EXHIBIT 1.1
BLUE NILE, INC.
(a Delaware corporation)
3,740,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: _________, 2004
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BLUE NILE, INC.
(a Delaware corporation)
3,740,000 Shares of Common Stock
(Par Value $0.001 Per Share)
PURCHASE AGREEMENT
_________, 2004
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇
& ▇▇▇▇▇ Incorporated
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
as Representatives of the several Underwriters
4 World Financial Center
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Blue Nile, Inc., a Delaware corporation (the "Company"), and the
persons listed in Schedule B hereto (the "Selling Stockholders"), confirm their
respective agreements with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ &
▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and each of the other Underwriters named
in Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇ and Bear, ▇▇▇▇▇▇▇ & Co. Inc., are acting as
representatives (in such capacity, the "Representatives"), with respect to (i)
the sale by the Company and the Selling Stockholders, acting severally and not
jointly, and the purchase by the Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $0.001
per share, of the Company ("Common Stock") set forth in Schedules A and B
hereto and (ii) the grant by the Company and the Selling Stockholders to the
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of 561,000 additional shares of
Common Stock to cover overallotments, if any. The aforesaid 3,740,000 shares of
Common Stock (the "Initial Securities") to be purchased by the Underwriters and
all or any part of the 561,000 shares of Common Stock subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities".
The Company and the Selling Stockholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem(s) advisable after this Agreement has been executed and
delivered.
The Company, the Selling Stockholders and the Underwriters agree that
up to [ ] shares of the Securities to be purchased by the Underwriters
(the "Reserved Securities") shall be reserved for sale by the Underwriters to
certain eligible employees and persons having business relationships with the
Company (the "Invitees"), as part of the distribution of the Securities by the
Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. (the "NASD") and all other applicable laws, rules and
regulations. To the extent that such Reserved Securities are not orally
confirmed for purchase by Invitees by the end of the
first business day after the date of this Agreement, such Reserved Securities
may be offered to the public as part of the public offering contemplated
hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-113494), including
the related preliminary prospectus or prospectuses, covering the registration
of the Securities under the Securities Act of 1933, as amended (the "1933
Act"). Promptly after execution and delivery of this Agreement, the Company
will prepare and file a prospectus in accordance with the provisions of Rule
430A ("Rule 430A") of the rules and regulations of the Commission under the
1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations. The information included in such
prospectus that was omitted from such registration statement at the time it
became effective but that is deemed to be part of such registration statement
at the time it became effective pursuant to paragraph (b) of Rule 430A is
referred to as "Rule 430A Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted the
Rule 430A Information and that was used after such effectiveness and prior to
the execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits and any
schedules thereto, at the time it became effective, and including the Rule 430A
Information, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus in the form first furnished to the Underwriters
for use in connection with the offering of the Securities is herein called the
"Prospectus." For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("▇▇▇▇▇").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto has become effective under the 1933 Act
and no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement or any post-effective
amendment thereto has been issued under the 1933 Act and no proceedings
for that purpose have been instituted or are pending or, to the knowledge
of the Company, are contemplated by the Commission, and any request on the
part of the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement complied and any amendments and supplements
thereto will comply in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations and did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus, any preliminary prospectus and any
supplement thereto or prospectus wrapper prepared in connection therewith,
at their respective times of issuance and at
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the Closing Time, complied and will comply in all material respects with
any applicable laws or regulations of foreign jurisdictions in which the
Prospectus and such preliminary prospectus, as amended or supplemented, if
applicable, are distributed in connection with the offer and sale of
Reserved Securities. Neither the Prospectus nor any amendments or
supplements thereto (including any prospectus wrapper), at the time the
Prospectus or any such amendment or supplement was issued and at the
Closing Time (and, if any Option Securities are purchased, at the Date of
Delivery), included or will include an untrue statement of a material fact
or omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment
or supplement thereto).
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus delivered
to the Underwriters for use in connection with this offering was identical
to the electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations. Except as described in the Prospectus and as
preapproved in accordance with the requirements set forth in Section 10A
of the Exchange Act, Pricewaterhousecoopers LLP has not engaged in any
"prohibited activities" (as defined in Section 10A of the Exchange Act) on
behalf of the Company.
(iii) Financial Statements. The financial statements included in the
Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position of the Company
and the Subsidiary (as hereinafter defined) at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules included in the
Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data and
the summary financial information included in the Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement and consistent with the books and records of the
Company.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
the Subsidiary (as hereafter defined) considered as one enterprise,
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (B) there have been no transactions entered into by the
Company or any of the Subsidiary, other than those in the ordinary course
of business, which are material (individually or in the aggregate) with
respect to the Company and the Subsidiary considered as one enterprise,
(C) there has been no dividend or distribution of any kind declared,
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paid or made by the Company on any class of its capital stock, (D) there
has not been any change in the capital stock (other than (i) upon the
issuance or exercise of stock options granted pursuant to the Company's
stock plans described in the Prospectus; (ii) the purchase of shares upon
termination of service pursuant to agreements or plans described in the
Prospectus; (iii) the conversion of preferred stock into common stock; or
(iv) upon the exercise of warrants described in the Prospectus and
outstanding prior to such dates) or long-term debt of the Company or the
Subsidiary, and (E) the Company and the Subsidiary have not incurred any
liabilities or obligations, direct or contingent, which are material
individually or in the aggregate other than trade payables in the ordinary
course of business consistent with past practice.
(v) Good Standing of the Company. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws
of the state of Delaware and has corporate power and authority to own,
lease and operate its properties and to conduct its business as described
in the Prospectus and to enter into and perform its obligations under this
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.
(vi) Good Standing of Subsidiary. Blue Nile, LLC (the "Subsidiary")
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct
of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding membership units of the Subsidiary have been duly authorized
and validly issued, are fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares membership units of the Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of the
Subsidiary. The Subsidiary is the only subsidiary of the Company.
(vii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of options or warrants referred to
in the Prospectus). The shares of issued and outstanding capital stock of
the Company, including the Securities to be purchased by the Underwriters
from the Selling Stockholders, have been duly authorized and validly
issued and are fully paid and non-assessable; none of the outstanding
shares of capital stock of the Company, including the Securities to be
purchased by the Underwriters from the Selling Stockholders, was issued in
violation of the preemptive or other similar rights of any securityholder
of the Company. Except as set forth in the Prospectus, no options,
warrants or other rights to purchase, agreements or other obligations to
issue, or rights to convert any obligations into or exchange any
securities for, shares of capital stock of or ownership interests in the
Company are outstanding as of the date set forth therein. All options,
warrants and other rights to purchase shares of capital stock in the
Company have been duly and validly authorized and issued, were issued in
compliance with federal and state securities laws, and conform to the
description thereof contained in the
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Prospectus. The outstanding preferred stock of the Company will, upon
the closing of the public offering contemplated by the Registration
Statement, convert into shares of Common Stock.
