4,500,000 SHARES
DVD EXPRESS, INC.
COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
UNDERWRITING AGREEMENT
[________], 1999
ING BARING ▇▇▇▇▇▇ ▇▇▇▇ LLC
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇▇ & COMPANY, INC.
As Representatives of the
several Underwriters
c/o ING Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
SECTION 1. INTRODUCTION. DVD Express, Inc., a Delaware corporation
(the "COMPANY") proposes to issue and sell to the several underwriters named in
Schedule I hereto (the "UNDERWRITERS"), for which ING Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC
("ING"), Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. and ▇▇▇▇▇▇▇ & Company, Inc. are
acting as representatives (the "REPRESENTATIVES"), an aggregate of 4,500,000
shares of the Company's common stock, par value $.0001 per share (the "COMMON
STOCK"). The 4,500,000 shares of Common Stock to be sold by the Company are
referred to herein as the "FIRM SHARES." The Company also proposes to issue and
sell to the several Underwriters an aggregate of not more than 675,000
additional shares of Common Stock (the "ADDITIONAL SHARES"), if requested by the
Underwriters in accordance with Section 9 hereof. The Firm Shares and the
Additional Shares are collectively referred to herein as the "SHARES." The
words "YOU" and "YOUR" refer to the Representatives.
The Company hereby agrees with the several Underwriters as follows:
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to, and agrees with, each of the Underwriters
that:
(a) PREPARATION, FILING OF REGISTRATION STATEMENT,
PRELIMINARY PROSPECTUSES, PROSPECTUS. A registration statement on Form S-
1 (File No. 333-76121) under the Securities Act of 1933 as amended (the
"ACT"), with respect to the Shares,
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including a form of prospectus subject to completion, has been prepared by
the Company in conformity with the requirements of the Act and the rules
and regulations of the Securities and Exchange Commission (the
"COMMISSION") thereunder (the "RULES AND REGULATIONS"). Such registration
statement has been filed with the Commission under the Act, and one or
more amendments to such registration statement may also have been so
filed. As used in this Agreement, the term "REGISTRATION STATEMENT" means
such registration statement, as amended at the time when it was or is
declared effective, including all financial schedules and exhibits
thereto; the Registration Statement shall be deemed to include any
information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined) and shall also mean
any registration statement filed pursuant to Rule 462(b) under the Act;
the term "PRELIMINARY PROSPECTUS" means each prospectus subject to
completion contained in the Registration Statement or any amendment
thereto (including the prospectus subject to completion, if any, included
in the Registration Statement or any amendment thereto or filed pursuant
to Rule 424(a) under the Act at the time it was or is declared effective);
and the term "PROSPECTUS" means the prospectus first filed with the
Commission pursuant to Rule 424(b) under the Act or, if no prospectus is
required to be filed pursuant to said Rule 424(b), such term means the
prospectus included in the Registration Statement.
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company
has not received any order preventing or suspending the use of any
Preliminary Prospectus and the Company has not received any notice that
the Commission has instituted nor, to the Company's knowledge, has the
Commission threatened to institute any proceedings with respect to such an
order. When any Preliminary Prospectus was filed with the Commission it
(i) contained all statements required to be stated therein in accordance
with, and complied in all material respects with the requirements of the
Act and the Rules and Regulations and (ii) did not include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. When the Registration
Statement was or is declared effective, it (i) contained or will contain
all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of
the Act and the Rules and Regulations and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading. When the
Prospectus is filed with the Commission pursuant to Rule 424(b) (or, if
the Prospectus is not required to be so filed, when the Registration
Statement containing the Prospectus was or is declared effective) and at
all times subsequent thereto up to and including the Closing Date (as
defined in Section 3 hereof) and the Option Closing Date (as defined in
Section 9 hereof), the Prospectus (i) contained or will contain all
statements required to be stated therein in accordance with, and complied
or will comply in all material respects with the requirements of, the Act
and the Rules and Regulations and (ii) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (b) shall not apply to (i) statements or
omissions made in any Preliminary Prospectus which
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have been corrected in a subsequent Preliminary Prospectus or the
Prospectus or (ii) statements or omissions made in any Preliminary
Prospectus, the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance upon, and in
conformity with, information furnished in writing to the Company by or on
behalf of the Underwriters through the Representatives expressly for use
therein.
(c) DUE INCORPORATION, QUALIFICATION OF COMPANY,
SUBSIDIARIES. The Company (i) is a duly incorporated and validly existing
corporation in good standing under the laws of its jurisdiction of
incorporation, with corporate power and corporate authority to own or
lease its properties and to conduct its business as described in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus); and (ii) is duly
qualified to do business as a foreign corporation and is in good standing
in each jurisdiction (A) in which the conduct of its business requires
such qualification (except for those jurisdictions in which the failure so
to qualify has not had and will not have a MATERIAL ADVERSE EFFECT (as
hereinafter defined)) and (B) in which it owns or leases property.
"MATERIAL ADVERSE EFFECT" means, when used in connection with the Company,
any development, change or effect that is materially adverse to the
business, properties, assets, net worth, condition (financial or other) or
results of operations of the Company taken as a whole. The Company has no
subsidiaries.
(d) CAPITALIZATION. The Company has the duly authorized and
validly outstanding capitalization set forth under the caption
"Capitalization" in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and will have the
adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, based on the assumptions and including the exceptions
set forth therein and the footnotes thereto. The capital stock of the
Company conforms in all material respects to the description thereof
contained in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus). The outstanding shares of Common
Stock have been duly authorized and validly issued by the Company and are
fully paid and nonassessable. Except as created hereby or described in
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no outstanding options, warrants,
rights or other arrangements requiring the Company or any subsidiary of
the Company at any time to issue any capital stock. No holders of
outstanding shares of capital stock of the Company are entitled as such to
any preemptive or other rights to subscribe for any of the Shares, other
than those which have been waived or satisfied, and neither the filing of
the Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, other than those
that have been waived or satisfied, for or relating to, the registration
of any securities of the Company. All offers and sales of the Company's
capital stock prior to the date hereof were at all relevant times exempt
from the registration requirements of the Act and were duly registered
with or the subject of an available exemption from the registration
requirements of the applicable state securities or Blue Sky laws. The
Shares have been duly authorized; on the Closing Date or the Option
Closing Date (as the case may be), after payment therefor in accordance
with the terms of this Agreement, (i) the
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Firm Shares and the Additional Shares to be sold by the Company hereunder
will be validly issued, fully paid and nonassessable, and (ii) good and
marketable title to the Shares will pass to the Underwriters on the
Closing Date or the Option Closing Date (as the case may be) free and
clear of any lien, encumbrance, security interest, claim or other
restriction whatsoever.
(e) EXCHANGE ACT REGISTRATION; NASDAQ. The Company has
filed a registration statement pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") to register the
Common Stock thereunder. The Company has received, subject to notice of
issuance, approval to have the Shares quoted on the National Market System
of the National Association of Securities Dealers' Automated Quotation
System ("Nasdaq National Market") and the Company knows of no reason or
set of facts which is likely to adversely affect such approval.
