1
Exhibit 10.1
5,665,000 Shares
E*TRADE Group, Inc.
Common Stock
Underwriting Agreement
August 15, 1996
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY LLC
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC
DEUTSCHE ▇▇▇▇▇▇ GRENFELD/▇.▇. ▇▇▇▇▇▇▇▇ INC.
As representatives of the several Underwriters
c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies/Gentlemen:
E*TRADE GROUP, INC., a Delaware corporation (the "Company"), and certain
stockholders of the Company named in Schedule B hereto (hereafter called the
"Selling Stockholders") address you as the Representatives of each of the
persons, firms and corporations listed in Schedule A hereto (herein
collectively called the "Underwriters") and hereby confirm their respective
agreements with the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
5,000,000 shares of its authorized and unissued Common Stock, $.01 par value,
to the several Underwriters. The Selling Stockholders, acting severally and
not jointly, propose to sell an aggregate of 665,000 shares of the Company's
authorized and outstanding Common Stock, $.01 par value, to the several
Underwriters. The 5,000,000 shares of Common Stock, $.01 par value, of the
Company to be sold by the Company are hereinafter called the "Company Shares"
and the 665,000 shares of Common Stock, $.01 par value, to be sold by the
Selling Stockholders are hereinafter called the "Selling Stockholder Shares."
The Company Shares and the Selling Stockholder Shares are hereinafter
collectively referred to as the "Firm Shares." The Company and a certain
Selling Stockholder also propose to grant, severally and not jointly, to the
Underwriters an option to purchase up to 849,750 additional shares of the
Company's Common Stock, $.01 par value (the "Option Shares"), as provided in
Section 7 hereof. As used in this Agreement, the term "Shares" shall include
the Firm Shares and the Option Shares. All shares of Common Stock, $.01 par
value, of the Company to be outstanding after giving effect to the sales
contemplated hereby, including the Shares, are hereinafter referred to as
"Common Stock."
2. Representations, Warranties and Agreements of the Company and the
Selling Stockholders.
I. The Company represents and warrants to and agrees with each Underwriter
and each Selling Stockholder that:
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(a) A registration statement on Form S-1 (File No. 333-05525)
with respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed with the
Commission; such amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration
statements pursuant to Rule 462(b) of the Rules and Regulations as may have
been required prior to the date hereof have been similarly prepared and filed
with the Commission; and the Company will file such additional amendments to
such registration statement, such amended prospectuses subject to completion
and such abbreviated registration statements as may hereafter be required.
Copies of such registration statement and amendments, of each related
prospectus subject to completion (the "Preliminary Prospectuses"), and of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
Company LLC, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or
(c), as applicable, of the Rules and Regulations pursuant to subparagraph
(1), (4) or (7) of Rule 424(b) of the Rules and Regulations or as part of a
post-effective amendment to the registration statement (including a final
form of prospectus). If the registration statement relating to the Shares
has not been declared effective under the Act by the Commission, the Company
will prepare and promptly file an amendment to the registration statement,
including a final form of prospectus, or, if ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company
LLC, on behalf of the several Underwriters, shall agree to the utilization of
Rule 434 of the Rules and Regulations, the information required to be
included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations. The term "Registration Statement"
as used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits, in the form in which it became
or becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files
a term sheet pursuant to Rule 434 of the Rules and Regulations, the
information deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and
Regulations) and, in the event of any amendment thereto or the filing of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations relating thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such
amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement
shall mean the prospectus relating to the Shares as included in such
Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of
the Registration Statement at the time it became effective pursuant to Rule
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430A(b) of the Rules and Regulations); provided, however, that if in reliance
on Rule 434 of the Rules and Regulations and with the consent of ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Company LLC, on behalf of the several Underwriters, the Company
shall have provided to the Underwriters a term sheet pursuant to Rule 434(b)
or (c), as applicable, prior to the time that a confirmation is sent or given
for purposes of Section 2(10)(a) of the Act, the term "Prospectus" shall mean
the "prospectus subject to completion" (as defined in Rule 434(g) of the
Rules and Regulations) last provided to the Underwriters by the Company and
circulated by the Underwriters to all prospective purchasers of the Shares
(including the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 434(d) of the Rules and
Regulations). Notwithstanding the foregoing, if any revised prospectus shall
be provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters
for such use. If in reliance on Rule 434 of the Rules and Regulations and
with the consent of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC, on behalf of the
several Underwriters, the Company shall have provided to the Underwriters a
term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time
that a confirmation is sent or given for purposes of Section 2(10)(a) of the
Act, the Prospectus and the term sheet, together, will not be materially
different from the prospectus in the Registration Statement.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings
for that purpose, and each such Preliminary Prospectus has conformed in all
material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up
to and on the Closing Date (hereinafter defined) and on any later date on
which Option Shares are to be purchased, (i) the Registration Statement and
the Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act
and the Rules and Regulations and will in all material respects conform to
the requirements of the Act and the Rules and Regulations, (ii) the
Registration Statement, and any amendments or supplements thereto, did not
and will not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that none of the
representations and warranties contained in this subparagraph (b) shall apply
to information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
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the Company by such Underwriter specifically for use in the preparation
thereof.
(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation with full corporate power
and authority to own, lease and operate its properties and conduct its
business as described in the Prospectus; the Company owns all of the
outstanding capital stock of its subsidiaries free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest; each of
the Company and its subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in the
United States in which the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure
to be so qualified or be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered
as one enterprise; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit
or curtail, such power and authority or qualification; each of the Company
and its subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and effect;
neither the Company nor any of its subsidiaries is in violation of its
respective charter or bylaws or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any material
bond, debenture, note or other evidence of indebtedness, or in any material
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective properties may be bound, except as to violations or defaults which
individually or in the aggregate would not have a material adverse effect on
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise; and neither the Company nor any of its subsidiaries is in
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or
over their respective properties of which the Company has knowledge, except
as to violations or defaults which individually or in the aggregate would not
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than E*TRADE Securities, Inc., a California corporation, E*TRADE
Capital, Inc., a California corporation, Trade*Plus Brokerage, Inc., a
California corporation, and E*TRADE Online Ventures, Inc., a California
corporation (each, a "Subsidiary" and collectively, the "Subsidiaries");
provided, however, that the Company has an equity interest in Roundtable
Partners LLC.
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(d) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, except as rights to indemnification
and contribution hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles or the
limitation on availability of equitable remedies; the performance of this
Agreement and the consummation of the transactions herein contemplated will
not result in a material breach or violation of any of the terms and
provisions of, or constitute (i) a material default under any material bond,
debenture, note or other evidence of indebtedness, or under any material
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective properties may be bound, (ii) a default under the charter or
bylaws of the Company or any of its subsidiaries, or (iii) a material default
under any law, order, rule, regulation, writ, injunction, judgment or decree
of any court, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or any of its subsidiaries or over their
respective properties. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties is required for the
execution and delivery of this Agreement and the consummation by the Company
or any of its subsidiaries of the transactions herein contemplated, except
such as may be required under the Act, or under state or other securities
laws, all of which requirements have been satisfied in all material respects
(except for any filings under Rule 424 of the Rules and Regulations, which
filings have been or will be made under Section 4(a) of this Agreement) or
Blue Sky laws.
(e) Except as set forth in the Prospectus, there is not any
pending or, to the best knowledge of the persons named in the table set forth
immediately under the heading "Management" in the Prospectus, excepting the
Secretary, the nonemployee directors and the director emeritus (the
"Company's Officers"), threatened action, suit, claim or proceeding against
the Company, any of its subsidiaries or any of their respective officers or
any of their respective properties, assets or rights before any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or over their
respective officers or properties or otherwise which (i) would, if adversely
determined, result in any material adverse change in the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise or might materially
and adversely affect their properties, assets or rights, (ii) might prevent
consummation of the transactions contemplated hereby or (iii) is required to
be disclosed in the Registration Statement or Prospectus and is not so
disclosed; and there are no agreements, contracts, leases or documents of the
Company or any of its subsidiaries of a character required to be described or
referred to in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement by the Act or the Rules and Regulations
which have not been accurately described in all material respects in the
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Registration Statement or Prospectus or filed as exhibits to the Registration
Statement.