(viii) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Securities to be
purchased by the Underwriters from the Company have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement and,
when issued and delivered by the Company pursuant to this Agreement
against payment of the consideration set forth herein, will be validly
issued and fully paid and non-assessable; the Common Stock conforms to all
statements relating thereto contained in the Prospectus and such
description conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal
liability by reason of being such a holder; and the issuance of the
Securities is not subject to the preemptive or other similar rights of any
securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor the
Subsidiary is in violation of its charter or by-laws. Neither the Company
nor the Subsidiary is in violation of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets may
be subject or is (nor will either of them, with notice of any current or
past condition or event or passage of time thereafter, be) in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or the Subsidiary is a party or by which it or they may
be bound, or to which any of the property or assets of the Company or the
Subsidiary is subject (collectively, "Agreements and Instruments") except
for such defaults that would not result in a Material Adverse Effect or
affect the validity of the Securities; and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectus under the caption
"Use of Proceeds") and compliance by the Company with its obligations
hereunder have been duly authorized by all necessary corporate action and
do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or the Subsidiary pursuant to, the
Agreements and Instruments (except for such conflicts, breaches, defaults
or Repayment Events or liens, charges or encumbrances that would not
result in a Material Adverse Effect or affect the validity of the
Securities), nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or the Subsidiary or
any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or the Subsidiary or any of
its assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or the Subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the employees of
the Company or the Subsidiary exists or, to the knowledge of the Company,
is imminent, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its or the Subsidiary's
principal suppliers, manufacturers, customers or contractors, which, in
either case, would result in a Material Adverse Effect.
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(xii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or the
Subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might result in a
Material Adverse Effect, or which might materially and adversely affect
the properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or the Subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no Agreements and Instruments
or other documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which have
not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and the
Subsidiary own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names, Internet domain names or other
intellectual property (collectively, "Intellectual Property") necessary to
carry on the business now operated by them, and, except as disclosed in the
Registration Statement or the Prospectus, neither the Company nor the
Subsidiary has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or the Subsidiary therein, and which infringement
or conflict (if the subject of any unfavorable decision, ruling or finding)
or invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale
of the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as have been already
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws or by the rules and regulations of
the National Association of Securities Dealers, Inc. (the "NASD") in
connection with the purchase and distribution of the Securities by the
Underwriters and (ii) such as have been obtained under the laws and
regulations of jurisdictions outside of the United States in which the
Securities are offered.
(xvi) Absence of Manipulation. Neither the Company nor any affiliate
of the Company has taken, nor will the Company or any affiliate take,
directly or indirectly, any action which is designed to or which has
constituted or which would be expected to cause or result in stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.
(xvii) Possession of Licenses and Permits. The Company and the
Subsidiary possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them, except where the
failure so to possess
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would not, singly or in the aggregate, result in a Material Adverse
Effect; the Company and the Subsidiary are in compliance with the terms
and conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, result in a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and
effect would not, singly or in the aggregate, result in a Material Adverse
Effect; and neither the Company nor any of the Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
such Governmental Licenses which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
(xviii) Title to Property. Neither the Company nor the Subsidiary owns
any real property. The Company and the Subsidiary have good title to all
properties owned by them, in each case, free and clear of all mortgages,
pledges, liens, security interests, claims, restrictions or encumbrances
of any kind except such as (a) are described in the Prospectus or (b) do
not, singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Company or the Subsidiary; and all of the leases and
subleases material to the business of the Company and the Subsidiary,
considered as one enterprise, and under which the Company or the
Subsidiary holds properties described in the Prospectus, are in full force
and effect, and neither the Company nor the Subsidiary has any notice of
any material claim of any sort that has been asserted by anyone adverse to
the rights of the Company or the Subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the
Company or the Subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xix) Investment Company Act. The Company is not required, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be required, to register as an "investment company" under the
Investment Company Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the Registration
Statement or except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A) neither the Company nor any of the Subsidiary
is in violation of any federal, state, local or foreign statute, law,
rule, regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any judicial
or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products, asbestos-containing materials or mold
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and the Subsidiary have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or the Subsidiary
and (D) there are no events or circumstances that would reasonably be
expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or
agency, against or affecting the Company or any of the Subsidiary relating
to Hazardous Materials or any Environmental Laws.
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(xxi) Registration Rights. Other than rights that have been
effectively waived and the rights of the Selling Stockholders to sell the
Securities held by them as contemplated by this Agreement there are no
persons with registration rights or other similar rights to have any
securities registered pursuant to the Registration Statement. Except as
described in the Prospectus, there are no contracts, agreements or
understandings between the Company and any person granting such person the
right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to
be owned by such person or to require the Company to include such
securities in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act.
(xxii) Capital Stock. The statements set forth in the Prospectus under
the caption "Description of Capital Stock," insofar as they purport to
constitute a summary of the terms of the Securities, are accurate
summaries and descriptions of such terms and provisions in all material
respects.
(xxiii) Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance
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 asset accountability; (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 the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxiv) No Additional Authorization. No authorization, approval,
consent, license, order, registration or qualification of or with any
government, governmental instrumentality or court, other than such as have
been obtained and other than such authorizations, approvals, consents,
orders, registrations and qualifications that if not obtained would not
have a Material Adverse Effect, is required in connection with the
offering of the Reserved Securities in any jurisdiction in which the
Reserved Securities are being offered.
(xxv) No Offers. The Company has not offered, or caused the
Underwriters to offer, Reserved Shares to any person with the specific
intent to unlawfully influence (i) a customer or supplier of the Company
to alter the customer's or supplier's level or type of business with the
Company, or (ii) a trade journalist or publication to write or publish
favorable information about the Company or its products.
(xxvi) Benefit Plans. Each Company "employee benefit plan" within the
meaning of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations
thereunder ("ERISA") has been established and maintained in all material
respects in accordance with ERISA; to the Company's knowledge, no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company would have any
material liability; the Company has not incurred and does not reasonably
expect to incur material liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"CODE"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the
Code is and has received a favorable determination, notification, advisory
and/or opinion letter with respect to such status from the IRS or has time
remaining to apply under applicable Treasury Regulation or
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IRS pronouncement for a determination, notification, advisory and/or
opinion letter and to make any necessary amendments, and, to the Company's
knowledge, nothing has occurred, whether by action or by failure to act,
which would reasonably be expected to cause the loss of such
qualification.