(f) FINANCIAL STATEMENTS. The consolidated financial
statements and the related notes and schedules thereto included in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present, in all
material respects, the consolidated financial condition, results of
operations, stockholders' equity and cash flows of the Company at the
dates and for the periods specified therein. Such financial statements
and the related notes and schedules thereto have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise noted
therein) and such financial statements have been examined by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, which are independent public accountants within the meaning
of the Act and the Rules and Regulations, as indicated in their reports
filed therewith. The selected financial information set forth under the
captions "Prospectus Summary - Summary Financial Data" and "Selected
Financial Data" in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) has been prepared on a
basis consistent with the consolidated financial statements of the
Company.
(g) TAX RETURNS. The Company has filed all necessary
federal, state and local income, franchise and other material tax returns
and have paid all taxes shown as due thereunder, and the Company has no
knowledge of any tax deficiency that is reasonably likely to be assessed
against the Company which, if so assessed, would have a Material Adverse
Effect.
(h) INSURANCE. The Company maintains insurance of the
types, in amounts and with such deductibles generally deemed adequate for
the business of the Company, in such amounts and with such deductibles as
is customary for companies in the same or similar business, all of which
insurance is in full force and effect. The Company (i) has not received
any 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 and (ii) has no reason to believe that
it will not be able to renew its existing insurance coverage as and when
such coverage expires or will not be
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able to obtain similar coverage from similar insurers at a cost that would
not have a Material Adverse Effect.
(i) ABSENCE OF PROCEEDINGS. Except as disclosed in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there is no action, suit, proceeding or
investigation pending or, to the Company's best knowledge, threatened
before or by any court, regulatory body or administrative agency or any
other governmental agency or body, domestic or foreign, that (i) questions
the validity of the capital stock of the Company or this Agreement or of
any action taken or to be taken by the Company pursuant to or in
connection with this Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings, if
any, as are summarized in the Registration Statement are accurately
summarized in all material respects), or (iii) if decided adversely to the
Company, would have a Material Adverse Effect.
(j) AUTHORIZATION; BINDING AGREEMENT; NO VIOLATION. The
Company has all requisite corporate, power and authority to enter into
this Agreement and to consummate the transactions provided for herein.
This Agreement has been duly authorized, executed and delivered by the
Company and, assuming it is a binding agreement of the Underwriters,
constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating
to or affecting the enforcement of creditors' rights and the application
of general equitable principles relating to the availability of remedies
and except as rights to indemnity or contribution may be limited by
federal or state securities laws and the public policy underlying such
laws), and none of the Company's execution or delivery of this Agreement,
its performance hereunder, its consummation of the transactions
contemplated herein, its application of the net proceeds of the offering
in the manner set forth under the caption "Use of Proceeds" or the conduct
of its business as described in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), conflicts or
will conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, causes or will cause (or permits or will permit), except as
specifically disclosed in the Prospectus, the maturation or acceleration
of any liability or obligation or the termination of any right under, or
result in the creation or imposition of any lien, charge, or encumbrance
upon, any property or assets of the Company pursuant to the terms of
(i) the certificate of incorporation or by-laws of the Company, (ii) any
indenture, mortgage, deed of trust, voting trust agreement, stockholders'
agreement, note agreement or other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any of
its property is or may be subject or (iii) any statute, judgment, decree,
order, rule or regulation applicable to the Company of any government,
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, having jurisdiction over
the Company or any of its activities or properties, except, in the cases
of clauses (ii) and (iii) above, for
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breaches, violations, defaults or terminations which would not be
reasonably likely to have a Material Adverse Effect.
(k) EXHIBITS. All executed agreements or copies of executed
agreements filed as exhibits to the Registration Statement to which the
Company is a party or by it may be bound or to which any of its assets,
properties or businesses is or may be subject, have been duly and validly
authorized, executed and delivered by the Company and, assuming such
agreements are the legal, valid, binding and enforceable agreements of the
other parties thereto, constitute the legal, valid and binding agreements
of the Company enforceable against the Company in accordance with their
respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting the enforcement of
creditors' rights and the application of general equitable principles
relating to the availability of remedies and except as rights to indemnity
or contribution may be limited by federal or state securities laws and the
public policy underlying such laws). The descriptions in the Registration
Statement of contracts and other documents are accurate in all material
respects and fairly present the information required to be shown with
respect thereto by the Act and the Rules and Regulations, and there are no
contracts or other documents which are required by the Act or the Rules
and Regulations to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are complete and correct
copies, in all material respects, of the documents of which they purport
to be copies.
(l) LIABILITIES, OBLIGATIONS, DIVIDENDS; NO MATERIAL ADVERSE
CHANGE. Subsequent to the most recent respective dates as of which
information is given in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and except as
expressly disclosed or contemplated therein, (i) the Company has not
incurred, other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent, or purchased any of its
outstanding capital stock, paid or declared any dividends or other
distributions on its capital stock or entered into any material
transactions not in the ordinary course of business and there has been no
material change in capital stock or long- or short-term debt of the
Company, and (ii) there has not been any material adverse change, or
development involving a prospective material adverse change, in the
business, properties, assets, net worth, condition (financial or other),
or results of operations of the Company taken as a whole.
(m) NO VIOLATION. Neither the Company nor the manner in
which it conducts its business is in breach or violation of, or in default
under, any term or provision of (i) its certificate of incorporation or
bylaws, (ii) any indenture, mortgage, deed of trust, voting trust
agreement, stockholders' agreement, note agreement or other agreement or
instrument to which it is a party or by which it is or may be bound or to
which any of its property is or may be subject, or any indebtedness, the
effect of which breach or default singly or in the aggregate may have a
Material Adverse Effect, or (iii) any statute, judgment, decree, order,
rule or regulation applicable to the Company or
6
of any arbitrator, court, regulatory body, administrative agency or any
other governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its activities or properties and
the effect of which breach or default singly or in the aggregate would
have a Material Adverse Effect.
(n) LABOR DISTURBANCES. No labor disturbance by the
employees of the Company exists or, to the Company's knowledge, is
imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, customers,
contractors or distribution (or syndication) partners which would have a
Material Adverse Effect.
(o) INTELLECTUAL PROPERTY. The Company owns and possesses
all right, title and interest in and to, or has duly licensed from other
parties, all Internet domains, trademarks, copyrights and other
proprietary rights which are used in and material to the business of the
Company taken as a whole ("TRADE RIGHTS"). The Company has not received
any notice of infringement, misappropriation or conflict from any party as
to such material Trade Rights that has not been resolved or disposed of
and the Company has not infringed, misappropriated or otherwise conflicted
with material Trade Rights of any third parties, which infringement,
misappropriation or conflict would have a Material Adverse Effect.
(p) ABSENCE OF FURTHER REQUIREMENTS. No consent, approval,
authorization or order of or filing with any court, regulatory body,
administrative agency or any other governmental agency or body, domestic
or foreign, is required for the performance of this Agreement or the
consummation of the transactions contemplated hereby, except (i) such as
have been or may be required to be obtained under the Act, (ii) such as
may be required under state securities or Blue Sky laws in connection with
the Underwriters' purchase and distribution of the Shares, (iii) for the
approval of the listing of the Common Stock on the Nasdaq National Market,
and (iv) for the review and no objection of the NASD to the terms of the
underwriting of the Shares as set forth in this Agreement.