(f) All outstanding shares of capital stock of the Company
(including the Selling Stockholder Shares) have been duly authorized and
validly issued and are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and the authorized and outstanding capital stock
of the Company is, in all material respects, as set forth in the Prospectus
under the caption "Capitalization" and conforms in all material respects to
the statements relating thereto contained in the Registration Statement and
the Prospectus (and such statements correctly state the substance of the
instruments defining the capitalization of the Company); the Firm Company
Shares and the Option Shares to be purchased from the Company hereunder have
been duly authorized for issuance and sale to the Underwriters pursuant to
this Agreement and, when issued and delivered by the Company against payment
therefor in accordance with the terms of this Agreement, will be duly and
validly issued and fully paid and nonassessable, and will be sold free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest; and no preemptive right, co-sale right, registration right, right
of first refusal or other similar right of stockholders exists with respect
to any of the Firm Company Shares or Option Shares to be purchased from the
Company hereunder or the issuance and sale thereof other than those that have
been expressly waived prior to the date hereof and those that will
automatically expire upon and will not apply to the consummation of the
transactions contemplated on the Closing Date. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale or transfer of the Shares except
as may be required under the Act or under state or other securities or Blue
Sky laws. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and
are fully paid and nonassessable, and were not issued in violation of or
subject to any preemptive right, or other rights to subscribe for or purchase
shares and are owned by the Company free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest. Except as
disclosed in the Prospectus and the financial statements of the Company, and
the related notes thereto, included in the Prospectus, neither the Company
nor any subsidiary has outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth in the Prospectus
accurately and fairly presents the information required to be shown by the
Act and the applicable Rules and Regulations with respect to such plans,
arrangements, options and rights.
(g) Deloitte & Touche LLP, which has examined the consolidated
financial statements of the Company, together with the related schedules and
notes, as of September 30, 1995 and 1994 and for each of the years in the
three (3) years ended September 30, 1995 filed with the Commission as a part
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of the Registration Statement, which are included in the Prospectus, are, to
the Company's knowledge, independent accountants within the meaning of the
Act and the Rules and Regulations; the audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, forming part of the
Registration Statement and Prospectus, fairly present the financial position
and the results of operations of the Company and its subsidiaries at the
respective dates and for the respective periods to which they apply; and all
audited consolidated financial statements of the Company, together with the
related schedules and notes, and the unaudited consolidated financial
information, filed with the Commission as part of the Registration Statement,
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved except as may
be otherwise stated therein. The selected and summary financial and
statistical data included in the Registration Statement present fairly the
information shown therein and have been compiled on a basis consistent with
the audited financial statements presented therein. No other financial
statements or schedules are required to be included in the Registration
Statement.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been (i)
any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (ii) any transaction that is
material to the Company and its subsidiaries considered as one enterprise,
except transactions entered into in the ordinary course of business, (iii)
any obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of business,
(iv) any change in the capital stock or outstanding indebtedness of the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries considered as one enterprise (other than upon the sale of the
Shares hereunder, the exercise of options and warrants described in the
Registration Statement and the automatic conversion of the outstanding shares
of Preferred Stock into Common Stock prior to the First Closing as described
in the Registration Statement), (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of its
subsidiaries, or (vi) any loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries which has been sustained
which has a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its subsidiaries has good title to
all properties and assets described in the Registration Statement and
Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would
not have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (ii) the agreements to which the
Company or any of its subsidiaries is a party described in the Registration
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Statement and Prospectus are valid agreements, enforceable by the Company and
its subsidiaries (as applicable), except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles or the limitation on availability of equitable
remedies and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements, and (iii) each of the Company and its subsidiaries
has valid and enforceable leases for all properties described in the
Registration Statement and Prospectus as leased by it, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles or the
limitation on availability of equitable remedies. Except as set forth in the
Registration Statement and Prospectus, the Company owns or leases all such
properties as are necessary to its operations as now conducted.
(j) The Company and its subsidiaries have timely filed all
necessary federal, state and foreign income and franchise tax returns and
have paid all taxes shown thereon as due, and there is no tax deficiency that
has been or, to the best of the Company's knowledge, might properly and
validly be asserted against the Company or any of its subsidiaries that would
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise; and all tax liabilities are
adequately provided for on the books of the Company and its subsidiaries.
(k) The Company and its subsidiaries (or the Company on behalf
of its subsidiaries) maintain insurance with insurers of recognized financial
responsibility of the types and in the amounts generally deemed adequate for
the businesses of the Company and its subsidiaries and consistent with
insurance coverage maintained by similar companies in similar businesses,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company or its subsidiaries against theft, damage,
destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect; neither the
Company nor any such subsidiary has been refused any insurance coverage
sought or applied for; and neither the Company nor any such subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
at a cost that would not materially and adversely affect the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise.
(l) To the best knowledge of the Company's Officers, no labor
disturbance by the employees of the Company or any of its subsidiaries exists
or is imminent; and none of the Company's Officers is aware of any existing
or imminent labor disturbance by the employees of any of the Company's
principal suppliers that might be expected to result in a material adverse
change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered
as one enterprise. No collective bargaining agreement exists with any of the
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Company's employees and, to the best knowledge of the Company's Officers, no
such agreement is imminent.
(m) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration
Statement and Prospectus; the Company has not received any written notice of,
and none of the Company's Officers has received any notice or has any
knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names or copyrights
(other than the use of the name "eBroker" by TransTerra Co.); and the Company
has not received any written notice of, and none of the Company's Officers
has any knowledge of, any infringement of or conflict with asserted rights of
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise.
(n) The Common Stock has been approved for quotation on the
Nasdaq National Market, subject to official notice of issuance.
(o) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to use its best efforts to conduct, its affairs in such a manner as to
ensure that it will not become an "investment company" or a company
"controlled" by an "investment company" within the meaning of the 1940 Act
and such rules and regulations.
(p) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option
Shares are to be purchased, as the case may be, and (ii) completion of the
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any Preliminary Prospectuses, the
Prospectus, the Registration Statement and other materials, if any, permitted
by the Act.
(q) Neither the Company nor any of its subsidiaries has at any
time during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any such
contribution in violation of law, or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by
the laws of the United States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
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(s) Each officer and director of the Company, each Selling
Stockholder and the beneficial owners of 95% of the outstanding shares of
Common Stock (assuming conversion of all outstanding shares of Preferred
Stock into Common Stock) (including shares held by such officers, directors
and Selling Stockholders) as of the date hereof have agreed in writing that
such person will not, for a period of 180 days from the date that the
Registration Statement is declared effective by the Commission (the "Lock-up
Period"), offer to sell, contract to sell, or otherwise sell, dispose of,
loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to
purchase any shares of Common Stock or any securities convertible into or
exchangeable for shares of Common Stock (collectively, "Securities") now
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise
than (i) as a bona fide gift or gifts, provided the donee or donees thereof
agree in writing to be bound by this restriction, (ii) as a distribution to
partners or stockholders of such person, provided that the distributees
thereof agree in writing to be bound by the terms of this restriction, or
(iii) with the prior written consent of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC.
The foregoing restriction has been expressly agreed to preclude the holder of
the Securities from engaging in any hedging or other transaction which is
designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period, even if such Securities would be
disposed of by someone other than such holder. Such prohibited hedging or
other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any
Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Securities. Furthermore, such person has also agreed and
consented to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by such person
except in compliance with this restriction. The Company has provided to
counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the agreements
pursuant to which its officers, directors and stockholders have agreed to
such or similar restrictions (the "Lock-up Agreements") presently in effect
or effected hereby. The Company hereby represents and warrants that it will
not release any of its officers, directors or other stockholders from any
Lock-up Agreements currently existing or hereafter effected without the prior
written consent of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC. Notwithstanding the
foregoing, the foregoing restrictions shall not prohibit the sale of Shares
by any such person pursuant to this Agreement.
(t) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in material compliance with all rules, laws
and regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the
11
Registration Statement and the Prospectus, (iii) to its knowledge, the
Company will not be required to make future material capital expenditures to
comply with Environmental Laws and (iv) no property which is owned, leased or
occupied by the Company has been designated as a Superfund site pursuant to
the Comprehensive Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. section 9601, et seq.), or otherwise designated as a
contaminated site under applicable state or local law.
(u) Each of the Company and E*TRADE Securities, Inc. maintains
a system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them required to be disclosed in the Registration Statement and
Prospectus pursuant to the Act and the Rules and Regulations, except as
disclosed in the Registration Statement and the Prospectus.
(w) The Company has complied with all provisions of Section
517.075, Florida Statutes, relating to doing business with the Government of
Cuba or with any person or affiliate located in Cuba.
II. Each Selling Stockholder, severally and not jointly, represents
and warrants to and agrees with each Underwriter and the Company that:
(a) Such Selling Stockholder now has and on the Closing Date,
and on any later date on which Option Shares are purchased from such Selling
Stockholder, will have valid marketable title to the Shares to be sold by
such Selling Stockholder, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest other than pursuant to
this Agreement; and upon delivery of such Shares hereunder and payment of the
purchase price as herein contemplated, each of the Underwriters will obtain
valid marketable title to the Shares purchased by it from such Selling
Stockholder, free and clear of any pledge, lien, security interest pertaining
to such Selling Stockholder or such Selling Stockholder's property,
encumbrance, claim or equitable interest, including any liability for estate
or inheritance taxes, or any liability to or claims of any creditor, devisee,
legatee or beneficiary of such Selling Stockholder.