(xxvii) Taxes. The Company has filed all federal, state and local
income and franchise tax returns required to be filed through the date
hereof and has paid all taxes due thereon, and no tax deficiency has been
determined adversely to the Company or the Subsidiary which has had (nor
does the Company have any knowledge of any tax deficiency which, if
determined adversely to the Company or the Subsidiary, might have) a
Material Adverse Effect.
(xxviii) Unlawful Payments. Neither the Company nor the Subsidiary,
nor to the Company's knowledge any director, officer, agent, employee or
other person associated with or acting on behalf of the Company or any of
its subsidiaries, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(xxix) Disclosure Controls and Procedures. The Company has established
and maintains disclosure controls and procedures (as such term is defined
in Rule 13a-14 and 15d-14 under the Exchange Act), which (i) are designed
to ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to the Company's principal
executive officer and its principal financial officer by others within
those entities; and (ii) are effective in all material respects to perform
the functions for which they were established. The Company is not aware of
any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls.
Since the date of the most recent evaluation of the Company's disclosure
controls and procedures, there have been no significant changes in
internal controls or in other factors that could significantly affect
internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses. Upon the effectiveness
of the Registration Statement, the Company will be in compliance with all
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective and
applicable to the Company as an "issuer" as defined under the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
(xxx) Off-Balance Sheet Transactions. Except as described in the
Prospectus, there are no material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), or any other
relationships with unconsolidated entities or other persons, that may have
a material current or future effect on the Company's financial condition,
changes in financial condition, results of operations, liquidity, capital
expenditures, capital resources, or significant components of revenues or
expenses.
(xxxi) Audit Committee. The Company's Board of Directors has validly
appointed an audit committee whose composition satisfies the requirements
of Rule 4350(d) of the Rules of the National Association of Securities
Dealers, Inc. (the "NASD RULES") and Rule 10A-3 under the Exchange Act,
and the Board of Directors of the Company and/or the audit committee has
adopted a charter that satisfies the requirements of Rule 4350(d) of the
NASD Rules. The audit committee has reviewed the adequacy of its charter
within the past twelve months.
(xxxii) Insurance. The Company carries, or is covered by, insurance
with insurers of recognized reputability in such amounts and covering such
risks as it believes is commercially
9
reasonable in light of the business presently conducted by the Company,
all of which insurance is in full force and effect, and the Company has no
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 at a cost, that would not, single or in the
aggregate, have a Material Adverse Effect, and there are no claims by the
Company of any material amount under any such policy as to which any
insurer is denying liability or defending under a reservation of rights
claim and the Company has not received notice from any insurer or agent of
such insurer that substantial capital improvements or other material
expenditures will have to be made in order to continue such insurance.
(xxxiii) Privacy.
(A) "Privacy Statements" means, collectively, any and all of the
Company's privacy statements and policies published on Company web sites
or products or otherwise made available by Company regarding the
collection, retention, use, and distribution of the personal information
of individuals, including, without limitation, from visitors or users of
any Company web sites or products ("Individuals").
(B) The Company: (i) complies with the Privacy Statements as
applicable to any given set of personal information collected by the
Company from Individuals; (ii) complies in all material respects with all
applicable United States and foreign laws and regulations regarding the
collection, retention, use, transfer, or disclosure of personal
information; and (iii) takes reasonable measures to protect and maintain
the confidential nature of the personal information provided to the
Company by Individuals, in accordance with the terms of the applicable
Privacy Statements.
(C) To the Company's knowledge, no claims or controversies have
arisen regarding the Privacy Statements or the implementation thereof.
(xxxiv) Spam. The Company's email direct marketing activities have not
violated in any material respect, the CAN-SPAM Act or any other federal or
state law or regulation applicable to electronic direct marketing.
(xxxv) Minute Books. The minute books of the Company and the
Subsidiary have been made available to the Underwriters and counsel for
the Underwriters, and such books (i) contain a summary of all meetings and
actions of the board of directors (including each committee thereof) and
stockholders of the Company and the member of the Subsidiary since the
time of its respective formation through the date of the latest meeting
and action, and (ii) accurately in all material respects reflect all
resolutions adopted at such meetings or actions referred to in such
minutes.
(b) Representations and Warranties by the Selling Stockholders. Each
Selling Stockholder severally represents and warrants to each Underwriter as of
the date hereof, as of the Closing Time, and, if the Selling Stockholder is
selling Option Securities on a Date of Delivery, as of each such Date of
Delivery, and agrees with each Underwriter, as follows:
(i) Authorization of this Agreement. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling
Stockholder.
10
(ii) Authorization of Power of Attorney and Custody Agreement. The
Power of Attorney and Custody Agreement, in the form heretofore furnished
to the Representatives (the "Power of Attorney and Custody Agreement"), has
been duly authorized, executed and delivered by such Selling Stockholder
and is the valid and binding agreement of such Selling Stockholder.
(iii) Noncontravention. The execution and delivery of this Agreement
and the Power of Attorney and Custody Agreement and the sale and delivery
of the Securities to be sold by such Selling Stockholder and the
consummation of the transactions contemplated herein and compliance by such
Selling Stockholder with its obligations hereunder do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any tax, lien, charge or encumbrance upon the
Securities to be sold by such Selling Stockholder or any property or assets
of such Selling Stockholder pursuant to any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder may be bound, or to which any of the
property or assets of such Selling Stockholder is subject, nor will such
action result in any violation of the provisions of the charter or by-laws
or other organizational instrument of such Selling Stockholder, if
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
such Selling Stockholder or any of its properties.
(iv) Certificates Suitable for Transfer. The Securities to be sold by
such Selling Stockholder pursuant to this Agreement are certificated
securities in registered form and are not held in any securities account or
by or through any securities intermediary within the meaning of the Uniform
Commercial Code as in effect in the State of New York (the "UCC").
Certificates for all of the Securities to be sold by such Selling
Stockholder pursuant to this Agreement, in suitable form for transfer by
delivery or accompanied by duly executed instruments of transfer or
assignment in blank with signatures guaranteed, have been placed in custody
with Mellon Investor Services, LLC (the "Custodian") with irrevocable
conditional instructions to deliver such Securities to the Underwriters
pursuant to this Agreement.
(v) Valid Title. Such Selling Stockholder has, and at the Closing Time
will have, valid title to the Securities to be sold by such Selling
Stockholder free and clear of all security interests, claims, liens,
equities or other encumbrances and the legal right and power, and all
authorization and approval required by law, to enter into this Agreement
and the Power of Attorney and Custody Agreement and to sell, transfer and
deliver the Securities to be sold by such Selling Stockholder.