(q) PROPERTIES AND ASSETS. The Company has good and valid
title to, or valid and enforceable leasehold interests in, all properties
and assets owned or leased by it, free and clear of all mortgages, liens,
encumbrances, security interests, claims, restrictions, equities, claims
and defects, except such as are described in the Registration Statement
and Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), or such as do not have a Material Adverse Effect.
The Company owns or leases all such properties as are materially necessary
to its operations as now conducted, and as proposed to be conducted as set
forth in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus);
and the properties and business of the Company conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus). All the material leases and
subleases of the Company, and under which the
7
Company holds properties or assets as lessee or sublessee, constitute
valid leasehold interests of the Company free and clear of any lien,
encumbrance, security interest, restriction, equity, claim or defect, are
in full force and effect, and the Company is not in default in respect of
any of the material terms or provisions of any such material leases or
subleases, and the Company has no notice of any claim which has been
asserted by anyone adverse to the Company's rights as lessee or sublessee
under either the material lease or sublease, or affecting or questioning
the Company's right to the continued possession of the leased or subleased
premises under any such material lease or sublease, in each case which
default or claim would have a Material Adverse Effect.
(r) ENVIRONMENTAL, SAFETY, HEALTH, SIMILAR LAWS. The
Company has not violated any environmental, safety, health or similar law
applicable to the business of the Company, nor any federal or state law
relating to discrimination in the hiring, promotion, or pay of employees,
nor any applicable federal or state wages and hours law, nor any
provisions of the federal Employee Retirement Income Security Act or the
rules and regulations promulgated thereunder, the consequences of which
violation would have a Material Adverse Effect.
(s) LICENSES, PERMITS. The Company holds and at the Closing
Date and any later Option Closing Date, as the case may be, will hold, all
franchises, licenses, permits, approvals, certificates and other
authorizations ("AUTHORIZATIONS") from federal, state and foreign and
other governmental or regulatory authorities necessary to the ownership,
leasing and operation of its properties or required for the present
conduct of its business, and such Authorizations are in full force and
effect and the Company is in compliance therewith in all material respects
except where the failure so to obtain, maintain or comply would not have a
Material Adverse Effect. No event has occurred (including, without
limitation, the receipt of any notice from any authority or governing
body) that allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or results
or, after notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such Authorization.
(t) RELATED PARTY RELATIONSHIPS/TRANSACTIONS. Except as
disclosed in the Prospectus, there are no business relationships or
related party transactions required to be disclosed therein by Item 404 of
Regulation S-K of the Commission.
(u) STATISTICAL, MARKET-RELATED DATA. The statistical and
market-related data included in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus) are based on or
derived from independent sources that the Company believes to be reliable
and accurate in all material respects, or represent the Company's
good-faith estimate made on the basis of data derived from such sources.
(v) INTERNAL ACCOUNTING CONTROLS. The Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with
management's general or specific
8
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(w) COMPLIANCE WITH CUBA ACT. The Company is in compliance
with all provisions of Florida Statutes Section 517.075, and the
regulations thereunder, relating to issuers doing business with Cuba.
(x) POLITICAL CONTRIBUTIONS; PAYMENTS TO OFFICIALS. The
Company has not at any time during the last five years (i) made any
unlawful contribution to any candidate for foreign office, or failed to
disclose fully any contribution in violation of law, or (ii) made any
payment to any foreign, United States or state governmental officer or
official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the
United States.
(y) INVESTMENT COMPANY ACT. The Company is not, and after
giving effect to the offering of the Shares contemplated hereby and the
application of the proceeds therefrom, will not be, an "investment
company" or an entity "controlled" by an investment company, as such terms
are defined in Section 3(a) of the Investment Company Act of 1940, as
amended.
(z) YEAR 2000. The Company has reviewed its operations and
any other parties with which the Company has a material relationship in
order to evaluate the extent to which the business or operations of the
Company will be affected by the Year 2000 Problem (as defined below). As
a result of such review, management of the Company has no reason to
believe, and does not believe, that the Year 2000 Problem will result in a
Material Adverse Effect or result in any material loss or interference
with the business or operations of the Company. The "Year 2000 Problem"
means any significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
SECTION 3. PURCHASE, SALE AND DELIVERY OF THE SHARES. On the basis
of the representations, warranties, covenants and agreements herein contained,
but subject to the terms and conditions herein set forth, the Company agrees to
sell to each Underwriter and each Underwriter, severally and not jointly, agrees
to purchase from the Company at a purchase price of $[_______] per Share, the
number of Firm Shares set forth opposite the name of such Underwriter on
SCHEDULE I.
Delivery of certificates, and payment of the purchase price, for the
Firm Shares shall be made at the offices of ING Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other location as shall be agreed upon by the Company
and the Representatives. Such delivery and payment shall be made at 10:00 a.m.,
New York City time, on [__________], 1999 or at such other time and date not
more than ten business days thereafter as shall be agreed upon by the
Representatives and the Company. The time and date of such delivery and payment
are herein called the "CLOSING DATE." Delivery of the certificates for the Firm
Shares shall be made through the facilities of the Depository Trust Company to
the Representatives for the respective accounts of the several Underwriters
against payment by the several Underwriters through the Representatives of the
purchase price for the Firm Shares by wire transfer of immediately-available
funds to an account designated to the Representatives in writing at least two
business days preceding the Closing Date. The certificates for the Shares to be
so delivered will be in definitive, fully-registered form, will bear no
restrictive legends and will be in such denominations and registered in such
names as the Representatives shall request, not less than two full business days
prior to the Closing Date. The certificates for the Firm Shares will be made
available to the Representatives at such office or such other place as the
Representatives may designate for inspection, checking and packaging not later
than 9:30 a.m., New York time on the business day prior to the Closing Date.
SECTION 4. PUBLIC OFFERING OF THE SHARES. It is understood that
the Underwriters propose to make a public offering of the Shares at the price
and upon the other terms set forth in the Prospectus.
SECTION 5. COVENANTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters that:
(a) FILING OF REGISTRATION STATEMENT, PROSPECTUS. Promptly
following execution of this Agreement, the Company shall file with the
Commission either (i) if the Registration Statement, as it may have been
amended, has been declared by the Commission to be effective under the
Act, a prospectus in the form most recently included in an amendment to
the Registration Statement filed with the Commission (or, if no such
amendment shall have been filed, in the Registration Statement), with such
insertions and changes as are required by Rule 430A under the Act and as
shall have been provided to and approved by the Representatives prior to
the filing thereof, or (ii) if the Registration Statement, as it may have
been amended, has not been declared by the Commission to be effective
under the Act, an amendment to the Registration Statement, including a
form of prospectus, a copy of which amendment has been furnished to and
approved by the Representatives prior to the filing thereof. If the
Registration Statement does not cover all of the Shares, the Company shall
file with the Commission, if available, a registration statement under
Rule 462(b) of the Rules and Regulations registering the Shares not so
covered by 10:00 p.m., New York City time, on the date of this Agreement,
and shall pay to the Commission the filing fee for such registration
statement at the time of filing or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) of the Rules and Regulations.
