Company’s execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby and by the Disclosure Package and by the Prospectus and the issuance and sale of the Shares (i) have been duly authorized by all necessary corporate action and will not result in any Default under the charter or by-laws of the Company or any subsidiary, (ii) will not conflict with or constitute a breach of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument, and (iii) will not result in any violation of any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any subsidiary of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority

 

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having jurisdiction over the Company, any subsidiary or any of their properties. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency is required for the Company’s execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby and by the Disclosure Package and by the Prospectus, except such as have been obtained or made by the Company and are in full force and effect under the Securities Act, applicable state securities or blue sky laws and from the Nasdaq Global Market and the NASD Inc. (the “NASD”).

 

(r)            No Material Actions or Proceedings . There are no legal or governmental actions, suits or proceedings pending or, to the best of the Company’s knowledge, threatened (i) against or affecting the Company or any of its subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case (A)(1) there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company or any of its subsidiaries and (2) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or adversely affect the consummation of the transactions contemplated by this Agreement or (B) any such action, suit or proceeding is or would be material in the context of the sale of Common Stock.

 

(s)           Labor Matters . No labor problem or dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is threatened or imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or its subsidiaries’ principal suppliers, contractors or customers, that could result in a Material Adverse Change.

 

(t)            Intellectual Property Rights . To the Company’s knowledge, the Company and its subsidiaries own, possess, license or have other rights to use, on reasonable terms, all material patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of the Company’s or any of its subsidiary’s business as now conducted or as proposed in each of the Disclosure Package and the Prospectus to be conducted. Except as set forth in the Disclosure Package, (i) no party has been granted an exclusive license to use any portion of such Intellectual Property owned by the Company or any of its subsidiaries; (ii) to the knowledge of the Company, there is no material infringement by third parties of any such Intellectual Property owned by or exclusively licensed to the Company or any of its subsidiaries; (iii) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the Company’s or any of its subsidiaries’ rights in or to any material Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (iv) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; and (v) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company’s or any of its subsidiary’s business as now conducted infringes or otherwise violates any patent, trademark,

 

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copyright, trade secret or other proprietary rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim.

 

(u)           Patent Applications . The Company and its subsidiaries have duly and properly filed or caused to be filed with the U. S. Patent and Trademark Office (the “PTO”) and applicable foreign and international patent authorities all patent applications owned by the Company or any of its subsidiaries (the “Company Patent Applications”). Each of the Company and its subsidiaries has complied with the PTO’s duty of candor and disclosure for the Company Patent Applications and have made no material misrepresentation in the Company Patent Applications. To the Company’s knowledge, the Company Patent Applications disclose patentable subject matters. To the Company’s knowledge, neither the Company nor any of its subsidiaries has been notified of any inventorship challenges nor has any interference been declared or provoked nor is any material fact known by the Company that would preclude the issuance of patents with respect to the Company Patent Applications or would render such patents, if issued, invalid or unenforceable.

 

(v)           Intellectual Property Licenses . Neither the Company nor any of its subsidiaries has breached or is currently in breach of any provision of any license, contract or other agreement governing the Company’s or any of its subsidiaries’ use of Intellectual Property owned by third parties (collectively, the “Intellectual Property Licenses”) and no third party has alleged any such breach and the Company is unaware of any facts that would form a reasonable basis for such a claim. To the Company’s knowledge, no other party to the Intellectual Property Licenses has breached or is currently in breach of any provision of the Intellectual Property Licenses. Each of the Intellectual Property Licenses is in full force and effect and constitutes a valid and binding agreement between the parties thereto, enforceable in accordance with its terms, and there has not occurred any breach or default under any such Intellectual Property Licenses or any event that with the giving of notice or lapse of time would constitute a breach or default thereunder. Except as would not have a Material Adverse Change, neither the Company nor any of its subsidiaries has been or is currently involved in any disputes regarding the Intellectual Property Licenses. To the Company’s knowledge, all patents licensed to the Company or any of its subsidiaries pursuant to the Intellectual Property Licenses are valid, enforceable and being duly maintained. To the Company’s knowledge, all patent applications licensed to the Company or any of its subsidiaries pursuant to the Intellectual Property Licenses are being duly prosecuted.