(vi) Delivery of Securities. Upon the Underwriters' acquiring
possession of the Securities to be sold by such Selling Stockholder and
paying the purchase price therefor pursuant to this Agreement, the
Underwriters (assuming that no such Underwriter has notice of any "adverse
claim," within the meaning of Section 8-105 of the UCC to such Securities)
will acquire their respective interests in such Securities (including,
without limitation, all rights that such Selling Stockholder had or has the
power to transfer in such Securities) free and clear of any adverse claim
within the meaning of Section 8-102 of the UCC.
(vii) Absence of Manipulation. Such Selling Stockholder has not taken,
and will not take, directly or indirectly, any action which is designed to
or which has constituted or would be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.
11
(viii) Absence of Further Requirements. No filing with, or consent,
approval, authorization, order, registration, qualification or decree of,
any court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by each Selling Stockholder of
its obligations hereunder or in the Power of Attorney and Custody
Agreement, or in connection with the sale and delivery of the Securities
hereunder or the consummation of the transactions contemplated by this
Agreement, except (i) such as may have previously been made or obtained or
as may be required under the 1933 Act or the 1933 Act Regulations, state
securities laws or pursuant to the rules and regulations of the NASD and
(ii) such as have been obtained under the laws and regulations of
jurisdictions outside the United States in which the Reserved Securities
are offered.
(ix) Authorization. The Lock-Up Agreement in substantially the form
attached hereto as Exhibit A (the "Lock-Up Agreement") has been duly
authorized, executed and delivered by or on behalf of such Selling
Stockholder. Such Selling Stockholder has all requisite power and authority
to execute and deliver the Lock-Up Agreement and to carry out and perform
its obligations under the terms of the Lock-Up Agreement. All action on the
part of the Selling Stockholder necessary for the authorization, execution,
delivery and performance of the Lock-Up Agreement, and the performance of
all of the Selling Stockholder's obligations under the Lock-Up Agreement,
has been taken. The Lock-Up Agreement constitutes a valid and legally
binding obligation of such Selling Stockholder, enforceable in accordance
with its terms.
(x) No Association with NASD. Except as disclosed to the
Representatives, neither such Selling Stockholder nor any of its affiliates
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or is a person associated
with (within the meaning of Article I (dd) of the By-laws of the NASD), any
member firm of the National Association of Securities Dealers, Inc.
(c) Officer's Certificates. Any certificate signed by any officer of the
Company or any of the Subsidiary delivered to the Representatives or to counsel
for the Underwriters shall be deemed a representation and warranty by the
Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Stockholders as such and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by
such Selling Stockholders to the Underwriters as to the matters covered
thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and each Selling Stockholder, severally and not jointly, agree to sell
to each Underwriter, severally and not jointly, and each Underwriter, severally
and not jointly, agrees to purchase from the Company and each Selling
Stockholder, at the price per share set forth in Schedule C, that proportion of
the number of Initial Securities set forth in Schedule B opposite the name of
the Company or such Selling Stockholder, as the case may be, which the number
of Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial Securities, subject, in
each case, to such adjustments among the Underwriters as the Representatives in
its sole discretion shall make to eliminate any sales or purchases of
fractional securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company and the Selling
12
Stockholders, acting severally and not jointly, hereby grant(s) an option to
the Underwriters, severally and not jointly, to purchase up to an additional
561,000 shares of Common Stock, as set forth in Schedule B, at the price per
share set forth in Schedule C, less an amount per share equal to any dividends
or distributions declared by the Company and payable on the Initial Securities
but not payable on the Option Securities. The option hereby granted will expire
30 days after the date hereof and may be exercised in whole or in part from
time to time only for the purpose of covering overallotments which may be made
in connection with the offering and distribution of the Initial Securities upon
notice by ▇▇▇▇▇▇▇ ▇▇▇▇▇ to the Company and the Selling Stockholders setting
forth the number of Option Securities as to which the several Underwriters are
then exercising the option and the time and date of payment and delivery for
such Option Securities. Any such time and date of delivery (a "Date of
Delivery") shall be determined by ▇▇▇▇▇▇▇ ▇▇▇▇▇, but shall not be later than
seven full business days after the exercise of said option, nor in any event
prior to the Closing Time, as hereinafter defined. If the option is exercised
as to all or any portion of the Option Securities, each of the Underwriters,
acting severally and not jointly, will purchase that proportion of the total
number of Option Securities then being purchased which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter bears
to the total number of Initial Securities, subject in each case to such
adjustments as ▇▇▇▇▇▇▇ ▇▇▇▇▇ in its discretion shall make to eliminate any
sales or purchases of fractional shares. If a portion of the option is
exercised, the exercise will be allocated pro rata among the Company and the
Selling Stockholders, unless otherwise agreed to by the Company, the Selling
Stockholders and the Underwriters.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or
at such other place as shall be agreed upon by the Representatives and the
Company and the Selling Stockholders, at 9:00 A.M. (Eastern time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time)) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such
date as shall be agreed upon by the Representatives and the Company and the
Selling Stockholders (such time and date of payment and delivery being herein
called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Representatives and the Company and the Selling Stockholders, on each Date of
Delivery as specified in the notice from the Representatives to the Company and
the Selling Stockholders.
Payment shall be made to the Company and the Selling Stockholders by wire
transfer of immediately available funds to bank accounts designated by the
Company and the Custodian pursuant to each Selling Stockholder's Power of
Attorney and Custody Agreement, as the case may be, against delivery to the
Representatives for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as representatives of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
13
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern
time) on the business day prior to the Closing Time or the relevant Date of
Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Representatives
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives notice
of its intention to file or prepare any amendment to the Registration Statement
(including any filing under Rule 462(b)) or any amendment, supplement or
revision to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, will furnish the Representatives
with copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any such
document to which the Representatives or counsel for the Underwriters shall
object.
(c) Delivery of Registration Statements. The Company has furnished or will
deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies
of the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to ▇▇▇▇▇, except
to the extent permitted by Regulation S-T.