(b) EFFECTIVENESS; AMENDMENTS, FINAL PROSPECTUS. The
Company will use its best efforts to cause the Registration Statement, if
not effective at the time of
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execution of this Agreement, and any amendments thereto to become
effective as promptly as practicable. If required, the Company will file
the Prospectus and any amendment or supplement thereto with the Commission
in the manner and within the time period required by Rule 424(b) under the
Act. During any time when a prospectus relating to the Shares is required
to be delivered under the Act, the Company (i) will comply with all
requirements imposed upon it by the Act and the Rules and Regulations to
the extent necessary to permit the continuance of sales of or dealings in
the Shares in accordance with the provisions hereof and of the Prospectus,
as then amended or supplemented, and (ii) will not file with the
Commission the prospectus or the amendment referred to in the third
sentence of Section 2(a) hereof or any amendment or supplement to such
prospectus or any amendment to the Registration Statement, of which the
Representatives shall not previously have been advised and furnished with
a copy a reasonable period of time prior to the proposed filing and as to
which filing the Representatives shall not have given their consent.
(c) INFORMATION TO BE PROVIDED TO REPRESENTATIVES; STOP
ORDERS. As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Representatives (i) when the Registration
Statement, as amended, has become effective; if the provisions of Rule
430A promulgated under the Act will be relied upon, when the Prospectus
has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective;
(ii) of any request made by the Commission for amending the
Registration Statement, for supplementing any Preliminary Prospectus or
the Prospectus or for additional information, or (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or any
order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus in any jurisdiction or any amendment or supplement
thereto or the institution or threat of any investigation or proceeding
for that purpose, and will use its best efforts to prevent the issuance
of any such order and, if issued, to obtain the lifting thereof as soon
as possible.
(d) BLUE SKY LAWS. The Company will (i) use its best
efforts to arrange for the qualification of the Shares for offer and sale
under the state securities or Blue Sky Laws of such jurisdictions as the
Representatives may designate, and the continuation of such qualifications
in effect for as long as may be necessary to complete the distribution of
the Shares, and (ii) make such applications, file such documents and
furnish such information as may be required for the purposes set forth in
clause (i); PROVIDED, HOWEVER, that the Company shall not be required to
qualify as a foreign corporation or file a general or unlimited consent to
service of process in any such jurisdiction.
(e) USE OF PROSPECTUS; AMENDMENT. The Company consents to
the use of the Prospectus (and any amendment or supplement thereto) by the
Underwriters and all dealers to whom the Shares may be sold, in connection
with the offering or sale of the Shares and for such period of time
thereafter as the Prospectus is required by law to be
11
delivered in connection therewith. The Company shall promptly notify the
Representatives if, at any time when a prospectus relating to the Shares
is required to be delivered under the Act, any event occurs as a result of
which the Prospectus, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading, or it becomes
necessary at any time to amend or supplement the Prospectus to comply with
the Act or the Rules and Regulations. In such case, and at any other time
during such period that counsel to the Underwriters reasonably determines
that it is necessary to amend or supplement the Prospectus to comply with
the Act or the Rules and Regulations, the Company will, subject to Section
5(a) hereof, promptly prepare and file with the Commission an amendment to
the Registration Statement or an amendment or supplement to the Prospectus
that will correct such statement or omission or effect such compliance,
each such amendment or supplement to be reasonably satisfactory to counsel
to the Underwriters, and shall use its best efforts to cause any such
amendment to the Registration Statement to become effective as soon as
possible. In the event that any Underwriter is required to deliver a
prospectus nine months or more following the effective date of the
Registration Statement, the Company shall upon request (but at the expense
of such Underwriter) prepare promptly such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section
10(a)(3) of the Act.
(f) EARNINGS STATEMENT. As soon as practicable, but in any
event not later than 45 days after the end of the twelve-month period
beginning on the day after the end of the fiscal quarter of the Company
during which the effective date of the Registration Statement occurs (90
days in the event that the end of such fiscal quarter is the end of the
Company's fiscal year), the Company will make generally available to its
security holders, in the manner specified in Rule 158(b) of the Rules and
Regulations, and to the Representatives, an earnings statement which will
be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Rules and
Regulations, which statement need not be audited unless required by the
Act or the Rules and Regulations, covering a period of at least twelve
consecutive months after the effective date of the Registration Statement.
(g) REPORTS. During the period of three years from the date
hereof, the Company will furnish to its stockholders, as soon as
practicable, annual reports (including financial statements audited by
independent public accountants) and unaudited quarterly reports of
earnings, and will deliver to the Representatives:
(i) concurrently with furnishing any quarterly reports to
its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders;
(ii) concurrently with furnishing annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of income,
stockholders' equity and cash flows of the Company
12
for such fiscal year, accompanied by a copy of the report thereon
of independent public accountants;
(iii) as soon as they are available, copies of all
information (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the
Commission, the National Association of Securities Dealers, Inc.
("NASD") or any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the
Company or its affairs that is released or prepared by the
Company; and
(vi) any additional information of a public nature
concerning the Company or its business that is in the possession
of the Company at such time and that the Representatives may
reasonably request.
During such three-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for
any significant subsidiary that is not so consolidated.
(h) MATERIAL TRANSACTIONS. The Company will not, prior to
the earliest of the Option Closing Date, the termination or expiration of
the Underwriters' right to purchase Additional Shares, and the purchase of
all Additional Shares available for purchase pursuant to Section 9, enter
into any material transaction, other than in the ordinary course of
business and except as contemplated by the Prospectus.
(i) TRANSFER AGENT, REGISTRAR. The Company will maintain a
transfer agent and, if necessary under the jurisdiction of incorporation
of the Company, a registrar (which may be the same entity as the transfer
agent) for the Common Stock.
(j) COPIES OF REGISTRATION STATEMENT, PRELIMINARY
PROSPECTUS, PROSPECTUS. The Company will furnish to the Representatives
or on the Representatives' order, without charge, at such place as the
Representatives may designate, copies of the Registration Statement (of
which two copies will be signed, and which will include all financial
statements and exhibits) and any pre-effective or post-effective
amendments thereto (of which two copies will be signed, and which will
include all financial statements and exhibits), each Preliminary
Prospectus and the Prospectus, and all amendments and supplements thereto,
in each case as soon as available and in such quantities as the
Representatives may reasonably request.
(k) CORRESPONDENCE WITH THE COMMISSION. The Company will
promptly deliver to the Representatives copies of all correspondence to
and from, and all
13
documents issued to and by, the Commission in connection with the
registration of the Shares under the Act.
(l) LIMITATION ON ISSUANCE AND SALE. Without the prior
written consent of ING Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC, the Company will not issue
or directly or indirectly offer, sell, offer to sell, contract to sell,
grant any option for the sale or purchase of, or otherwise dispose of (or
announce any issuance, offer, sale, offer to sell, contract to sell,
option grant or other disposition of) any shares of Common Stock or any
security convertible or exchangeable into or exercisable for Common Stock,
or any substantially similar securities, for a period of 180 days from the
date of the Prospectus.
(m) LISTING ON NASDAQ. The Company will use its best
efforts to cause the Shares to be included for quotation on the Nasdaq
National Market prior to the Closing Date, and to maintain the listing of
the Shares on the Nasdaq National Market or a national securities exchange
for a period of three years following the date of this Agreement.
(n) USE OF PROCEEDS. The Company will apply the net
proceeds of the offering received by it in the manner set forth under the
caption "Use of Proceeds" in the Prospectus.