(b) Such Selling Stockholder has duly authorized (if
applicable), executed and delivered, in the form heretofore furnished to the
Representatives, an irrevocable Power of Attorney (the "Power of Attorney")
appointing ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as
attorneys-in-fact (collectively, the "Attorneys" and individually, an
12
"Attorney") and a Custody Agreement (the "Custody Agreement") with American
Stock Transfer & Trust Company, as custodian (the "Custodian") (which Custody
Agreement may be executed by an attorney-in-fact for the Selling Stockholder
under the Custody Agreement); each of the Power of Attorney and the Custody
Agreement constitutes a valid and binding agreement on the part of such
Selling Stockholder, enforceable in accordance with its terms, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles; and each of
such Selling Stockholder's Attorneys, acting alone, is authorized to execute
and deliver this Agreement and the certificate referred to in Section 6(h)
hereof on behalf of such Selling Stockholder, to determine the purchase price
to be paid by the several Underwriters to such Selling Stockholder as
provided in Section 3 hereof, to authorize the delivery of the Selling
Stockholder Shares and the Option Shares to be sold by such Selling
Stockholder under this Agreement and to duly endorse (in blank or otherwise)
the certificate or certificates representing such Shares or a stock power or
powers with respect thereto, to accept payment therefor, and otherwise to act
on behalf of such Selling Stockholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders required
for the execution and delivery by such Selling Stockholder of the Power of
Attorney and the Custody Agreement, the execution and delivery by or on
behalf of such Selling Stockholder of this Agreement and the sale and
delivery of the Selling Stockholder Shares and the Option Shares to be sold
by such Selling Stockholder under this Agreement (other than, at the time of
the execution hereof (if the Registration Statement has not yet been declared
effective by the Commission), the issuance of the order of the Commission
declaring the Registration Statement effective and such consents, approvals,
authorizations or orders as may be necessary under state or other securities
or Blue Sky laws) have been obtained and are in full force and effect; such
Selling Stockholder, if other than a natural person, has been duly organized
and is validly existing in good standing under the laws of the jurisdiction
of its organization as the type of entity that it purports to be; and such
Selling Stockholder has full legal right, power and authority to enter into
and perform its obligations under this Agreement and such Power of Attorney
and Custody Agreement, and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder under this Agreement.
(d) Such Selling Stockholder will not, during the Lock-up
Period, effect the Disposition of any Securities now owned or hereafter
acquired directly by such Selling Stockholder or with respect to which such
Selling Stockholder has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a
distribution to partners or stockholders of such Selling Stockholder,
provided that the distributees thereof agree in writing to be bound by the
terms of this restriction, or (iii) with the prior written consent of
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC. The foregoing restriction is expressly
agreed to preclude the holder of the Securities from engaging in any hedging
or other transaction which is designed to or reasonably expected to lead to
or result in a Disposition of Securities during the Lock-up Period, even if
such Securities would be disposed of by someone other than the Selling
13
Stockholder. Such prohibited hedging or other transactions would include,
without limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from Securities.
Such Selling Stockholder also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent against the transfer
of the securities held by such Selling Stockholder except in compliance with
this restriction. Notwithstanding the foregoing, the foregoing restrictions
shall not prohibit the sale of Shares by such Selling Stockholder pursuant to
this Agreement.
(e) Certificates in negotiable form for all Shares to be sold
by such Selling Stockholder under this Agreement, together with a stock power
or powers duly endorsed in blank by such Selling Stockholder, have been
placed in custody with the Custodian for the purpose of effecting delivery
hereunder.
(f) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Stockholder and is a valid and
binding agreement of such Selling Stockholder, enforceable in accordance with
its terms, except as rights to indemnification and contribution hereunder may
be limited by applicable law and except as the enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles; and the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
breach or violation of any of the terms and provisions of or constitute a
default under any bond, debenture, note or other evidence of indebtedness, or
under any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder, or any
Selling Stockholder Shares or any Option Shares to be sold by such Selling
Stockholder hereunder, may be bound or, to the best of such Selling
Stockholders' knowledge, result in any violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over
such Selling Stockholder or over the properties of such Selling Stockholder,
or, if such Selling Stockholder is other than a natural person, result in any
violation of any provisions of the charter, bylaws or other organizational
documents of such Selling Stockholder.
(g) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
(h) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
14
(i) All information furnished by or on behalf of such Selling
Stockholder relating to such Selling Stockholder and the Selling Stockholder
Shares that is contained in the representations and warranties of such
Selling Stockholder in such Selling Stockholder's Power of Attorney or set
forth in the Registration Statement or the Prospectus is, and at the time the
Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined), and on any later date on which Option Shares are to be purchased
from such Selling Stockholder, was or will be, true, correct and complete,
and does not, and at the time the Registration Statement became or becomes,
as the case may be, effective and at all times subsequent thereto up to and
on the Closing Date, and on any later date on which Option Shares are to be
purchased from such Selling Stockholder, will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make such information not misleading.
(j) Such Selling Stockholder will review the Prospectus and
will comply with all agreements and satisfy all conditions on its part to be
complied with or satisfied pursuant to this Agreement on or prior to the
Closing Date, or any later date on which Option Shares are to be purchased
from such Selling Stockholder, as the case may be, and will advise one of its
Attorneys and ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC prior to the Closing Date or
such later date on which Option Shares are to be purchased from such Selling
Stockholder, as the case may be, if any statement to be made on behalf of
such Selling Stockholder in the certificate contemplated by Section 6(h)
would be inaccurate if made as of the Closing Date or such later date on
which Option Shares are to be purchased from such Selling Stockholder, as the
case may be.
(k) Such Selling Stockholder does not have, or has waived prior
to the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Shares that are to be
sold by the Company or any of the other Selling Stockholders to the
Underwriters pursuant to this Agreement; such Selling Stockholder does not
have, or has waived prior to the date hereof, any registration right or other
similar right to participate in the offering made by the Prospectus, other
than such rights of participation as have been satisfied by the participation
of such Selling Stockholder in the transactions to which this Agreement
relates in accordance with the terms of this Agreement; and such Selling
Stockholder does not own any warrants, options or similar rights to acquire,
and does not have any right or arrangement to acquire, any capital stock,
rights, warrants, options or other securities from the Company, other than
those described in the Registration Statement and the Prospectus.
(l) Such Selling Stockholder is not aware (without having
conducted any investigation or inquiry) that any of the representations and
warranties of the Company set forth in Section 2.I. above is untrue or
inaccurate in any material respect.
3. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and the Selling
Stockholders agree, severally and not jointly, to sell to the Underwriters,
15
and each Underwriter agrees, severally and not jointly, to purchase from the
Company and the Selling Stockholders, respectively, at a purchase price of
$9.765 per share, the respective number of Firm Company Shares as hereinafter
set forth and Selling Stockholder Shares set forth opposite the names of the
Company and the Selling Stockholders in Schedule B hereto. The obligation of
each Underwriter to the Company and to each Selling Stockholder shall be to
purchase from the Company or such Selling Stockholder that number of Firm
Company Shares or Selling Stockholder Shares, as the case may be, which (as
nearly as practicable, as determined by you) is in the same proportion to the
number of Company Shares or Selling Stockholder Shares, as the case may be,
set forth opposite the name of the Company or such Selling Stockholder in
Schedule B hereto as the number of Firm Shares which is set forth opposite
the name of such Underwriter in Schedule A hereto (subject to adjustment as
provided in Section 10) is to the total number of Firm Shares to be purchased
by all the Underwriters under this Agreement.
The certificates in negotiable form for the Selling Stockholder Shares
have been placed in custody (for delivery under this Agreement) under the
Custody Agreement. Each Selling Stockholder agrees that the certificates for
the Selling Stockholder Shares of such Selling Stockholder so held in custody
are subject to the interests of the Underwriters hereunder, that the
arrangements made by such Selling Stockholder for such custody, including the
Power of Attorney is to that extent irrevocable and that the obligations of
such Selling Stockholder hereunder shall not be terminated by the act of such
Selling Stockholder or by operation of law, whether by the death or
incapacity of such Selling Stockholder or the occurrence of any other event,
except as specifically provided herein or in the Custody Agreement. If any
Selling Stockholder should die or be incapacitated, or if any other such
event should occur, before the delivery of the certificates for the Selling
Stockholder Shares hereunder, the Selling Stockholder Shares to be sold by
such Selling Stockholder shall, except as specifically provided herein or in
the Custody Agreement, be delivered by the Custodian in accordance with the
terms and conditions of this Agreement as if such death, incapacity or other
event had not occurred, regardless of whether the Custodian shall have
received notice of such death or other event.