14
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion
of the distribution of the Securities as contemplated in this Agreement and in
the Prospectus. If at any time when a prospectus is required by the 1933 Act to
be delivered in connection with sales of the Securities, any event shall occur
or condition shall exist as a result of which it is necessary, in the opinion
of counsel for the Underwriters or for the Company, to amend the Registration
Statement or amend or supplement the Prospectus in order that the Prospectus
will not include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in the light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at any
such time to amend the Registration Statement or amend or supplement the
Prospectus in order to comply with the requirements of the 1933 Act or the 1933
Act Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Company will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Representatives may designate and to
maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(g) Rule 158. The Company will timely file such reports pursuant to the
Securities Exchange Act of 1934 (the "1934 Act") as are necessary in order to
make generally available to its securityholders as soon as practicable an
earnings statement for the purposes of, and to provide the benefits
contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectus under
"Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect and maintain
the quotation of the Securities on the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectus, the Company will not, without the prior written
consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or file any
registration statement under the 1933 Act with respect to any of the foregoing
or (ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Securities to be sold hereunder, (B) any
shares of Common Stock issued by the Company upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus, (C) any shares of Common Stock issued or options
to purchase Common Stock granted pursuant to existing employee benefit plans of
the Company referred to in the Prospectus or (D) any shares of Common Stock
issued pursuant to any non-employee director stock plan.
15
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act, will file all
documents required to be filed with the Commission pursuant to the 1934 Act
within the time periods required by the 1934 Act and the rules and regulations
of the Commission thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the NASD
or the NASD rules from sale, transfer, assignment, pledge or hypothecation for
a period of three months following the date of this Agreement. The Underwriters
will notify the Company as to which persons will need to be so restricted. At
the request of the Underwriters, the Company will direct the transfer agent to
place a stop transfer restriction upon such securities for such period of time.
Should the Company release, or seek to release, from such restrictions any of
the Reserved Securities, the Company agrees to reimburse the Underwriters for
any reasonable expenses (including, without limitation, legal expenses) they
incur in connection with such release.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company and the Selling Stockholders will pay or cause
to be paid all expenses incident to the performance of their obligations under
this Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the Securities to
the Underwriters, including any stock or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the Securities to
the Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, such fees and disbursement
of counsel not to exceed $15,000, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus and of the Prospectus and
any amendments or supplements thereto, (vii) the preparation, printing and
delivery to the Underwriters of copies of the Blue Sky Survey and any
supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in connection
with the marketing of the Securities, including without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior written approval of the Company, travel and
lodging expenses of the officers of the Company and with the prior written
approval of the Company any such consultants, and the cost of aircraft and
other transportation chartered in connection with the road show and (x) the
filing fees incident to, and the reasonable fees and disbursements of counsel
to the Underwriters in connection with, the review by the NASD of the terms of
the sale of the Securities and (xi) the fees and expenses incurred in
connection with the inclusion of the Securities in the Nasdaq National Market
and (xii ) all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, in connection with matters
related to the Reserved Securities which are designated by the Company for sale
to Invitees.
(b) Expenses of the Selling Stockholders. The Selling Stockholders,
jointly and severally, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by this Agreement, including (i) any stamp duties, capital duties
and stock transfer taxes, if any, payable upon the sale of the Securities to
the Underwriters, and their transfer between the Underwriters pursuant to an
agreement between such Underwriters, and (ii) the
16
fees and disbursements of their respective counsel and other advisors. The
Company will not be responsible for the underwriting discounts and commission
on the securities sold by the Selling Stockholders hereunder.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company and the Selling Stockholders shall reimburse
the Underwriters for all of their out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Stockholders may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholders
contained in Section 1 hereof or in certificates of any officer of the Company
or the Subsidiary of the Company or on behalf of any Selling Stockholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
(b) Opinion of Counsel for Company. At Closing Time, the Representatives
shall have received the favorable opinion, dated as of Closing Time, of ▇▇▇▇▇▇
Godward LLP, counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters to the effect set forth in Exhibit A
hereto.
(c) Opinion of Counsel for the Selling Stockholders. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of respective counsel for each of the Selling Stockholders, in form and
substance satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to the
effect set forth in Exhibit B hereto.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel
for the Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters with respect to the matters set forth in
clauses (i), (ii), (v), (vi) (solely as to preemptive or other similar rights
arising by operation of law or under the charter or by-laws of the Company),
(viii) through (x), inclusive, (xi), (xiii) (solely as to the information in
the Prospectus under "Description of Capital Stock--Common Stock") and the
penultimate paragraph of Exhibit A hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other than
the law of the State of Washington and the State of New York, the federal law
of the United States and the General Corporation Law of the State of Delaware,
upon the opinions of counsel satisfactory to the Representatives. Such counsel
may also state that, insofar as such opinion involves
17
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and the Subsidiary and certificates of
public officials.
(e) Officers' Certificates.
(i) At Closing Time, there shall not have been, since the date hereof
or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and the Subsidiary considered as one enterprise, whether or
not arising in the ordinary course of business, and the Representatives
shall have received a certificate of the President or a Vice President of
the Company and of the chief financial or chief accounting officer of the
Company, dated as of Closing Time, to the effect that (A) there has been
no such material adverse change, (B) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (C) the Company has
complied with all agreements and satisfied all conditions on its part to
be performed or satisfied at or prior to Closing Time, and (D) 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, to their knowledge, contemplated by the Commission; and
(ii) At Closing Time, the Representatives shall have received a
certificate executed by the Chief Financial Officer of the Company on
behalf of the Company, dated as of the Closing Time, in the form and
substance satisfactory to the Representatives.
(f) Certificate of Selling Stockholders. At Closing Time, the
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Stockholder, dated as of Closing Time, to the effect
that (i) the representations and warranties of each Selling Stockholder
contained in Section 1(b) hereof (and, in the case of the Insider Selling
Stockholders, the additional representations and warranties of the Insider
Selling Stockholders contained in Section 1(c) hereof) are true and correct in
all respects with the same force and effect as though expressly made at and as
of Closing Time and (ii) each Selling Stockholder has complied in all material
respects with all agreements and all conditions on its part to be performed
under this Agreement at or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from PricewaterhouseCoopers,
LLP a letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(h) Bring-down Comfort Letter. At Closing Time, the Representatives shall
have received from PricewaterhouseCoopers, LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (g) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(i) Approval of Listing. At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(j) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
18
(k) Lock-up Agreements. At the date of this Agreement, the Representatives
shall have received an agreement substantially in the form of Exhibit C hereto
signed by the persons listed on Schedule D hereto.
(l) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company and the Selling Stockholders contained herein and the statements
in any certificates furnished by the Company, the Subsidiary of the Company and
the Selling Stockholders hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representatives shall have
received:
(i) Officers' Certificate. A certificate, dated such Date of Delivery,
of the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company confirming that the
certificate delivered at the Closing Time pursuant to Section 5(e) hereof
remains true and correct as of such Date of Delivery.
(ii) Certificate of Selling Stockholders. A certificate, dated such
Date of Delivery, of an Attorney-in-Fact on behalf of each Selling
Stockholder confirming that the certificate delivered at Closing Time
pursuant to Section 5(f) remains true and correct as of such Date of
Delivery.