(o) FILING OF REPORTS. The Company will timely file all
such reports, forms or other documents as may be required from time to
time, under the Act, the Rules and Regulations, the Exchange Act and the
rules and regulations thereunder, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Rules and Regulations and the Exchange Act
and the rules and regulations thereunder.
(p) COMMUNICATIONS WITH PRESS. Prior to the earliest of the
Option Closing Date, the termination or expiration of the Underwriters'
right to purchase Additional Shares, and the purchase of all Additional
Shares available for purchase pursuant to Section 9, the Company will
issue no press release or other communication (except for communications
relating to product announcements in the ordinary course of business) and
hold no press conferences with respect to the Company or with respect to
the financial condition, results of operations, business, properties,
assets or liabilities of any of them, or the Offering, without the prior
consent of the Representatives, which shall not be unreasonably withheld.
(q) OTHER TASKS. The Company will exercise its best efforts
to do and perform all tasks required or necessary to be done or performed
under this Agreement by the Company prior to the Closing Date or any
Option Closing Date, as the case may be, and to satisfy all conditions
precedent to the delivery of the Shares.
SECTION 6. EXPENSES.
14
(a) RESPONSIBILITY FOR COMPANY/UNDERWRITER EXPENSES.
Regardless of whether the transactions contemplated in this Agreement are
consummated, and regardless of whether for any reason this Agreement is
terminated, SUBJECT TO THIS SECTION 6, the Company will pay, and hereby
agrees to indemnify each Underwriter against, all fees and expenses
incident to the performance of the obligations of the Company under this
Agreement, including, but not limited to, (i) fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation (other than fees of counsel
for the Underwriters), duplication, printing, filing, delivery and
shipping of copies of the Registration Statement and any pre-effective or
post-effective amendments thereto, any Preliminary Prospectus and the
Prospectus and any amendments or supplements thereto (including postage
costs related to the delivery by the Underwriters of any Preliminary
Prospectus or Prospectus, or any amendment or supplement thereto), this
Agreement, the Agreement Among Underwriters, the Underwriters'
Questionnaire, the Underwriters' Power of Attorney, and all other
documents in connection with the transactions contemplated herein,
including the cost of all copies thereof, (iii) fees and expenses relating
to qualification of the Shares under state securities or Blue Sky Laws,
including the cost of preparing and mailing the preliminary and final blue
sky memoranda and filing fees and disbursements and reasonable fees of
counsel for the Underwriters and other related expenses, if any, in
connection therewith, (iv) filing fees of the Commission relating to
registration of the Shares under the Act, (v) any fees and expenses in
connection with the quotation of the Shares on the Nasdaq National Market,
(vi) the filing fees incident to, and the fees and disbursements of
counsel for the Underwriters in connection with, securing any required
review by the NASD of the terms of the underwriting of the Shares as set
forth in this Agreement, (vii) costs and expenses incident to the
preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Shares, including the transfer agent's and the registrar's
fees and any applicable transfer taxes incurred in connection with the
delivery to the Underwriters of the Shares to be sold by the Company
pursuant to this Agreement, (viii) costs and expenses incident to any
meetings with prospective investors in the Shares (other than as shall
have been specifically approved by the Representatives to be paid for by
the Underwriters), (ix) costs and expenses of advertising relating to the
offering of the Shares (other than as shall have been specifically
approved by the Representatives to be paid for by the Underwriters), and
(x) all other costs and expenses incident to the performance of its
obligations hereunder that are not otherwise specifically provided for in
this section. Except as set forth above and in Section 6(b) below, the
Underwriters shall pay all of their own expenses (including the fees and
disbursements of their counsel and their travel expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(b) RESPONSIBILITY FOR EXPENSES IF PURCHASE OF SHARES NOT
CONSUMMATED. If the purchase of the Shares as herein contemplated is not
consummated for any reason other than the Underwriters' default under this
Agreement or other than by reason of the Representatives giving the notice
to the Company set forth in Section 11(a), the Company shall reimburse the
several Underwriters for their reasonable out-of-pocket expenses
(including reasonable counsel fees and disbursements) in connection with
any
15
investigation made by them, and any preparation made by them in respect of
marketing of the Shares or in contemplation of the performance by them of
their obligations hereunder.
SECTION 7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The
obligation of each Underwriter to purchase and pay for the Shares set forth
opposite the name of such Underwriter in SCHEDULE I is subject to, in the
discretion of the Underwriters, the continuing accuracy of the representations
and warranties of the Company herein as of the date hereof and as of the Closing
Date as if they had been made on and as of the Closing Date, the accuracy on and
as of the Closing Date of the statements of officers of the Company made
pursuant to the provisions hereof, the performance by the Company on and as of
the Closing Date of all of its covenants and agreements hereunder which are to
be performed on or prior to the Closing Date, and the following additional
conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT, FILING OF
PROSPECTUS. If the Company has elected to rely on Rule 430A under the
Act, the Registration Statement shall have been declared effective, and
the Prospectus (containing the information omitted pursuant to Rule 430A)
shall have been filed with the Commission not later than the Commission's
close of business on the second business day following the date hereof or
such later time and date to which the Representatives shall have
consented; if the Company does not elect to rely on Rule 430A, the
Registration Statement (including any registration statement filed under
Rule 462(b)) shall have been declared effective not later than 11:00 a.m.
New York time, on the first business day following the date hereof or such
later time and date to which the Representatives shall have consented; if
required, in the case of any changes in or amendments or supplements to
the Prospectus in addition to those contemplated above, the Company shall
have filed such Prospectus as amended or supplemented with the Commission
in the manner and within the time period required by Rule 424(b) under the
Act; no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no
proceedings for that purpose shall have been instituted or, to the
knowledge of the Company or the Representatives, shall be contemplated or
threatened by the Commission; and the Company shall have complied with any
request of the Commission for additional information (to be included in
the Registration Statement or the Prospectus or otherwise).
(b) NO MISSTATEMENTS/OMISSIONS. The Registration Statement,
or any amendment thereto, shall not contain an untrue statement of
material fact, or omit to state a material fact that is required to be
stated therein or is necessary to make the statements therein not
misleading, and the Prospectus, or any supplement thereto, shall not
contain an untrue statement of material fact, or omit to state a material
fact that is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(c) OPINION OF UNDERWRITERS' COUNSEL. On or prior to the
Closing Date, the Representatives shall have received from ▇▇▇▇▇▇▇,
Phleger & ▇▇▇▇▇▇▇▇ LLP, counsel to the Underwriters, such opinion or
opinions with respect to the issuance and sale of the Firm Shares, the
Registration Statement and the Prospectus and such other
16
related matters as the Representatives reasonably may request, and such
counsel shall have received such documents and other information as they
reasonably may request to enable them to pass upon such matters.
(d) OPINION OF COUNSEL TO THE COMPANY. On the Closing Date,
the Underwriters shall have received the opinion, dated the Closing Date,
of Troop ▇▇▇▇▇▇▇ Pasich Reddick & ▇▇▇▇▇, LLP, counsel to the Company, in
the form attached hereto as APPENDIX A, addressed to the Underwriters.