 

(w)          All Necessary Permits, etc . Each of the Company and its subsidiaries possesses such valid and current licenses, certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies (“Licenses”) necessary to conduct their respective businesses, except to the extent that any failure to have any such licenses, certificates, authorizations or permits would not, individually or in the aggregate, result in a Material Adverse Change. Neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such License which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could result in a Material Adverse Change. Each of the Company and its subsidiaries is in compliance with the terms of the Licenses (except where the failure to so comply would not, individually or in the aggregate, result in a Material Adverse Change). No registrations, filings, applications, notices, transfers, consents, approvals, audits, qualifications,

 

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waivers or other actions of any kind is required by virtue of the execution and delivery of this Agreement, or of the consummation of the transactions contemplated hereby, by the Disclosure Package or by the Prospectus and the issuance and sale of the Shares (i) to avoid the loss of any such License or any asset, property or right pursuant to the terms thereof, or the violation or breach of any applicable law thereto or (ii) to enable the Company or its subsidiaries to hold and enjoy the same after the Closing Date or any Subsequent Closing Date, as the case may be, in the conduct of its business as conducted prior to the Closing Date (except, in each case, for such registrations, filings, applications, notices, transfers, consents, approvals, audits, qualifications, waivers or other actions the failure to obtain or complete which would not, individually or in the aggregate, result in a Material Adverse Change).

 

(x)            Title to Properties . Except as otherwise disclosed in the Disclosure Package and the Prospectus, each of the Company and its subsidiaries has good and marketable title to all the properties and assets reflected as owned in the financial statements referred to in Section 1(k) above (or elsewhere in the Disclosure Package), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company or any of its subsidiaries. The real property, improvements, equipment and personal property held under lease by the Company or any of its subsidiaries are held under valid and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company or any of its subsidiaries.

 

(y)           Tax Law Compliance . Each of the Company and its subsidiaries has filed all necessary federal, state, local and foreign income and franchise tax returns in a timely manner (after giving effect to all permissible extensions) and has paid all taxes required to be paid by it and, if due and payable, any related or similar assessment, fine or penalty levied against it, except for any taxes, assessments, fines or penalties being contested in good faith for which reserves in accordance with generally accepted accounting principles have been provided or where the failure to so file or pay would not, individually or in the aggregate, result in a Material Adverse Change. Each of the Company and its subsidiaries has made appropriate provisions in the applicable financial statements referred to in Section 1(k) above in respect of all federal, state, local and foreign income and franchise taxes for all current or prior periods as to which the tax liability of the Company or any of its subsidiaries has not been finally determined.

 

(z)            Company Not an “Investment Company” . The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not, and after receipt of payment for the Shares and the application of the proceeds thereof as contemplated under the caption “Use of Proceeds” in each of the Base Prospectus and the Prospectus will not be, an “investment company” within the meaning of the Investment Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act.

 

(aa)         Insurance . Each of the Company and its subsidiaries is insured by recognized, financially sound and reputable institutions with policies in such amounts and with such deductibles and covering such risks as the Company reasonably believes are prudent and

 

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deems adequate including, but not limited to, policies covering real and personal property owned or leased by the Company and its subsidiaries against theft, damage, destruction, and acts of vandalism. All policies of insurance and fidelity or surety bonds insuring the Company and its subsidiaries or their businesses, assets, employees, officers and directors are in full force and effect. Each of the Company and its subsidiaries is in compliance with the terms of such policies and instruments in all material respects; and there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and since December 1, 2003, neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for. Each of the Company and its subsidiaries has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change.

 

(bb)         No Restrictions on Dividends . No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Disclosure Package and the Prospectus.

 

(cc)         No Price Stabilization or Manipulation . The Company has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares. The Company acknowledges that the Underwriters may engage in passive market making transactions in the Shares on the Nasdaq Global Market in accordance with Regulation M under the Exchange Act.

 

(dd)         Related Party Transactions . There are no business relationships or related-party transactions involving the Company, any subsidiary or any other person required by the Securities Act or the Exchange Act to be described in the Base Prospectus or the Prospectus that have not been described as required.

 

(ee)         Controls and Procedures . The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act), which (i) are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, (ii) have been evaluated for effectiveness as of a date within 90 days prior to the earlier of the date that the Company filed its most recent annual or quarterly report with the Commission and the date of the Disclosure Package and the Prospectus and (iii) are effective in all material respects to perform the functions for which they were established.

 

(ff)           No Material Weakness in Internal Controls . Except as disclosed in the Disclosure Package and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (i) no significant deficiency or material weakness in the design or

 

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operation of the Company’s internal control over financial reporting (whether or not remediated) (ii) no fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting and (iii) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. C

 

(gg)         No Unlawful Contributions or Other Payments . Neither the Company, any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the FCPA (as defined below), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, and each of the Company and its subsidiaries, and, to the knowledge of the Company, their respective affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith. For purposes of this paragraph, “FCPA” means Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

(hh)         No Conflict with Money Laundering Laws . The operations of each of the Company and its subsidiaries are and have been conducted at all times in material compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