Delivery of definitive certificates for the Firm Shares to be purchased
by the Underwriters pursuant to this Section 3 shall be made against payment
of the purchase price therefor by the several Underwriters by wire transfer
or certified or official bank check or checks, at the option of the Company,
drawn in same-day funds, payable to the order of the Company with regard to
the Shares being purchased from the Company, and to the order of the
Custodian for the respective accounts of the Selling Stockholders with regard
to the Shares being purchased from such Selling Stockholders, at the offices
of ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other place as may be agreed upon
among the Representatives and the Company and the Attorneys), at 7:00 a.m.,
San Francisco time (a) on the third (3rd) full business day following the
first day that Shares are traded, (b) if this Agreement is executed and
delivered after 1:30 p.m., San Francisco time, the fourth (4th) full business
day following the day that this Agreement is executed and delivered or (c) at
such other time and date not later than seven (7) full business days
following the first day that Shares are traded as the Representatives and the
16
Company and the Attorneys may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date;" provided, however, that if the Company has not made available
to the Representatives copies of the Prospectus within the time provided in
Section 4(d) hereof, the Representatives may, in their sole discretion,
postpone the Closing Date until no later than two (2) full business days
following delivery of copies of the Prospectus to the Representatives. The
certificates for the Firm Shares to be so delivered will be made available to
you at such office or such other location including, without limitation, in
New York City, as you may reasonably request for checking at least one (1)
full business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2)
full business days prior to the Closing Date. If the Representatives so
elect, delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment
of the purchase price on behalf of any Underwriter or Underwriters whose
check or checks shall not have been received by you prior to the Closing Date
for the Firm Shares to be purchased by such Underwriter or Underwriters. Any
such payment by you shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public
offering price of $10.50 per share. After the initial public offering, the
several Underwriters may, in their discretion, vary the public offering
price.
The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), on the inside
front cover concerning stabilization and over-allotment by the Underwriters,
and under the second, sixth and seventh paragraphs and the third sentence of
the fifth paragraph under the caption "Underwriting" in any Preliminary
Prospectus and in the Prospectus constitutes the only information furnished
by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement, and you, on behalf
of the respective Underwriters, represent and warrant to the Company and the
Selling Stockholders that the statements made therein do not include any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
4. Further Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the
time and date that this Agreement is executed and delivered by the parties
17
hereto, to become effective as promptly as possible; the Company will use its
best efforts to cause any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations as may be required subsequent to the date
the Registration Statement is declared effective to become effective as
promptly as possible; the Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus and term sheet meeting the requirements of Rule 434(b) or
(c), as applicable, of the Rules and Regulations, have been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (7) of
Rule 424(b) of the Rules and Regulations; if for any reason the filing of the
final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the
time period prescribed; it will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information; promptly upon your request, it
will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in the opinion of counsel for
the several Underwriters, ▇▇▇▇▇▇ Godward ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
("Underwriters' Counsel"), may be necessary or advisable in connection with
the distribution of the Shares by the Underwriters; it will promptly prepare
and file with the Commission, and promptly notify you of the filing of, any
amendments or supplements to the Registration Statement or Prospectus which
may be necessary to correct any statements or omissions, if, at any time when
a prospectus relating to the Shares is required to be delivered under the
Act, any event shall have occurred as a result of which the Prospectus or any
other prospectus relating to the Shares as then in effect would include any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; in case any Underwriter is
required to deliver a prospectus nine (9) months or more after the effective
date of the Registration Statement in connection with the sale of the Shares,
it will prepare promptly upon request, but at the expense of such
Underwriter, such amendment or amendments to the Registration Statement and
such prospectus or prospectuses as may be necessary to permit compliance with
the requirements of Section 10(a)(3) of the Act; and it will file no
amendment or supplement to the Registration Statement or Prospectus which
shall not previously have been submitted to you a reasonable time prior to
the proposed filing thereof or to which you shall reasonably object in
writing, subject, however, to compliance with the Act and the Rules and
Regulations and the provisions of this Agreement.
18
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of
the initiation or threat of any proceeding for that purpose; and it will
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order
should be issued.
(c) The Company will use its best efforts to qualify the Shares
for offering and sale under the securities laws of such jurisdictions as you
may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except that
the Company shall not be required in connection therewith or as a condition
thereof to qualify as a foreign corporation or to execute a general consent
to service of process in any jurisdiction in which it is not otherwise
required to be so qualified or to so execute a general consent to service of
process. In each jurisdiction in which the Shares shall have been qualified
as above provided, the Company will make and file such statements and reports
in each year as are or may be required by the laws of such jurisdiction for
such purpose.
(d) The Company will furnish to you, as soon as available, and,
in the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, in no event later than the first (1st) full business day
following the first day that Shares are traded, copies of the Registration
Statement (three of which will be signed and which will include all
exhibits), each Preliminary Prospectus, the Prospectus and any amendments or
supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you
may from time to time reasonably request. Notwithstanding the foregoing, if
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC, on behalf of the several Underwriters,
shall agree to the utilization of Rule 434 of the Rules and Regulations, the
Company shall provide to you copies of a Preliminary Prospectus updated in
all respects through the date specified by you in such quantities as you may
from time to time reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement, an earnings statement (which will be in reasonable
detail but need not be audited) complying with the provisions of Section
11(a) of the Act (including, at the election of the Company, Rule 158 of the
Rules and Regulations) and covering a twelve (12) month period beginning
after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof,
the Company will furnish to its stockholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal
year, and will furnish to you and the other several Underwriters hereunder,
upon request (i) concurrently with furnishing such reports to its
19
stockholders, statements of operations of the Company for each of the first
three (3) quarters in the form furnished to the Company's stockholders, (ii)
concurrently with furnishing to its stockholders, a balance sheet of the
Company as of the end of such fiscal year, together with statements of
operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon
of independent certified public accountants, (iii) as soon as they are
available, copies of all reports (financial or other) mailed to stockholders,
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, any securities exchange
or the National Association of Securities Dealers, Inc. ("NASD"), (v) every
material press release and every material news item or article in respect of
the Company or its affairs which was generally released to stockholders by
the Company or any of its subsidiaries, and (vi) any additional information
of a public nature concerning the Company or its subsidiaries, or its
business which you may reasonably request. During such five (5) year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts
of the Company and its subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(i) The Company will file Form SR in conformity with the
requirements of the Act and the Rules and Regulations.
(j) If the transactions contemplated hereby are not consummated
by reason of any failure, refusal or inability on the part of the Company or
any Selling Stockholder to perform any agreement on their respective parts to
be performed hereunder or to fulfill any condition of the Underwriters'
obligations hereunder, or if the Company shall terminate this Agreement
pursuant to Section 11(a) hereof, or if the Underwriters shall terminate this
Agreement pursuant to Section 11(b)(i), the Company will reimburse the
several Underwriters for all out-of-pocket expenses (including fees and
disbursements of Underwriters' Counsel) incurred by the Underwriters in
investigating or preparing to market or marketing the Shares.
(k) If at any time after the Registration Statement becomes
effective until the later of (i) 25 days after the date of the Prospectus and
(ii) the date the Representatives advise the Company that the distribution of
Shares has been completed (which, in the absence of express notice, will be
deemed to be the closing of the sale of the Option Shares or the termination
or expiration of the option period set forth in Section 7(a)), any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Common Stock has been
or is likely to be materially affected (regardless of whether such rumor,
20
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on
such rumor, publication or event.
(l) During the Lock-up Period, the Company will not, without
the prior written consent of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Company LLC, effect the
Disposition of, directly or indirectly, any Securities other than (i) the
sale of the Firm Company Shares and the Option Shares to be sold by the
Company hereunder, (ii) the issuance of options or Common Stock under the
Company's presently authorized 1996 Stock Incentive Plan and the issuance of
Common Stock upon the exercise of options outstanding under the 1993 Stock
Option Plan and the 1983 Employee Incentive Stock Option Plan, (iii) the
issuance of options (or Common Stock upon exercise thereof) to employees,
consultants or directors or otherwise for compensatory purposes outside the
1996 Stock Incentive Plan (provided that the optionee agrees upon exercise of
such options to be bound by a Lock-up Agreement for the days remaining in the
Lock-up Period) or (iv) pursuant to equipment or lease financing activities
entered into in the ordinary course of the Company's business, in connection
with the acquisition by the Company of another business, product or
technology, or to a strategic investor or partner of the Company in
conjunction with an agreement involving a technical, manufacturing or
marketing collaboration in the ordinary course of business; provided, that,
in each case, the parties receiving any such Securities agree not to make a
Disposition of, directly or indirectly, any Securities and such parties are
bound to a Lock-up Agreement for the days remaining in the Lock-up Period.
5. Expenses.
(a) The Company and the Selling Stockholders agree with each
Underwriter that:
(i) The Company will pay and bear all costs and expenses
in connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or supplements
thereto; the printing of this Agreement, the Agreement Among Underwriters,
the Selected Dealer Agreement, the Preliminary Blue Sky Survey and any
Supplemental Blue Sky Survey, the Underwriters' Questionnaire and Power of
Attorney, and any instruments related to any of the foregoing; the issuance
and delivery of the Shares hereunder to the several Underwriters, including
transfer taxes, if any, the cost of all certificates representing the Shares
and transfer agents' and registrars' fees; the fees and disbursements of
counsel for the Company; all fees and other charges of the Company's
independent certified public accountants; the cost of furnishing to the
several Underwriters copies of the Registration Statement (including
appropriate exhibits), Preliminary Prospectus and the Prospectus, and any
amendments or supplements to any of the foregoing; NASD filing fees and the
cost of qualifying the Shares under the laws of such jurisdictions as you may
designate (including filing fees and reasonable and customary fees and
disbursements of Underwriters' Counsel in connection with such NASD filings
21
and Blue Sky qualifications); and all other expenses directly incurred by the
Company in connection with the performance of their obligations hereunder.