(e) OTHER DOCUMENTS, CERTIFICATES, OPINIONS. On or prior to
the Closing Date, counsel to the Underwriters shall have been furnished
such documents, certificates and opinions as they may reasonably require
in order to evidence the accuracy, completeness or satisfaction of any of
the representations or warranties of the Company, or conditions herein
contained.
(f) COMFORT LETTER AND BRINGDOWN LETTER OF ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP. At the time of execution of this Agreement, the Representatives
shall have received a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, addressed to the
Company and the Underwriters, confirming that it is an independent
certified public accountant with respect to the Company within the meaning
of the Act and the Rules and Regulations thereunder and setting forth
certain information as may be requested by the Representatives concerning
financial and operating data of the Company for the year ending December
31, 1998 and the quarter ending March 31, 1999 contained in the
Preliminary Prospectus (the "AA ORIGINAL LETTER"). On the Closing Date,
the Representatives shall have received a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
addressed to the Company and the Underwriters, dated the Closing Date,
confirming that it is an independent certified public accountant with
respect to the Company within the meaning of the Act and the Rules and
Regulations thereunder and based upon the procedures described in the AA
Original Letter, but carried out to a date not more than three days prior
to the Closing Date, (i) confirming that the statements and conclusions
set forth in the AA Original Letter are accurate as of the Closing Date;
and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the AA Original Letter that are necessary to
reflect any changes in the facts described in the AA Original Letter since
the date of such letter, or to reflect the availability of more recent
financial statements, data or information. It is a condition of the
Underwriters' obligations hereunder that such letter not disclose any
change, or any development involving a prospective change, in or affecting
the business or properties of the Company which, in ING's reasonable
judgment, makes it impracticable or inadvisable to proceed with the public
offering of the Shares as contemplated by the Prospectus. In addition,
the Representatives shall have received from AA LLC a letter addressed to
the Company and made available to the Representatives for the use of the
Underwriters stating that its review of the Company's system of internal
accounting controls, to the extent it deemed necessary in establishing the
scope of its latest examination of the Company's financial statements, did
not disclose any weaknesses in internal controls that it considered to be
material weaknesses. All such letters shall be in a form reasonably
satisfactory to the Representatives and their counsel.
17
(g) OFFICERS' CERTIFICATE. On the Closing Date, the
Representatives shall have received a certificate, dated the Closing Date,
of the principal executive officer and the principal financial or
accounting officer of the Company to the effect that each of such persons
has carefully examined the Registration Statement and the Prospectus and
any amendments or supplements thereto and this Agreement, and that:
(i) The representations and warranties of the Company set
forth in this Agreement are true and correct, as if made on and as
of the Closing Date, and the Company has complied with all
agreements and covenants and satisfied all conditions contained in
this Agreement on its part to be performed or satisfied at or prior
to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best
knowledge of each of such persons, are contemplated or threatened,
under the Act and any and all filings required by Rule 424 and Rule
430A have been timely made;
(iii) The Registration Statement and Prospectus and, if any,
each amendment and each supplement thereto, contain all statements
and information required to be included therein, and neither the
Registration Statement nor any amendment thereto includes any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and neither the Prospectus nor any supplement
thereto includes any untrue statement of a material fact or omits or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus up to and including the Closing Date, other than as
disclosed or contemplated by the Prospectus: the Company has not
incurred, other than in the ordinary course of its business, any
material liabilities or obligations, direct or contingent; the
Company has not purchased any of its outstanding capital stock or
paid or declared any dividends or other distributions on its capital
stock; the Company has not entered into any transactions not in the
ordinary course of business; and there has not been any change in
the capital stock or consolidated long-term debt or any increase in
the consolidated short-term borrowings (other than any increase in
short-term borrowings in the ordinary course of business) of the
Company or any material adverse change to the business, properties,
assets, net worth, condition (financial or other), or results of
operations of the Company taken as a whole; the Company has not
sustained any material loss or damage to its property or assets,
whether or not insured; and there is no litigation which is pending
or threatened against the Company which if adversely decided would
have a Material Adverse Effect.
18
References to the Registration Statement and the Prospectus in this
paragraph (g) are to such documents as amended and supplemented at
the date of the certificate.
(h) NO MATERIAL CHANGE. Subsequent to the respective dates
as of which information is given in the Registration Statement and the
Prospectus up to and including the Closing Date there has not been (i) any
material change or decrease specified in the letter referred to in
paragraph (g) of this Section 7 or (ii) any material adverse change, or
any development involving a prospective material adverse change, in the
business or properties of the Company, whether or not arising in the
ordinary course of business, which change or decrease in the case of
clause (i) or change or development in the case of clause (ii) makes it
impractical or inadvisable in the Representatives' judgment to proceed
with the public offering or the delivery of the Shares as contemplated by
the Prospectus.
(i) NO STOP ORDERS BY STATE AUTHORITIES. No order
suspending the sale of the Shares in any jurisdiction designated by you
pursuant to Section 5(d) hereof has been issued on or prior to the Closing
Date and no proceedings for that purpose have been instituted or, to your
knowledge or that of the Company, have been or are contemplated.
(j) LOCKUP AGREEMENTS. The Representatives shall have
received from each person identified on APPENDIX B attached hereto an
agreement to the effect that, absent the prior written consent of ING
Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC, such person will not (and, to the extent allowable
by law, will not permit any other person who is a transferee of such
person's shares of Common Stock or substantially similar securities of the
Company to) directly or indirectly offer, sell, offer to sell, contract to
sell, grant any option for the sale or purchase of, or otherwise dispose
of, any shares of Common Stock (including but not limited to any shares of
Common Stock issued or issuable upon conversion of any Preferred Stock of
the Company), or any security convertible or exchangeable into or
exercisable for Common Stock (including but not limited to shares of
Preferred Stock of the Company), or any substantially similar securities,
whether now owned or hereafter acquired or owned by such person listed on
APPENDIX B or with respect to which such person listed on APPENDIX B has
the power of disposition or beneficial ownership (collectively, the
"LOCKUP SHARES") or, in any manner, transfer all or a portion of the
economic consequences associated with the ownership of the Lockup Shares,
for a period of 180 days from the date of the Prospectus.
(k) ADDITIONAL DOCUMENTS. The Company shall have furnished
the Underwriters with such further opinions, letters, certificates or
documents as you or counsel for the Representatives may reasonably
request. All opinions, certificates, letters and documents to be
furnished by the Company shall be deemed to comply with the provisions
hereof (to the extent a form of such document is not attached hereto) only
if they are reasonably satisfactory in all material respects to the
Representatives and to counsel for the Representatives. The Company shall
furnish the Representatives with conformed copies of such opinions,
certificates, letters and documents in such quantities as you reasonably
request. The certificates delivered under this Section 7 shall constitute
19
representations, warranties and agreements of the Company, as to all
matters set forth therein, as fully and effectively as if such matters had
been set forth in Section 2 of this Agreement.
(l) The Shares shall have been duly authorized for quotation
on the Nasdaq National Market.
SECTION 8. INDEMNIFICATION.