(ii)           No Conflict with OFAC Laws . Neither the Company, any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and each of the Company and its subsidiaries will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds, to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(jj)           Compliance with Environmental Laws . Except as otherwise disclosed in the Disclosure Package and the Prospectus:  (i) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, order, permit, policy or rule of common law or any judicial or administrative order, consent, decree or judgment or other requirement relating to pollution or protection of human health or

 

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the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, “Materials of Environmental Concern”), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environment Concern (collectively, “Environmental Laws”), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the business of the Company or any of its subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company or any of its subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries is in violation of any Environmental Law, except as would not, individually or in the aggregate, result in a Material Adverse Change; (ii) there is no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company or any of its subsidiaries has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys’ fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its subsidiaries now or in the past (collectively, “Environmental Claims”), pending or, to the Company’s knowledge, threatened against the Company, any of its subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law, except as would not, individually or in the aggregate, result in a Material Adverse Change; (iii) to the Company’s knowledge, there are no past, present or anticipated future actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law, require expenditures to be incurred pursuant to Environmental Law, or form the basis of a potential Environmental Claim against the Company, any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law, except as would not, individually or in the aggregate, result in a Material Adverse Change; and (iv) neither the Company nor any of its subsidiaries is subject to any pending or threatened proceeding under Environmental Law to which a governmental authority is a party and which is reasonably likely to result in monetary sanctions of $100,000 or more.

 

(kk)         ERISA Compliance . No “prohibited transaction” (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)) or “accumulated funding deficiency” (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the thirty-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of the Company or any of its subsidiaries which would result in a Material Adverse Change. Each employee benefit plan of the Company or any of its subsidiaries is in compliance in all material

 

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respects with applicable law, including ERISA and the Code. The Company and its subsidiaries have not incurred and do not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan as defined in ERISA). Each “pension plan” for which the Company or any of its subsidiaries would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.

 

(ll)           Brokers . There is no broker, finder or other party, except for the Underwriters, that is entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement.

 

(mm)       No Outstanding Loans or Other Indebtedness . There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or any of its subsidiaries to or for the benefit of any of the officers or directors of the Company, any of its subsidiaries or any of the members of any of them, except as disclosed in the Disclosure Package and the Prospectus.

 

(nn)         Sarbanes-Oxley Compliance . There is and has been no failure on the part of the Company or any of its subsidiaries or any of the their respective directors or officers, in their capacities as such, to comply with, in all material respects, any applicable provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including Section 402 related to loans.

 

(oo)         Subsidiaries . Except as described in the Disclosure Package and the Prospectus, the Company does not own or control, directly or indirectly, any corporation, association, or other entity other than the subsidiaries listed in Exhibit 21 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Other than the Significant Subsidiaries, none of the subsidiaries of the Company, considered alone or in the aggregate as a single subsidiary, constitutes a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X.

 

(pp)         Lending Relationship . Except as disclosed in the Registration Statement and the Disclosure Package and the Prospectus, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any Underwriter, and (ii) does not intend to use any of the proceeds from the sale of the Common Shares hereunder to repay any outstanding debt owed to any affiliate of any Underwriter.

 

(qq)         Statistical and Market Related Data . Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included in each of the Disclosure Package and the Prospectus is not based on or derived from sources that are reliable and accurate in all material respects.

 

(rr)           SEC Comment Letters. There are no comments outstanding under any letters from the staff of the SEC relating to the Company’s SEC filings.

 

(ss)         Compliance with Laws . The Company has not been advised, and has no reason to believe, that it and each of its subsidiaries are not conducting business in compliance with all applicable laws, rules and regulations of the jurisdictions in which they are conducting

 

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business except as disclosed in the Disclosure Package and the Prospectus or except where failure to be so in compliance would not result in a Material Adverse Change

 

(tt)           Preliminary Prospectus . Each Preliminary Prospectus filed as part of the Registration Statement, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder.

 

B.            Representations and Warranties of the Selling Stockholder . The Selling Stockholder represents, warrants and covenants to each Underwriter as follows:

 

(a)           The Underwriting Agreement . This Agreement has been duly authorized, executed and delivered by or on behalf of, and is a valid and binding agreement of, the Selling Stockholder, enforceable against the Selling Stockholder in accordance with its terms.

 

(b)           The Custody Agreement and Power of Attorney . Certificates in negotiable form representing all of the Shares to be sold by the Selling Stockholder hereunder have been placed in custody under a Custody Agreement and Power of Attorney (the “Custody Agreement and Power of Attorney”), in the form heretofore furnished to you, duly executed and delivered by the Selling Stockholder to Mellon Investor Services, LLC, as custodian (the “Custodian”), and the Selling Stockholder has duly executed and delivered the Custody Agreement and Power of