Any additional expenses incurred as a result of the sale of the Shares by the
Selling Stockholders will be borne collectively by the Company and the
Selling Stockholders. The provisions of this Section 5(a)(i) are intended to
relieve the Underwriters from the payment of the expenses and costs which the
Selling Stockholders and the Company hereby agree to pay, but shall not
affect any agreement which the Selling Stockholders and the Company may make,
or may have made, for the sharing of any of such expenses and costs. Such
agreements shall not impair the obligations of the Company and the Selling
Stockholders hereunder to the several Underwriters.
(ii) In addition to its other obligations under Section
8(a) hereof, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(a) hereof, it will reimburse the Underwriters on a
monthly basis for all reasonable legal or other expenses reasonably incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by
the Commission, a court or arbitration tribunal of competent jurisdiction.
To the extent that any such interim reimbursement payment is so held to have
been improper, the Underwriters shall promptly return such payment to the
Company together with interest, compounded daily, determined on the basis of
the prime rate (or other commercial lending rate for borrowers of the highest
credit standing) listed from time to time in The Wall Street Journal which
represents the base rate on corporate loans posted by a substantial majority
of the nation's thirty (30) largest banks (the "Prime Rate"). Any such
interim reimbursement payments which are not made to the Underwriters within
thirty (30) days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request.
(iii) In addition to their other obligations under Section
8(b) hereof, each Selling Stockholder agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(b) hereof relating to such Selling
Stockholder, it will reimburse the Underwriters on a monthly basis for all
reasonable legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of such Selling Stockholder's obligation
to reimburse the Underwriters for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is
so held to have been improper, the Underwriters shall promptly return such
payment to the Selling Stockholders, together with interest, compounded
daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Underwriters within thirty
(30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
22
(b) In addition to their other obligations under Section 8(c)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(c) hereof, they will reimburse the
Company and each Selling Stockholder on a monthly basis for all reasonable
legal or other expenses reasonably incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Underwriters' obligation to reimburse the
Company and each such Selling Stockholder for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company and each
such Selling Stockholder shall promptly return such payment to the
Underwriters together with interest, compounded daily, determined on the
basis of the Prime Rate. Any such interim reimbursement payments which are
not made to the Company and each such Selling Stockholder within thirty (30)
days of a request for reimbursement shall bear interest at the Prime Rate
from the date of such request.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(a)(ii), 5(a)(iii) and 5(b) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the basis
on which such amounts shall be apportioned among the reimbursing parties,
shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock
Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the NASD.
Any such arbitration must be commenced by service of a written demand for
arbitration or a written notice of intention to arbitrate, therein electing
the arbitration tribunal. In the event the party demanding arbitration does
not make such designation of an arbitration tribunal in such demand or
notice, then the party responding to said demand or notice is authorized to
do so. Any such arbitration will be limited to the operation of the interim
reimbursement provisions contained in Sections 5(a)(ii), 5(a)(iii) and 5(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses that is created by the provisions of
Sections 8(a), 8(b) and 8(c) hereof or the obligation to contribute to
expenses that is created by the provisions of Section 8(e) hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date
and any later date on which Option Shares are to be purchased, as the case
may be, of the representations and warranties of the Company and the Selling
Stockholders herein, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 p.m., San Francisco time, on the date following the date of
this Agreement, or such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
23
issued and no proceedings for that purpose shall have been initiated or, to
the knowledge of the Company, any Selling Stockholder or any Underwriter,
threatened by the Commission, and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and such counsel shall have been furnished with such papers and information
as they may reasonably have requested to enable them to pass upon the matters
referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, or any later date on which Option Shares are
to be purchased, as the case may be, there shall not have been any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your reasonable judgment, is material and adverse and that makes
it, in your reasonable judgment, impracticable or inadvisable to proceed with
the public offering of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be,
the following opinion of counsel for the Company and the Selling
Stockholders, dated the Closing Date or such later date on which Option
Shares are to be purchased addressed to the Underwriters and with reproduced
copies or signed counterparts thereof for each of the Underwriters, to the
effect that:
(i) 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 full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement and Prospectus;
(ii) Each of E*TRADE Securities, Inc. and E*TRADE Online
Ventures, Inc. has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with the corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement and Prospectus;
(iii) To such counsel's knowledge, each of the Company,
E*TRADE Securities, Inc. and E*TRADE Online Ventures, Inc. is duly qualified
to do business as a foreign corporation and is in good standing in each state
in the United States, if any, in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
24
operations or business of the Company and its subsidiaries considered as one
enterprise. To such counsel's knowledge, the Company does not own (other
than minority interests) or control, directly or indirectly, any corporation,
association or other entity other than E*TRADE Securities, Inc., E*TRADE
Capital, Inc., TRADE*Plus Brokerage, Inc. and E*TRADE Online Ventures, Inc.;
(iv) The authorized capital stock of the Company conforms
as to legal matters in all material respects to the description thereof
contained in the Registration Statement and Prospectus under the captions
"Capitalization" and "Description of Capital Stock";
(v) The outstanding shares of capital stock of the
Company are as set forth in the Prospectus under the caption "Capitalization"
as of the dates stated therein, have been duly and validly authorized and
issued, are fully paid and nonassessable, and, to such counsel's knowledge,
are not subject to any preemptive or other similar rights to subscribe for or
purchase securities;
(vi) All issued and outstanding shares of capital stock
of each Subsidiary have been duly authorized and validly issued and are fully
paid and nonassessable, and, to such counsel's knowledge, have not been
issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right to
subscribe for or purchase securities and, to such counsel's knowledge, are
owned by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest;
(vii) The Company has the corporate power and authority
to enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares;
(viii) This Agreement has been duly authorized, executed
and delivered by the Company and, assuming due authorization, execution and
delivery by you, is a valid and binding agreement of the Company, enforceable
in accordance with its terms, except insofar as indemnification and
contribution provisions may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally or by general equitable principles and limitations on availability
of equitable remedies;
(ix) The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement will
not contravene the certificate of incorporation or bylaws of the Company or
its Subsidiaries, or, to such counsel's knowledge, any provision of
applicable law or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any of its properties
or any of its Subsidiaries or any of their properties, or, to such counsel's
knowledge, constitute a material breach or default under any material
agreement or other instrument binding upon the Company or any of its
Subsidiaries that has been identified to such counsel by the Company as
material and filed as an exhibit to the Registration Statement, and no
consent, approval, authorization or order of or qualification with any
25
governmental agency in the United States is required for the performance by
the Company of its obligations under this Agreement, except such as have been
obtained under the Act or such as may be required by the securities or Blue
Sky laws of the various states (on which such counsel need express no
opinion) in connection with the purchase and distribution of the Firm Shares
or the Option Shares, as the case may be, by the Underwriters;
(x) The Registration Statement has become effective
under the Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Act;
(xi) The descriptions in the Registration Statement and
the Prospectus of the charter and bylaws of the Company as set forth under
the captions "Risk Factors -- Effects of Certain Charter and Bylaw
Provisions" and "Description of Capital Stock" are accurate and fairly
present the information required to be presented by the Act and the
applicable Rules and Regulations;
(xii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened to which the Company or any of
its Subsidiaries is or may become a party or to which any of the properties
of the Company or any of the properties of its Subsidiaries is or may become
subject that are required to be described in the Registration Statement or
the Prospectus by the Act or the Rules and Regulations and are not so
described, nor, to such counsel's knowledge, is there any statute or
regulation to which the Company is subject or any contract or other document
to which the Company is a party that is known to such counsel that is
required by the Act or the Rules and Regulations to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described or filed as required;
(xiii) The certificates evidencing the Firm Shares or
the Option Shares, as the case may be, to be delivered hereunder are in
proper form under Delaware law and, when duly countersigned by the Company's
transfer agent and registrar, and delivered to you or upon your order against
payment of the agreed consideration therefor in accordance with the
provisions of this Agreement, the Firm Shares or the Option Shares, as the
case may be, represented thereby will be duly authorized and validly issued,
fully paid and nonassessable and will not have been issued in violation of or
subject to any preemptive rights or, to such counsel's knowledge, other
rights to subscribe for or purchase securities;
(xiv) To such counsel's knowledge, no holders of
securities of the Company have rights which have not been waived to the
registration of shares of Common Stock or other securities because of the
filing of the Registration Statement by the Company or the issuance and sale
of the Firm Shares or the Option Shares, as the case may be;
(xv) To such counsel's knowledge: each Selling
Stockholder that is not a natural person has full legal right, power and
authority to enter into and to perform its obligations under the Power of
26
Attorney and Custody Agreement to be executed and delivered by it in
connection with the transactions contemplated herein; the Power of Attorney
and Custody Agreement of each Selling Stockholder that is not a natural
person has been duly authorized by such Selling Stockholder; the Power of
Attorney and Custody Agreement of each Selling Stockholder has been duly
executed and delivered by or on behalf of such Selling Stockholder; and the
Power of Attorney and Custody Agreement of each Selling Stockholder
constitutes the valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles or the limitation on availability of equitable
remedies, and except with respect to those provisions relating to indemnities
or contributions for liabilities, as to which such counsel need express no
opinion;
(xvi) To such counsel's knowledge, each of the Selling
Stockholders has full legal right, power and authority to enter into and to
perform its obligations under this Agreement and to sell, transfer, assign
and deliver the Shares to be sold by such Selling Stockholder hereunder;
(xvii) To such counsel's knowledge, this Agreement has
been duly authorized by each Selling Stockholder that is not a natural person
and has been duly executed and delivered by or on behalf of each Selling
Stockholder; and
(xviii) To such counsel's knowledge, upon the delivery
of and payment for the Shares as contemplated in this Agreement, each of the
Underwriters will receive valid title to the Shares purchased by it from such
Selling Stockholder, free and clear of any pledge, lien, security interest
pertaining to such Selling Stockholder or to such Selling Stockholder's
property, encumbrance, claim or equitable interest. In rendering such
opinion, such counsel may assume that the Underwriters are bona fide
purchasers and without notice of any defect in the title of the Shares being
purchased from the Selling Stockholders.