(a) BY THE COMPANY. The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls such
Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, against any and all losses, claims, damages or
liabilities, joint or several (and actions in respect thereof), to which
such Underwriter or such controlling person may become subject, under the
Act or other federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or the Prospectus or any Preliminary Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission therein of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and will reimburse, as incurred, such Underwriter or such controlling
persons for any legal or other expenses reasonably incurred by such
Underwriter or such controlling persons in connection with investigating,
defending or appearing as a third party witness in connection with any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon
any untrue statement or alleged untrue statement or omission or alleged
omission made in any of such documents in reliance upon and in conformity
with information furnished in writing to the Company on behalf of such
Underwriter through the Representatives expressly for use therein. The
indemnity agreement in this paragraph (a) shall be in addition to any
liability that the Company may otherwise have.
(b) BY THE UNDERWRITERS. Each Underwriter agrees, severally
but not jointly, to indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the Registration Statement
and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, against any and
all losses, claims, damages or liabilities, joint or several (and actions
in respect thereof), to which the Company, its directors, each of its
officers who has signed the Registration Statement or such controlling
person may become subject, under the Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or the Prospectus or any
Preliminary Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or
20
alleged omission therein of a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with information furnished
in writing by that Underwriter through the Representatives to the
Company expressly for use therein, and will reimburse, as incurred, the
Company, its directors, each of its officers who has signed the
Registration Statement and such controlling persons for any legal or
other expenses reasonably incurred by the Company or any such person in
connection with investigating, defending or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or
action. The indemnity agreement contained in this paragraph (b) shall
be in addition to any liability that the Underwriters may otherwise
have.
(c) INDEMNIFICATION PROCEDURE. Promptly after receipt by an
indemnified party under this Section 8 of notice of the commencement of
any action, such indemnified party will, if a claim in respect thereof is
to be made against one or more indemnifying parties under this Section 8,
notify such indemnifying party or parties of the commencement thereof; but
the omission so to notify the indemnifying party shall not relieve it from
any liability to the extent that the indemnifying party was not adversely
affected by such omission, or from any liability which it may have to any
indemnified party otherwise than under paragraph (a) or (b) of this
Section 8. In case any such action is brought against an indemnified
party and it notifies an indemnifying party or parties of the commencement
thereof, the indemnifying party or parties against which a claim is to be
made will be entitled to participate therein and, to the extent that it or
they may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party);
PROVIDED HOWEVER, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party
has reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel to assume such
legal defenses and otherwise to participate in the defense of such action
on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so
to assume the defense of such action and approval by the indemnified party
of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses (other than the
reasonable costs of investigation) subsequently incurred by such
indemnified party in connection with the defense thereof, other than
reasonable costs if investigation, unless (i) the indemnified party has
employed such counsel in connection with the assumption of such different
or additional legal defenses in accordance with the proviso to the
immediately preceding sentence, (ii) the indemnifying party has not
employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized
in writing the employment of counsel for the indemnified party at the
expense of the indemnifying party. No indemnifying party
21
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect
of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment
(i) incudes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include
a statement as to or an admission of fault, culpability or failure to
act, by or on behalf of any indemnified party.
(d) CONTRIBUTION. If the indemnification provided for in
this Section 8 is unavailable or insufficient to hold harmless an
indemnified party under paragraph (a) or (b) above in respect of any
losses, claims, damages, expenses or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in
respect thereof) (i) in such proportion as is appropriate to reflect the
relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified, on the other hand, from the
offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified, on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the
contributing party and the Underwriters are the indemnified party, the
relative benefits received by the Company on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares (before
deducting expenses) bear to the total underwriting discounts received by
the Underwriters hereunder, in each case as set forth in the table on the
cover page of the Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this paragraph (d) 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 that
does not take account of the equitable considerations referred to above in
this paragraph (d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this paragraph (d) shall be deemed
to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this paragraph (d), the
Underwriters shall not be required to contribute any amount in excess of
the underwriting discount applicable to the Shares purchased by the
Underwriters hereunder. The Underwriters' obligations to contribute
pursuant to this paragraph (d) are several in
22
proportion to their respective underwriting obligations, and not joint.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For
purposes of this paragraph (d), (i) each person, if any, who controls
an Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act shall have the same rights to contribution as
such Underwriter and (ii) each director of the Company, each officer of
the Company who has signed the Registration Statement, and each person,
if any, who controls the Company within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Company, subject in each case to this paragraph
(d). Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against
such party in respect to which a claim for contribution may be made
against another party or parties under this paragraph (d), notify such
party or parties from whom contribution may be sought, but the omission
so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any other obligation
(x) it or they may have hereunder or otherwise than under this
paragraph (d) or (y) to the extent that such party or parties were not
adversely affected by such omission. The contribution agreement set
forth above shall be in addition to any liabilities which any
indemnifying party may otherwise have.
SECTION 9. RIGHT TO INCREASE OFFERING. At any time during a period
of 30 days from the date of the Prospectus, the Underwriters, by no less than
two business days' prior notice to the Company, may designate a closing (which
may be concurrent with, and part of, the closing on the Closing Date with
respect to the Firm Shares or which may be a second closing held on a date
subsequent to the Closing Date; in either case the date of such closing shall be
referred to herein as the "OPTION CLOSING DATE") at which the Underwriters may
purchase all or less than all of the Additional Shares in accordance with the
provisions of this Section 9 at the purchase price per share to be paid for the
Firm Shares. In no event shall the Option Closing Date be later than ten
business days after written notice of election to purchase Additional Shares is
given.
The Company agrees to sell to the several Underwriters on the
Option Closing Date the number of Additional Shares specified in such notice
and the Underwriters agree severally and not jointly, to purchase such
Additional Shares on the Option Closing Date. Such Additional Shares shall
be purchased for the account of each Underwriter in the same proportion as
the number of Firm Shares set forth opposite the name of such Underwriter on
Schedule I bears to the total number of Firm Shares (subject to adjustment by
ING to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of
the Firm Shares.
No Additional Shares shall be sold or delivered unless the Firm
Shares previously have been, or simultaneously are, sold and delivered. The
right to purchase the Additional Shares or any portion thereof may be
surrendered and terminated at any time upon notice by ING to the Company.
23
Except to the extent modified by this Section 9, all provisions of
this Agreement relating to the transactions contemplated to occur on the Closing
Date for the sale of the Firm Shares shall apply, MUTATIS MUTANDIS, to the
Option Closing Date for the sale of the Additional Shares.
SECTION 10. REPRESENTATIONS, ETC. TO SURVIVE DELIVERY. The
respective representations, warranties, agreements, covenants, indemnities and
statements of, and on behalf of, the Company and its officers and the
Underwriters, respectively, set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of the Underwriters, and will survive delivery of and payment for the
Shares. Any successors to the Underwriters shall be entitled to the indemnity,
contribution and reimbursement agreements contained in this Agreement.
SECTION 11. EFFECTIVE DATE AND TERMINATION.
(a) EFFECTIVE DATE. This Agreement shall become effective
at 11:00 a.m., New York time on the first business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Representatives, in their sole discretion, shall release
the Shares for the sale to the public, unless the Representatives shall
have given written notice to the Company that the Representatives on
behalf of the Underwriters elect that this Agreement shall not become
effective; PROVIDED, HOWEVER, that the provisions of this Section and of
Section 6 and Section 8 hereof shall at all times be effective. For
purposes of this Section 11(a), the Shares to be purchased hereunder shall
be deemed to have been so released upon the earlier of notification by the
Representatives to securities dealers releasing such Shares for offering
or the release by the Representatives for publication of the first
newspaper advertisement which is subsequently published relating to the
Shares.