(iii) Opinion of Counsel for Company. The favorable opinion of ▇▇▇▇▇▇
Godward LLP, counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, dated such Date of Delivery, relating to
the Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section 5(b)
hereof.
(iv) Opinion of Counsel for the Selling Stockholders. The favorable
opinion of the respective counsel for each of the Selling Stockholders, in
form and substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(c) hereof.
(v) Opinion of Counsel for Underwriters. The favorable opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(d) hereof.
(vi) Bring-down Comfort Letter. A letter from PricewaterhouseCoopers,
LLP, in form and substance satisfactory to the Representatives and dated
such Date of Delivery, substantially in the same form and substance as the
letter furnished to the Representatives pursuant to Section 5(g) hereof,
except that the "specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to such Date of
Delivery.
(m) Additional Documents. At Closing Time and at each Date of Delivery
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and the Selling Stockholders in connection with the
issuance and sale of the Securities as herein contemplated shall be
satisfactory in form and substance to the Representatives and counsel for the
Underwriters.
19
(n) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Company
and the Selling Stockholders at any time at or prior to Closing Time or such
Date of Delivery, as the case may be, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6, 7 and 8 shall survive any such termination and
remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company agrees to indemnify and
hold harmless each Underwriter, its affiliates, as such term is defined in Rule
501(b) under the 1933 Act (each, an "Affiliate"), its selling agents and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
or the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section 6
below) any such settlement is effected with the written consent of the
Company;
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇ ▇▇▇▇▇), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information, or
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that neither the Company nor any Selling
Stockholder will be liable to any Underwriter with respect to any Prospectus to
the extent that the Company or such Selling Stockholder shall sustain the
burden of proving that any such loss, liability, claim, damage or expense
resulted from the fact that such Underwriter, in contravention of a requirement
of this Agreement or applicable law, sold Securities to a person to whom such
Underwriter failed to send or give, at or prior to the Closing Date, a copy of
the Final Prospectus, as then amended or
20
supplemented if: (i) the Company has previously furnished copies thereof
(sufficiently in advance of the Closing Date to allow for distribution by the
Closing Date) to the Underwriter and the loss, liability, claim, damage or
expense of such Underwriter resulted from an untrue statement or omission of a
material fact contained in or omitted from the Preliminary Prospectus which was
correct in the Final Prospectus as, if applicable, amended or supplemented
prior to the Closing Date and such Final Prospectus was required by law to be
delivered at or prior to the written confirmation of sale to such person and
(ii) such failure to give or send such Final Prospectus by the Closing Date to
the party or parties asserting such loss, liability, claim, damage or expense
would have constituted the sole defense to the claim asserted by such person.
(b) Selling Stockholder Indemnification of Underwriters Each Selling
Stockholder, severally and not jointly, agrees to indemnify and hold harmless
each Underwriter, its Affiliates and selling agents and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act to the extent and in the manner set forth in
clauses (a) (i), (ii) and (iii) above, but only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information relating to such Selling
Stockholder furnished in writing by or on behalf of such Selling Stockholder
expressly for use in the Registration Statement, any preliminary prospectus,
the Prospectus or any amendments or supplements thereto. The liability of each
Selling Stockholder under the indemnity agreement contained in this paragraph
6(b) shall be limited to an amount equal to the net proceeds received by such
Selling Stockholder from the offering of the Securities sold by such Selling
Stockholder pursuant to this Agreement.
(c) Indemnification of Company, Directors and Officers and Selling
Stockholders. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each Selling
Stockholder and each person, if any, who controls any Selling Stockholder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a) or 6(b) above, counsel to the indemnified parties shall be selected by
▇▇▇▇▇▇▇ ▇▇▇▇▇, and, in the case of parties indemnified pursuant to Section 6(c)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations
21
or circumstances. No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a) (ii), 6(b) (by virtue of its reference to Section 6(a)(ii)) or
settlement of any claim in connection with any violation referred to in Section
6(f) effected without its written consent if (i) such settlement is entered
into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(f) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees to indemnify and hold
harmless the Underwriters, their Affiliates and selling agents and each person,
if any, who controls any Underwriter within the meaning of either Section 15 of
the 1933 Act or Section 20 of the 1934 Act, from and against any and all loss,
liability, claim, damage and expense (including, without limitation, any legal
or other expenses reasonably incurred in connection with defending,
investigating or settling any such action or claim), as incurred, (i) arising
out of the violation of any applicable laws or regulations of foreign
jurisdictions where Reserved Securities have been offered; (ii) arising out of
any untrue statement or alleged untrue statement of a material fact contained
in any prospectus wrapper or other material prepared by or with the consent of
the Company for distribution to Invitees in connection with the offering of the
Reserved Securities or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; (iii) caused by the failure of any Invitee
to pay for and accept delivery of Reserved Securities which have been orally
confirmed for purchase by any Invitee by the end of the first business day
after the date of the Agreement; or (iv) related to, or arising out of or in
connection with, the offering of the Reserved Securities.
(g) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Stockholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other hand
from the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Stockholders on the one hand and of the Underwriters on the other hand
in connection with the statements or omissions, or in connection with any
violation of the nature referred to in Section 6(e) hereof, which
22
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before
deducting expenses) received by the Company and the Selling Stockholders and
the total underwriting discount received by the Underwriters, in each case as
set forth on the cover of the Prospectus bear to the aggregate initial public
offering price of the Securities as set forth on the cover of the Prospectus.
The relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the Selling
Stockholders or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission or any violation of the nature referred to in Section
6(e) hereof. The Underwriters acknowledge and agree that the statements
relating to each Selling Stockholder under the caption "Principal and Selling
Stockholders" in the Prospectus constitute the only information furnished in
writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission and no Selling
Stockholder shall be required to contribute any amount in excess of the net
proceeds received by such Selling Stockholder from the sale of its securities
pursuant to this Agreement.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act and each Underwriter's Affiliates and selling agents shall have
the same rights to contribution as such Underwriter, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company or any Selling Stockholder within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company or such Selling
Stockholder, as the case may be. The Underwriters' respective obligations to
contribute pursuant to this
23
Section 7 are several in proportion to the number of Initial Securities set
forth opposite their respective names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Stockholders with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive. All
representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of the Subsidiary or the Selling
Stockholders submitted pursuant hereto, shall remain operative and in full
force and effect regardless of (i) any investigation made by or on behalf of
any Underwriter or its Affiliates or selling agents, any person controlling any
Underwriter, its officers or directors, any person controlling the Company or
any person controlling any Selling Stockholder and (ii) delivery of and payment
for the Securities.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Stockholders, at any time
at or prior to Closing Time (i) if there has been, since the time of execution
of this Agreement or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and the Subsidiary considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States or the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political,
financial or economic conditions, in each case the effect of which is such as
to make it, in the judgment of the Representatives, impracticable or
inadvisable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission, the NASD or the Nasdaq
National Market, or if trading generally on the American Stock Exchange or the
New York Stock Exchange or in the Nasdaq National Market has been suspended or
materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) a
material disruption has occurred in commercial banking or securities settlement
or clearance services in the United States, or (v) if a banking moratorium has
been declared by either Federal, Washington or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1,
6, 7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be agreed upon and upon
the terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
24
(i) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(ii) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement or, with
respect to any Date of Delivery which occurs after the Closing Time, the
obligation of the Underwriters to purchase and of the Company to sell the
Option Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option
Securities, as the case may be, either the (i) Representatives or (ii) the
Company and any Selling Stockholder shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
SECTION 11. Default by one or more of the Selling Stockholders or the
Company. (a) If a Selling Stockholder shall fail at Closing Time or at a Date
of Delivery to sell and deliver the number of Securities which such Selling
Stockholder or Selling Stockholders are obligated to sell hereunder, and the
remaining Selling Stockholders do not exercise the right hereby granted to
increase, pro rata or otherwise, the number of Securities to be sold by them
hereunder to the total number to be sold by all Selling Stockholders as set
forth in Schedule B hereto, then the Underwriters may, at option of the
Representatives, by notice from the Representatives to the Company and the
non-defaulting Selling Stockholders, either (i) terminate this Agreement
without any liability on the fault of any non-defaulting party except that the
provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect
or (ii) elect to purchase the Securities which the non-defaulting Selling
Stockholders and the Company have agreed to sell hereunder. No action taken
pursuant to this Section 11 shall relieve any Selling Stockholder so defaulting
from liability, if any, in respect of such default.
In the event of a default by any Selling Stockholder as referred to in
this Section 11, Representatives, the Company and the non-defaulting Selling
Stockholders shall have the right to postpone Closing Time or Date of Delivery
for a period not exceeding seven days in order to effect any required change in
the Registration Statement or Prospectus or in any other documents or
arrangements.
(b) If the Company shall fail at Closing Time or at the Date of Delivery
to sell the number of Securities that it is obligated to sell hereunder, then
this Agreement shall terminate without any liability on the part of any
nondefaulting party; provided, however, that the provisions of Sections 1, 4,
6, 7 and 8 shall remain in full force and effect. No action taken pursuant to
this Section shall relieve the Company from liability, if any, in respect of
such default.
SECTION 12. Tax Disclosure. Notwithstanding any other provision of this
Agreement, from the commencement of discussions with respect to the
transactions contemplated hereby, the Company (and each employee,
representatives or other agent of the Company) may disclose to any and all
persons,
25
without limitation of any kind, the tax treatment and tax structure (as such
terms are used in Sections 6011, 6111 and 6112 of the U.S. Code and the
Treasury Regulations promulgated thereunder) of the transactions contemplated
by this Agreement and all materials of any kind (including opinions or other
tax analyses) that are provided relating to such tax treatment and tax
structure.
SECTION 13. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at 4 World Financial
Center, New York, New York 10080, attention of ; notices to the Company
shall be directed to it at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇; and notices to the Selling Stockholders
shall be directed to the Company, attention of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
SECTION 14. Parties. This Agreement shall each inure to the benefit of and
be binding upon the Underwriters, the Company and the Selling Stockholders and
their respective successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any person, firm or corporation,
other than the Underwriters, the Company and the Selling Stockholders and their
respective successors and the controlling persons and officers and directors
referred to in Sections 6 and 7 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Stockholders and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm
or corporation. No purchaser of Securities from any Underwriter shall be deemed
to be a successor by reason merely of such purchase.
SECTION 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 16. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT
AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY
TIME.
SECTION 17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
SECTION 18. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
26
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Underwriters,
the Company and the Selling Stockholders in accordance with its terms.
Very truly yours,
BLUE NILE, INC.
By
-------------------------------------------
Title:
[ ]
By
-------------------------------------------
As Attorney-in-Fact acting on behalf of
the Selling Stockholders named in
Schedule B hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By
---------------------------------------
Authorized Signatory
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
By
---------------------------------------
Authorized Signatory
For itself and as Representatives of the other Underwriters named in Schedule A
hereto.
27
SCHEDULE A
Number of
Name of Underwriter Initial Securities
------------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated........................................................
Bear, ▇▇▇▇▇▇▇ & Co. Inc.........................................................
----------------
Total.................................................................. [1]
================
Sch A-1
SCHEDULE B
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- ------------------------
Blue Nile, Inc.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Trinity Venture Capital
Bessemer Venture Partners
Vulcan Ventures
Kleiner, Perkins, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Lightspeed Venture Partners
Total...............................
Sch B-1
SCHEDULE C
BLUE NILE, INC.
3,740,000 Shares of Common Stock
(Par Value $0.001 Per Share)
1. The initial public offering price per share for the Securities, determined as
provided in said Section 2, shall be $ .
2. The purchase price per share for the Securities to be paid by the several
Underwriters shall be $ , being an amount equal to the initial public
offering price set forth above less $ per share; provided that the purchase
price per share for any Option Securities purchased upon the exercise of the
overallotment option described in Section 2(b) shall be reduced by an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities.
Sch C-1
[SCHEDULE D]
[List of persons and entities
subject to lock-up]
Sch D - 1
EXHIBIT A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. 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, as the case may be, to operate
its properties and conduct its business as described in the Prospectus, to
execute an deliver the Purchase Agreement, to perform the Company's obligations
under the Purchase Agreement and to issue the Securities.
2. The Subsidiary has been duly formed and is validly existing as a limited
liability company in good standing under the laws of the State of Delaware, with
full limited liability power and authority to own or lease, as the case may be,
and to operate its properties and conduct its business as it is currently being
conducted.
3. The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state of the United States in
which the Company maintains an office, has employees or owns or leases property,
except where the failure to be so qualified would not have a material adverse
effect on the financial condition, earnings, business or properties of the
Company and the Subsidiary, taken as a whole.
4. The Subsidiary is duly qualified to do business as a foreign limited
liability company and is in good standing under the laws of each state of the
United States in which the Subsidiary maintains an office, has employees or owns
or leases property, except where the failure to be so qualified would not have a
material adverse effect on the financial condition, earnings, business or
properties of the Company and the Subsidiary, taken as a whole.