In addition, such counsel shall state that, in addition to rendering
legal advice and assistance to the Company in the course of the preparation
of the Registration Statement and the Prospectus, involving, among other
things, discussions and inquiries concerning various legal matters and the
review of certain corporate records, documents and proceedings, such counsel
also participated in conferences with certain officers and other
representatives of the Company, including its independent public accountants
and with you and your counsel at which the contents of the Registration
Statement, the Prospectus and related matters were discussed. Such counsel
may state that such counsel has not, however, except with respect to matters
expressly covered above by such counsel's opinion, independently checked or
verified the accuracy, completeness or fairness of the information contained
in the Registration Statement and the Prospectus.
Such counsel shall state, however, that based upon such counsel's
participation as described in the preceding paragraph, (i) such counsel
believes that the Registration Statement and the Prospectus (except for
27
financial statements, as to which such counsel need express no belief), as of
the effective date of the Registration Statement, complied as to form in all
material respects with the requirements of the Act and the applicable rules
and regulations of the Commission thereunder, and (ii) such counsel confirms
that such counsel has no reason to believe that (except for financial
statements, as to which such counsel need express no belief) either the
Registration Statement or the Prospectus, as of such effective date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that (except for financial statements,
as to which such counsel need express no belief) the Prospectus, on the
Closing Date or any later date on which the Option Shares are to be
purchased, as the case may be, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Such counsel is not called upon to express, and need not express, any
view, opinion or belief as to the financial statements, schedules,
statistical data and other financial data contained in the Registration
Statement or the Prospectus.
Counsel rendering the foregoing opinion may rely as to questions of law
not involving the laws of the United States or the State of California or the
Delaware General Corporation Law upon opinions of local counsel, and as to
questions of fact upon representations or certificates of officers of the
Company, the Selling Stockholders or officers of the Selling Stockholders
(when the Selling Stockholder is not a natural person), and of government
officials, in which case their opinion is to state that they are so relying
and that they have no knowledge of any material misstatement or inaccuracy in
any such opinion, representation or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, an
opinion of ▇▇▇▇▇▇ Godward ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, in form and substance
reasonably satisfactory to you, with respect to the sufficiency of all such
corporate proceedings and other legal matters relating to this Agreement and
the transactions contemplated hereby as you may reasonably require, and the
Company shall have furnished to such counsel such documents as they may have
reasonably requested for the purpose of enabling them to pass upon such
matters.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
letter from Deloitte & Touche LLP addressed to the Underwriters, dated the
Closing Date or such later date on which Option Shares are to be purchased,
as the case may be, confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable published Rules and Regulations and based upon the procedures
described in such letter delivered to you concurrently with the execution of
this Agreement (herein called the "Original Letter"), but carried out to a
28
date not more than five (5) business days prior to the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be,
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be,
and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter which are necessary to reflect
any changes in the facts described in the Original Letter since the date of
such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your reasonable judgment, is material and adverse and that makes
it, in your reasonable judgment, impracticable or inadvisable to proceed with
the public offering of the Shares as contemplated by the Prospectus. The
Original Letter from Deloitte & Touche LLP shall be addressed to or for the
use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that Deloitte &
Touche LLP are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheet of the Company as of September 30, 1995 and
related consolidated statements of operations, stockholders' equity, and cash
flows for the twelve (12) months ended September 30, 1995, (iii) state that
Deloitte & Touche LLP has performed the procedures set out in Statement on
Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information and providing the report of Deloitte & Touche LLP as described in
SAS 71 on the financial statements for each of the quarters presented in the
Prospectus (the "Quarterly Financial Statements"), (iv) state that in the
course of such review, nothing came to their attention that leads them to
believe that any material modifications need to be made to any of the
Quarterly Financial Statements in order for them to be in compliance with
generally accepted accounting principles consistently applied across the
periods presented, and (v) address other matters agreed upon by Deloitte &
Touche LLP and you. In addition, you shall have received from Deloitte &
Touche LLP a letter addressed to the Company and made available to you for
the use of the Underwriters stating that their review of the Company's system
of internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's consolidated
financial statements as of September 30, 1995, did not disclose any
weaknesses in internal controls that they considered to be material
weaknesses.
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, signed by the
Chief Executive Officer and Chief Financial Officer of the Company, to the
effect that, and you shall be reasonably satisfied that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the Closing Date
29
or any later date on which Option Shares are to be purchased, as the case may
be, and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to the
Closing Date or any later date on which Option Shares are to be purchased, as
the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and
at all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein
by the Act and the Rules and Regulations and in all material respects
conformed to the requirements of the Act and the Rules and Regulations, the
Registration Statement, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an amended
or supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has
not been (a) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise, (b) any
transaction that is material to the Company and its subsidiaries considered
as one enterprise, except transactions entered into in the ordinary course of
business, (c) any obligation, direct or contingent, that is material to the
Company and its subsidiaries considered as one enterprise, incurred by the
Company or its subsidiaries, except obligations incurred in the ordinary
course of business, (d) any change in the capital stock or outstanding
indebtedness of the Company or any of its subsidiaries that is material to
the Company and its subsidiaries considered as one enterprise, (e) any
dividend or distribution of any kind declared, paid or made on the capital
stock of the Company or any of its subsidiaries, or (f) any loss or damage
(whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained which has a material adverse effect on
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise.
(h) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for each Selling
Stockholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have not
30
been informed that:
(i) The representations and warranties made by such
Selling Stockholder herein are not true or correct in any material respect on
the Closing Date or on any later date on which Option Shares are to be
purchased, as the case may be; or
(ii) Such Selling Stockholder has not complied with any
obligation or satisfied any condition which is required to be performed or
satisfied on the part of such Selling Stockholder at or prior to the Closing
Date or any later date on which Option Shares are to be purchased, as the
case may be.
(i) The Company shall have obtained and delivered to you
an agreement from each officer and director of the Company, each Selling
Stockholder and the beneficial owners of 95% of the outstanding shares of
Common Stock (assuming conversion of all outstanding shares of Preferred
Stock into Common Stock) (including shares held by such officers, directors
and Selling Stockholders) as of the date hereof in writing prior to the date
hereof that such person will not, during the Lock-up Period, effect the
Disposition of any Securities now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires
the power of disposition, otherwise than (i) as a bona fide gift or gifts,
provided the donee or donees thereof agree in writing to be bound by this
restriction, (ii) as a distribution to partners or stockholders of such
person, provided that the distributees thereof agree in writing to be bound
by the terms of this restriction, or (iii) with the prior written consent of
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC. The foregoing restriction shall have been
expressly agreed to preclude the holder of the Securities from engaging in
any hedging or other transaction which is designed to or reasonably expected
to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than
such holder. Such prohibited hedging or other transactions would include,
without limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from Securities.
Furthermore, such person will have also agreed and consented to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction. Notwithstanding the foregoing, the fore-going restrictions
shall not prohibit the sale of Shares by such person pursuant to this
Agreement.
(j) The Company and the Selling Stockholders shall have
furnished to you such further certificates and documents as you shall
reasonably request (including certificates of officers of the Company, the
Selling Stockholders or officers of the Selling Stockholders (when the
Selling Stockholder is not a natural person) as to the accuracy of the
representations and warranties of the Company and the Selling Stockholders
herein, as to the performance by the Company and the Selling Stockholders of
their respective obligations hereunder and as to the other conditions
31
concurrent and precedent to the obligations of the Underwriters hereunder).