(b) TERMINATION. This Agreement (except for the provisions
of Sections 6 and 8 hereof) may be terminated by the Representatives by
notice to the Company if the Company has failed to comply in any respect
with any of the provisions of this Agreement required on its part to be
performed at or prior to the Closing Date or the Option Closing Date, or
if any of the representations or warranties of the Company is not accurate
in any respect or if the covenants, agreements or conditions of, or
applicable to the Company herein contained have not been complied with in
any respect or satisfied within the time specified on the Closing Date or
the Option Closing Date, respectively, or if prior to the Closing Date or
the Option Closing Date:
(i) the Company shall have sustained a loss by strike, fire,
flood, hurricane, accident or other calamity of such a character as
to interfere materially with the conduct of the business and
operations of the Company taken as a whole regardless of whether or
not such loss is covered by insurance;
(ii) trading in the Common Stock shall have been suspended by
the Commission or the Nasdaq National Market or trading in
securities generally on the New York Stock Exchange or the Nasdaq
National Market System shall have
24
been suspended or a material limitation on such trading shall have
been imposed or minimum or maximum prices shall have been
established on any such exchange or market system;
(iii) a banking moratorium shall have been declared by New
York State or United States authorities;
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an
outbreak or escalation of any other insurrection or armed conflict
involving the United States; or
(v) there shall have been a material adverse change in (A)
general economic, political or financial conditions or (B) the
present or prospective business or condition (financial or other) of
the Company taken as a whole that, in each case, in the
Representatives' judgment makes it impracticable or inadvisable to
make or consummate the public offering, sale or delivery of the
Company's Shares on the terms and in the manner contemplated in the
Prospectus and the Registration Statement.
(c) TERMINATION AFTER PURCHASE OF FIRM SHARES. Termination
of this Agreement under this Section 11 or Section 12 after the Firm
Shares have been purchased by the Underwriters hereunder shall be
applicable only to the Additional Shares. Termination of this Agreement
shall be without liability of any party to any other party other than as
provided in Sections 6 and 8 hereof.
SECTION 12. SUBSTITUTION OF UNDERWRITERS.
(a) DEFAULT BY UNDERWRITER OF 10% OR LESS. If one or more
of the Underwriters shall fail or refuse (otherwise than for a reason
sufficient to justify the termination of this Agreement under the
provisions of Section 7 or 11 hereof) to purchase and pay for (a) in the
case of the Closing Date, the number of Firm Shares agreed to be purchased
by such Underwriter or Underwriters upon tender to you of such Firm Shares
in accordance with the terms hereof or (b) in the case of the Option
Closing Date, the number of Additional Shares agreed to be purchased by
such Underwriter or Underwriters upon tender to you of such Additional
Shares in accordance with the terms hereof, and the number of such Shares
shall not exceed 10% of the Firm Shares or Additional Shares required to
be purchased on the Closing Date or the Option Closing Date, as the case
may be, then each of the non-defaulting Underwriters shall purchase and
pay for (in addition to the number of such Shares or Additional Shares
that it has severally agreed to purchase hereunder) that proportion of the
number of Shares or Additional Shares that the defaulting Underwriter or
Underwriters shall have so failed or refused to purchase on such Closing
Date or Option Closing Date, as the case may be, which the number of
Shares or Additional Shares agreed to be purchased by such non-defaulting
Underwriter bears to the aggregate number of Shares or Additional Shares
so agreed to be purchased by all such non-defaulting Underwriters on such
Closing Date or Option Closing Date, as the case may be. In such case,
ING shall have the right to
25
postpone the Closing Date or the Option Closing Date, as the case may
be, to a date not exceeding seven full business days after the date
originally fixed as such Closing Date or the Option Closing Date, as
the case may be, pursuant to the terms hereof in order that any
necessary changes in the Registration Statement, the Prospectus or any
other documents or arrangements may be made.
(b) DEFAULT BY UNDERWRITER OF MORE THAN 10%. If one or more
of the Underwriters shall fail or refuse (otherwise than for a reason
sufficient to justify the termination of this Agreement under the
provisions of Section 7 or 11 hereof) to purchase and pay for (a) in the
case of the Closing Date, the number of Firm Shares agreed to be purchased
by such Underwriter or Underwriters upon tender to you of such Firm Shares
in accordance with the terms hereof or (b) in the case of the Option
Closing Date, the number of Additional Shares agreed to be purchased by
such Underwriter or Underwriters upon tender to you of such Additional
Shares in accordance with the terms hereof, and the number of such Shares
shall exceed 10% of the Firm Shares or Additional Shares required to be
purchased by all the Underwriters on the Closing Date or the Option
Closing Date, as the case may be, then (unless within 48 hours after such
default arrangements to ING's satisfaction shall have been made for the
purchase of the defaulted Shares by an Underwriter or Underwriters) and
subject to the provisions of Section 11(a) hereof, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter
or on the part of the Company except as otherwise provided in Sections 6
and 8 hereof. As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this paragraph. Nothing
in this Section 12, and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in
writing and if sent to the Representatives shall be mailed or delivered or
telecopied and confirmed by letter to ING Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC at ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ATTENTION: Syndicate Department, with a copy
to ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ATTENTION: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., or, if sent to the Company, shall be
mailed or delivered or telecopied and confirmed by letter to the Company at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to Troop
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, ATTENTION: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
SECTION 14. SUCCESSORS. This Agreement shall inure to the benefit
of and be binding upon the Company and each Underwriter and the Company's and
each Underwriter's respective successors and legal representatives, and nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person, except that the representations, warranties, indemnities and
contribution agreements of the Company contained in this Agreement shall also be
for the benefit of any person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
and
26
except that the Underwriters' indemnity and contribution agreements shall also
be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement, and any person or persons,
if any, who control the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Shares from the Underwriters
will be deemed a successor because of such purchase.
SECTION 15. APPLICABLE LAW; JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to the choice of law or conflict of law principles
thereof. Each party hereto consents to the jurisdiction of each court in which
any action is commenced seeking indemnity or contribution pursuant to Section 8
above and agrees to accept, either directly or through an agent, service of
process of each such court.
SECTION 16. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which together shall be deemed to be one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
27
If the foregoing correctly sets forth our understanding, please
indicate the Underwriters' acceptance thereof in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
DVD EXPRESS, INC.
By:
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Accepted as of the date first
above written:
ING BARING ▇▇▇▇▇▇ ▇▇▇▇ LLC
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇▇ & COMPANY, INC.
Acting on their own behalf and as
Representatives of the several Underwriters
referred to in the foregoing Agreement
By: ING BARING ▇▇▇▇▇▇ ▇▇▇▇ LLC
By:
----------------------------
Name:
Title:
28
SCHEDULE I
UNDERWRITERS
UNDERWRITING AGREEMENT DATED [__________], 1999
NUMBER OF FIRM
SHARES TO BE
PURCHASED FROM
NAME AND ADDRESS THE COMPANY
---------------- -----------
ING Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC . . . . . . . . . . . . . . . . .
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. . . . . . . . . . . .
▇▇▇▇▇▇▇ & Company, Inc. . . . . . . . . . . . . . . . . . . .
--------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
--------------
--------------
1