5. The authorized, issued and outstanding capital stock of the Company was
as set forth in the Prospectus under the caption "Capitalization" as of the date
stated therein; the issued and outstanding shares of capital stock set forth in
the Prospectus under the caption "Capitalization" as of the date stated therein
have been duly and validly authorized and issued and are fully paid and
nonassessable, and were not issued in violation of any preemptive or similar
rights provided for in the Company's certificate of incorporation or bylaws or
in the Material Contracts. To our knowledge, all outstanding membership units of
the Subsidiary are owned of record by the Company and are free of any liens or
encumbrances. The rights associated with the outstanding membership units are as
stated in the Operating Agreement by and between the Company and the Subsidiary
dated as of May 1, 2003.
6. The Securities have been duly authorized and, when issued and paid for
by the Underwriters pursuant to the Agreement, will be validly issued, fully
paid and nonassessable.
7. The Securities are duly listed, and admitted and authorized for
quotation on the Nasdaq National Market.
8. The holders of outstanding shares of capital stock of the Company are
not entitled to preemptive or, to our knowledge, rights of first refusal or
other similar rights to subscribe for
A-1
the Securities. Except as set forth in the section captioned "Capitalization" in
the Prospectus as of the date stated therein, to our knowledge there were no
options, warrants or other rights to purchase or acquire any shares of capital
stock of the Company.
9. To our knowledge, there is (i) no action, suit or proceeding by or
before any court or other governmental agency, authority or body or any
arbitrator pending or overtly threatened against the Company or the Subsidiary,
or its properties (A) of a character required to be disclosed in the Prospectus
that is not disclosed in the Prospectus as required by the Act and the rules and
regulations thereunder or (B) which would reasonably be expected to materially
and adversely affect the consummation of the transactions contemplated in the
Purchase Agreement or the performance of the Company's obligations thereunder,
and (ii) no indenture, contract, lease, mortgage, deed of trust, note agreement,
loan or other agreement or instrument of a character required to be filed as an
exhibit to the Registration Statement, which is not filed as required by the Act
and the rules and regulations thereunder.
10. The statements in the Prospectus under the headings "Description of
Capital Stock," and "Shares Eligible for Future Sale," and in the Registration
Statement in Item 14, insofar as such statements purport to summarize legal
matters, proceedings, agreements or documents discussed therein, fairly present,
to the extent required by the Act and the rules thereunder, in all material
respects, such legal matters, proceedings, agreements or documents.
11. The Registration Statement has become effective under the Act, no stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or overtly threatened.
Any required filing of the Prospectus, and any supplement thereto, pursuant to
Rule 424(b) under the Act, has been made in the manner and within the time
period required by Rule 424(b).
12. The Registration Statement and the Prospectus (other than the financial
statements and notes thereto or other financial or statistical data derived
therefrom, as to which we express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the rules thereunder.
13. The Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and delivered by
the Company.
14. The Company is not, and, after giving effect to the offering and sale
of the Securities and the application of the proceeds thereof as described in
the Prospectus, will not be, an "investment company" as defined in the
Investment Company Act of 1940, as amended.
15. No consent, approval, authorization or filing with or order of any
court or governmental agency or body in the United States having jurisdiction
over the Company is required for the consummation by the Company of the
transactions contemplated by the Agreement, except such as have been made or
obtained under the Act and the Securities Exchange Act of 1934, as amended and
except such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters in the manner contemplated in the Agreement and in the Prospectus,
or under the bylaws, rules and regulations of the NASD.
A-2
16. The execution and delivery of the Agreement by the Company, the
performance by the Company of its obligations under the Agreement (if performed
in full as of the date hereof and other than with respect to the obligations set
forth in Sections 6 and 7 of the Agreement) and the issue and sale of the
Securities pursuant to the Agreement will not result in a breach or violation
of, or imposition of any lien, charge or encumbrance upon any property or assets
of the Company or the Subsidiary, pursuant to (i) the charter or bylaws of the
Company or the Subsidiary, (ii) the terms of any Material Contract (with or
without the passage of time and/or notice); or (iii) to our knowledge, any
statute, law, rule, or regulation applicable to the Company or the Subsidiary or
any judgment, order or decree applicable to the Company or the Subsidiary of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or the Subsidiary, except
for the bylaws, rules and regulations of the NASD and state securities or blue
sky laws.
17. To our knowledge, except as set forth in the Prospectus, no holders of
securities of the Company have rights to require the registration under the Act
of resales of such securities.
A-3
Exhibit B
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
1. The execution and delivery of the Purchase Agreement and the Power of
Attorney and Custody Agreement and the sale and delivery of the Securities and
the consummation of the transactions contemplated in the Purchase Agreement and
in the Registration Statement and compliance by the Selling Stockholder with
its obligations under the Purchase Agreement have been duly authorized by all
necessary action on the part of the Selling Stockholder. The Purchase Agreement
and the Custody Agreement and Power of Attorney have been duly executed and
delivered by the Selling Stockholder and the Custody Agreement and Power of
Attorney are valid and binding on the Selling Stockholder, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance.
2. Upon the Underwriters' acquiring possession of stock certificates
representing the Securities to be sold by the Selling Stockholder, endorsed to
the Underwriters and paying the purchase price therefor pursuant to the
Purchase Agreement, the Underwriters (assuming that no such Underwriter has
notice of any "adverse claim," within the meaning of Section 8-105 of the New
York Uniform Commercial Code, to such Securities) will acquire their respective
interests in such Securities (including, without limitation, all rights that
such Selling Stockholder had or has the power to transfer in such Securities)
free and clear of any adverse claim within the meaning of Section 8-102 of the
New York Uniform Commercial Code.
3. No consent, approval, authorization or order of, nor any filing with, any
court or governmental agency or body is required for the consummation by the
Selling Stockholder of the transactions contemplated in the Purchase Agreement
and the Custody Agreement and Power of Attorney, except such as may have been
obtained under the Act and such as may be required under the blue sky laws of
any jurisdiction in connection with the purchase and distribution of the
Selling Stockholder Securities by the Underwriters (as to which we express no
opinion).
4. Neither the sale of the Selling Stockholder Securities pursuant to the
Purchase Agreement, nor the performance by the Selling Stockholder of the
obligations set forth in the Purchase Agreement will conflict with, result in a
breach or violation of, or constitute a default under (a) any law, statute or
regulation or the terms of any indenture or other agreement or instrument known
to such counsel and to which the Selling Stockholder is a party or bound, any
judgment, order or decree known to such counsel to be applicable to the Selling
Stockholder of any court, regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over any Selling Stockholder, or (c) the
provisions of the charter or bylaws or any entity Selling Stockholder.
B-1