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company and the Selling
Stockholders will furnish you with such number of conformed copies of such
opinions, certificates, letters and documents as you shall reasonably
request.
7. Option Shares.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company and a certain Selling Stockholder identified on
Schedule B hereto hereby grant to the several Underwriters, for the purpose
of covering over-allotments in connection with the distribution and sale of
the Firm Shares only, a nontransferable option to purchase up to an aggregate
of 849,750 Option Shares at the purchase price per share for the Firm Shares
set forth in Section 3 hereof. Such option may be exercised by the
Representatives on behalf of the several Underwriters on only one (1)
occasion in whole or in part during the period of thirty (30) days after the
date on which the Firm Shares are initially offered to the public, by giving
written notice to the Company and the Attorneys for Selling Stockholders.
The number of Option Shares to be purchased by each Underwriter upon the
exercise of such option shall be the same proportion of the total number of
Option Shares to be purchased by the several Underwriters pursuant to the
exercise of such option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of
Firm Shares purchased by the several Underwriters (set forth in Schedule A
hereto), adjusted by the Representatives in such manner as to avoid
fractional shares. The number of Option Shares to be purchased from the
Company and such Selling Stockholder pursuant to this Section 7 shall be that
number of Option Shares as is set forth opposite the name of the Company and
such Selling Stockholder in Schedule B hereto.
The certificate or certificates in negotiable form for the Option Shares
to be sold by the Selling Stockholder set forth on Schedule B hereto have
been placed in custody (for delivery under this Agreement) under the Custody
Agreement. The Selling Stockholder who has granted the option hereunder
agrees that the certificate or certificates for the Option Shares of such
Selling Stockholder so held in custody are subject to the interests of the
Underwriters hereunder, that the arrangements made by such Selling
Stockholder for such custody, including the Power of Attorney, are to that
extent irrevocable and that the obligations of such Selling Stockholder
hereunder shall not be terminated by the act of such Selling Stockholder or
by operation of law, whether by the death or incapacity of such Selling
Stockholder or the occurrence of any other event, except as specifically
provided herein or in the Custody Agreement. If such Selling Stockholder
should die or be incapacitated, or if any other such event should occur,
before the delivery of the certificate or certificates for the Option Shares
hereunder, the Option Shares to be sold by such Selling Stockholder shall,
except as specifically provided herein or in the Custody Agreement, be
delivered by the Custodian in accordance with the terms and conditions of
32
this Agreement as if such death, incapacity or other event had not occurred,
regardless of whether the Custodian shall have received notice of such death
or other event.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by wire transfer or certified or
official bank check or checks, at the option of the Company, drawn in same-
day funds, payable to the order of the Company with regard to the Shares
being purchased from the Company, and to the order of the Custodian for the
account of the Selling Stockholder with regard to the Shares being purchased
from such Selling Stockholder, at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at
such other place as may be agreed upon among the Representatives and the
Company and the Attorneys), at 7:00 a.m., San Francisco time (i) on the
Closing Date, if written notice of the exercise of such option is received by
the Company at least two (2) full business days prior to the Closing Date, or
(ii) on a date which shall not be later than the third (3rd) full business
day following the date the Company and the Attorneys for the Selling
Stockholders receive written notice of the exercise of such option, if such
notice is received by the Company and the Attorneys for the Selling
Stockholders less than two (2) full business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to
be made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may
be made by credit through full fast transfer to the accounts at The
Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment
of the purchase price on behalf of any Underwriter or Underwriters whose
check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such
Underwriter or Underwriters. Any such payment by you shall not relieve any
such Underwriter or Underwriters of any of its or their obligations
hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment
and delivery for such Option Shares) to the accuracy of and compliance with
the representations, warranties and agreements of the Company and the Selling
Stockholders herein, to the accuracy of the statements of the Company, the
Selling Stockholders and officers of the Company made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder, to the conditions set
forth in Section 6 hereof, as applicable, and to the condition that all
33
proceedings taken at or prior to the payment date in connection with the sale
and transfer of such Option Shares shall be satisfactory in form and
substance to you and to Underwriters' Counsel, and you shall have been
furnished with all such documents, certificates and opinions as you may
reasonably request in order to evidence the accuracy and completeness of any
of the representations, warranties or statements, the performance of any of
the covenants or agreements of the Company and the Selling Stockholders or
the satisfaction of any of the conditions herein contained.
8. Indemnification and Contribution.
(a) The Company agrees to 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, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities (or actions in respect thereof) arising out of or
based upon (i) any breach of any representation, warranty, agreement or
covenant of the Company herein contained, (ii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein 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,
and agrees to reimburse each Underwriter for any legal or other related
expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such Preliminary
Prospectus or the Prospectus, or any such amendment or supplement thereto, in
reliance upon, and in conformity with, written information relating to any
Underwriter furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof and, provided further,
that the indemnity agreement provided in this Section 8(a) with respect to
any Preliminary Prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any losses, claims, damages, liabilities or
actions based upon any untrue statement or alleged untrue statement of
material fact or omission or alleged omission to state therein a material
fact purchased Shares, if a copy of the Prospectus in which such untrue
statement or alleged untrue statement or omission or alleged omission was
corrected had not been sent or given to such person within the time required
by the Act and the Rules and Regulations, unless such failure is the result
of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the
34
Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
(b) Each Selling Stockholder, severally and not jointly, agrees
to 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, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of
any representation, warranty, agreement or covenant of such Selling
Stockholder herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) any untrue statement or
alleged untrue statement of any material fact contained in any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, in the case of subparagraphs (ii) and (iii)
of this Section 8(b) to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company or such Underwriter by such Selling Stockholder, directly or
through such Selling Stockholder's representatives, specifically for use in
the preparation thereof, and agrees to reimburse each Underwriter for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement provided in this Section 8(b)
with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any losses, claims, damages,
liabilities or actions based upon any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state therein
a material fact purchased Shares, if a copy of the Prospectus in which such
untrue statement or alleged untrue statement or omission or alleged omission
was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(b) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any
liabilities which such Selling Stockholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and each Selling Stockholder against
any losses, claims, damages or liabilities, joint or several, to which the
Company or such Selling Stockholder may become subject under the Act or
otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities (or actions in respect thereof) arising out of or
based upon (i) any breach of any representation, warranty, agreement or
covenant of such Underwriter herein contained, (ii) any untrue statement or
35
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in the case of subparagraphs (ii)
and (iii) of this Section 8(c) to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter, directly or through you,
specifically for use in the preparation thereof, and agrees to reimburse the
Company and each such Selling Stockholder for any legal or other expenses
reasonably incurred by the Company and each such Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(c) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, each Selling Stockholder and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any
liabilities which each Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 8, except to the extent that the
indemnifying party has been materially prejudiced by such omission. In case
any such action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of the indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
36
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Section
8(a), 8(b) or 8(c) hereof who are parties to such action), (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party. In no event shall any indemnifying
party be liable in respect of any amounts paid in settlement of any action
unless the indemnifying party shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnification could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on all claims that are the
subject matter of such proceeding.
(e) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this
Section 8 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that this Section 8
provides for indemnification in such case, all the parties hereto shall
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion so
that, except as set forth in Section 8(f) hereof, the Underwriters severally
and not jointly are responsible pro rata for the portion represented by the
percentage that the underwriting discount bears to the initial public
offering price, and the Company and the Selling Stockholders are responsible
for the remaining portion, provided, however, that (i) no Underwriter shall
be required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Shares purchased by such Underwriter
exceeds the amount of damages which such Underwriter has otherwise been
required to pay and (ii) no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section 8(e) shall
extend upon the same terms and conditions to, and shall inure to the benefit
of, each person, if any, who controls any Underwriter, the Company or any
Selling Stockholder within the meaning of the Act or the Exchange Act and
each officer of the Company who signed the Registration Statement and each
director of the Company.
(f) Any provision hereof to the contrary notwithstanding, the
liability of each Selling Stockholder under the representations, warranties
and agreements contained herein and under the indemnity and contribution
37
agreements contained in the provisions of this Section 8 shall be limited to
an amount equal to the initial public offering price of the Selling
Stockholder Shares sold by such Selling Stockholder to the Underwriters minus
the amount of the underwriting discount paid thereon to the Underwriters by
such Selling Stockholder. In addition, a Selling Stockholder shall not be
required to provide indemnification or contribution hereunder to the
Underwriters in an amount in excess of such Selling Stockholder's pro rata
share of the amount of such indemnification or contribution (based on the
number of shares sold by such Selling Stockholder and the Company) until the
Underwriters have first made a demand on the Company with respect to such
indemnification or contribution and the Company shall have either rejected
such demand or failed to make such requested payment within sixty (60) days
after receipt of such demand. The Company and such Selling Stockholders may
agree, as among themselves and without limiting the rights of the
Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation,
the provisions of this Section 8, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 8
fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required
by the Act and the Exchange Act.
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company, the Selling Stockholders and the Underwriters herein or in
certificates delivered pursuant hereto, and the indemnity and contribution
agreements contained in Section 8 hereof shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter within the meaning of
the Act or the Exchange Act, or by or on behalf of the Company or any Selling
Stockholder, or any of their officers, directors or controlling persons
within the meaning of the Act or the Exchange Act, and shall survive the
delivery of the Shares to the several Underwriters hereunder or termination
of this Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such
Firm Shares in accordance with the terms hereof, and if the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters so agreed
but failed to purchase does not exceed 10% of the Firm Shares, the remaining
Underwriters shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
38
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm
Shares which the defaulting Underwriter or Underwriters so agreed but failed
to purchase. If such remaining Underwriters do not, at the Closing Date,
take up and pay for the Firm Shares which the defaulting Underwriter or
Underwriters so agreed but failed to purchase, the Closing Date shall be
postponed for twenty-four (24) hours to allow the several Underwriters the
privilege of substituting within twenty-four (24) hours (including non-
business hours) another underwriter or underwriters (which may include any
nondefaulting Underwriter) satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid by such
postponed Closing Date, the Closing Date may, at the option of the Company,
be postponed for a further twenty-four (24) hours, if necessary, to allow the
Company the privilege of finding another underwriter or underwriters,
satisfactory to you, to purchase the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase. If it shall be
arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 10, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven
(7) full business 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 promptly to file any
amendments to the Registration Statement, supplements to the Prospectus or
other such documents which may thereby be made necessary, and (ii) the
respective number of Firm Shares to be purchased by the remaining
Underwriters and substituted underwriter or underwriters shall be taken as
the basis of their underwriting obligation. If the remaining Underwriters
shall not take up and pay for all such Firm Shares so agreed to be purchased
by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or
shall not elect to seek another underwriter or underwriters for such Firm
Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company nor any Selling
Stockholder shall be liable to any Underwriter (except as provided in
Sections 5 and 8 hereof) nor shall any Underwriter (other than an Underwriter
who shall have failed, otherwise than for some reason permitted under this
Agreement, to purchase the number of Firm Shares agreed by such Underwriter
to be purchased hereunder, which Underwriter shall remain liable to the
Company, the Selling Stockholders and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company or any Selling
Stockholder (except to the extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of (i)
6:30 a.m., San Francisco time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
39
public offering of any of the Shares by the Underwriters after the
Registration Statement becomes effective. The time of the initial public
offering shall mean the time of the release by you, for publication, of the
first newspaper advertisement relating to the Shares, or the time at which
the Shares are first generally offered by the Underwriters to the public by
letter, telephone, telegram or telecopy, whichever shall first occur. By
giving notice as set forth in Section 12 before the time this Agreement
becomes effective, you, as Representatives of the several Underwriters, or
the Company, may prevent this Agreement from becoming effective without
liability of any party to any other party, except as provided in Sections
4(j), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be,
(i) if the Company or any Selling Stockholder shall have failed, refused or
been unable to perform any agreement on its part to be performed, or because
any other condition of the Underwriters' obligations hereunder required to be
fulfilled is not fulfilled, including, without limitation, any change in the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your reasonable judgment, is material and adverse, or (ii) if
additional material governmental restrictions, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New
York Stock Exchange or on the American Stock Exchange or in the over the
counter market by the NASD, or trading in securities generally shall have
been suspended on either such exchange or in the over the counter market by
the NASD, or if a banking moratorium shall have been declared by federal, New
York or California authorities, or (iii) if the Company shall have sustained
a loss by strike, fire, flood, earthquake, accident or other calamity of such
character as to interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in
the general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency
which, in the reasonable opinion of the Representatives, makes it
impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus. In the event of termination
pursuant to subparagraph (i) above, the Company shall remain obligated to pay
costs and expenses pursuant to Sections 4(j), 5 and 8 hereof. Any
termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party except as provided in
Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed
40
by letter. If the Company shall elect to prevent this Agreement from
becoming effective, the Company shall promptly notify you by telephone,
telecopy or telegram, in each case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to
you shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to you c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company
LLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
telecopier number (▇▇▇) ▇▇▇-▇▇▇▇, Attention: General Counsel; if sent to the
Company, such notice shall be mailed, delivered, telegraphed (and confirmed
by letter) or telecopied (and confirmed by letter) to E*TRADE Group, Inc.,
Four Embarcadero Place, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
telecopier number (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief
Executive Officer; if sent to one or more of the Selling Stockholders, such
notice shall be sent mailed, delivered, telegraphed (and confirmed by letter)
or telecopied (and confirmed by letter) to ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as Attorneys-in-Fact for the Selling
Stockholders, at E*TRADE Group, Inc., Four Embarcadero Place, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, telecopier number (▇▇▇) ▇▇▇-▇▇▇▇.
13. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and the Selling
Stockholders and their respective executors, administrators, successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person or entity, other than the parties
hereto and their respective executors, administrators, successors and
assigns, and the controlling persons within the meaning of the Act or the
Exchange Act, officers and directors referred to in Section 8 hereof, any
legal or equitable right, remedy or claim in respect of this Agreement or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of
the parties hereto and their respective executors, administrators, successors
and assigns and said controlling persons and said officers and directors, and
for the benefit of no other person or entity. No purchaser of any of the
Shares from any Underwriter shall be construed a successor or assign by
reason merely of such purchase.
In all dealings with the Company and the Selling Stockholders under this
Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and the Selling Stockholders shall be entitled to act and rely
upon any statement, request, notice or agreement made or given by you jointly
or by ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC on behalf of you.
14. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
15. Counterparts. This Agreement may be signed in several
counterparts, each of which will constitute an original.
If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
41
shall constitute a binding agreement among the Company, the Selling
Stockholders and the several Underwriters.
Very truly yours,
E*TRADE GROUP, INC.
By:/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
SELLING STOCKHOLDERS
By:/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Attorney-in-Fact for the Selling Stockholders
named in Schedule B hereto
ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY LLC
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC
DEUTSCHE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇/▇. ▇. ▇▇▇▇▇▇▇▇ INC.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY LLC
By ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY GROUP, L.L.C.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------
Authorized Signatory
42
SCHEDULE A
Underwriters Number of
Firm Shares
To Be
Purchased
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company LLC 2,099,250
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC 1,866,000
Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇/▇. ▇. ▇▇▇▇▇▇▇▇ Inc. 699,750
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C. 200,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., L.L.C. 200,000
Mesirow Financial, Inc. 200,000
Sands Brothers & Co., Ltd. 200,000
Unterberg Harris 200,000
---------
Total 5,665,000
=========
43
SCHEDULE B
Number of Firm Number of Option
Shares To Be Sold Shares To Be Sold
E*Trade Group, Inc. 5,000,000 609,750
========= =======
Name of Selling Stockholder
Number of Firm Number of Option
Shares To Be Sold Shares To Be Sold
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ 90,000 0
▇. ▇. ▇▇▇▇▇▇ 2,100 0
▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇ ▇. ▇▇▇▇▇▇, Trustees,
▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇ ▇. ▇▇▇▇▇▇ Family
Trust 269 U/A Dated 08/28/91 36,600 0
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ & ▇▇▇▇▇▇ ▇. ▇▇▇▇,
Trustees,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇ Revocable
Living Trust Dated 4/12/91 47,530 0
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 8,820 0
Hawaiian Trust Company, Ltd., Agent for the
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Family
Limited Partnership 54,840 0
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 17,040 0
Jackson, Tufts, ▇▇▇▇ & Black Profit
Sharing Plan
f/b/▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 7,200 0
▇▇▇▇▇▇ ▇. & ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as Joint Tenants 18,930 0
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Individual Retirement Account 60,000 0
▇▇▇▇▇ ▇. ▇▇▇▇ & ▇▇▇▇▇ ▇. ▇▇▇▇, Trustees,
▇▇▇▇ Revocable Family Trust 12,000 0
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 14,040 0
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,000 0
▇▇▇▇▇ ▇. ▇▇▇ 27,660 0
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 11,040 0
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 4,020 0
▇▇▇▇▇ ▇▇▇▇▇ 15,000 0
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
Trustees, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇ Intervivos Trust
Dated August 16, 1993 15,000 0
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Lewena ▇▇▇▇▇▇ 100,460 0
▇▇▇▇▇ ▇▇▇▇▇▇ 4,500 0
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 4,500 0
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 6,000 0
▇▇▇▇ ▇. & ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 7,000 0
▇▇▇▇▇▇ ▇. & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust 72,000 0
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 720 0
▇▇▇▇▇ ▇▇▇▇▇▇ 9,000 0
▇▇▇▇▇▇ ▇. Waymost & ▇▇▇▇▇▇▇▇▇ ▇. Waymost,
Trustees, Waymost Family Revocable Trust 12,000 0
▇▇▇▇▇▇ ▇. ▇▇▇▇▇/▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Joint Tenants 6,000 0
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 0 240,000
--------- ---------
TOTAL 665,000 240,000
========= =========