EXHIBIT 1.1
ETINUUM, INC.
4,500,000 Shares/1/
Common Stock
UNDERWRITING AGREEMENT
_____ __, 2000
CHASE SECURITIES INC.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, INC.
U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇, INC.
SOUNDVIEW TECHNOLOGY GROUP, INC.
c/o Chase Securities Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Etinuum, Inc., a Delaware corporation (the "Company"), proposes to issue
and sell 4,500,000 shares of its authorized but unissued Common Stock, $ 0.0001
par value (the "Common Stock") (said 4,500,000 shares of Common Stock being the
"Underwritten Stock"). The Company proposes to grant to the Underwriters (as
hereinafter defined) an option to purchase up to 675,000 additional shares of
Common Stock (the "Option Stock" and with the Underwritten Stock collectively
the "Stock"). The Common Stock is more fully described in the Registration
Statement and the Prospectus hereinafter mentioned.
The Company hereby confirms the agreements made with respect to the
purchase of the Stock by the several underwriters, for whom you are acting,
named in Schedule I hereto (collectively the "Underwriters", which term shall
also include any underwriter purchasing Stock pursuant to Section 3(b) hereof).
You represent and warrant that you have been authorized by each of the other
Underwriters to enter into this Agreement on its behalf and to act for it in the
manner herein provided.
_______________________
/1/ Plus an option to purchase from the Company up to 675,000 additional
shares to cover over-allotments.
Chase Securities Inc. and Wit Capital Corporation (an affiliate of
SoundView Technology Group, Inc.) have each agreed to reserve a portion of the
Stock to be purchased under this Agreement for sale to the Company's directors,
officers, employees and business associates and other parties related to the
Company (collectively, "Participants"), as set forth in the Prospectus under the
heading "Underwriting" (the "Directed Stock Program"). The Stock to be sold by
Chase Securities Inc. and Wit Capital Corporation pursuant to the Directed Stock
Program is referred to hereinafter as the "Directed Stock." Any Directed Stock
not orally confirmed for purchase by any Participants by the end of the business
day on which this Agreement is executed will be offered to the public by the
Underwriters as set forth in the Prospectus.
1. Registration Statement. The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1 (No.
333-94755), including the related preliminary prospectus, for the registration
under the Securities Act of 1933, as amended (the "Securities Act") of the
Stock. Copies of such registration statement and of each amendment thereto, if
any, including the related preliminary prospectus (meeting the requirements of
Rule 430A of the rules and regulations of the Commission) heretofore filed by
the Company with the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (a "Rule 462(b)
registration statement"), and, in the event of any amendment thereto after the
effective date of such registration statement (the "Effective Date"), shall also
mean (from and after the effectiveness of such amendment) such registration
statement as so amended (including any Rule 462(b) registration statement). The
term Prospectus as used in this Agreement shall mean the prospectus relating to
the Stock first filed with the Commission pursuant to Rule 424(b) and Rule 430A
(or if no such filing is required, as included in the Registration Statement)
and, in the event of any supplement or amendment to such prospectus after the
Effective Date, shall also mean (from and after the filing with the Commission
of such supplement or the effectiveness of such amendment) such prospectus as so
supplemented or amended. The term Preliminary Prospectus as used in this
Agreement shall mean each preliminary prospectus included in such registration
statement prior to the time it becomes effective.
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The Company has caused to be delivered to you copies of each Preliminary
Prospectus and has consented to the use of such copies for the purposes
permitted by the Securities Act.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
(a) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has full corporate
power and authority to own or lease its properties and conduct its business
as described in the Registration Statement and the Prospectus and as being
conducted, and is duly qualified as a foreign corporation and in good
standing in all jurisdictions in which the character of the property owned
or leased or the nature of the business transacted by it makes
qualification necessary (except where the failure to be so qualified would
not have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole).
(b) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
materially adverse change in the business, properties, financial condition
or results of operations of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business (a "Material Adverse Effect"), other than as set forth in the
Registration Statement and the Prospectus, and since such dates, except in
the ordinary course of business, neither the Company nor any of its
subsidiaries has entered into any material transaction not referred to in
the Registration Statement and the Prospectus.
(c) The Registration Statement and the Prospectus comply, and on the
Closing Date (as hereinafter defined) and any later date on which Option
Stock is to be purchased, the Prospectus will comply, in all material
respects, with the provisions of the Securities Act and the rules and
regulations of the Commission thereunder; on the Effective Date, the
Registration Statement did not contain any untrue statement of a material
fact and did not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date the Prospectus did not and, on the
Closing Date and any later date on which Option Stock is to be purchased,
will not contain 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
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circumstances under which they were made, not misleading; provided,
however, that none of the representations and warranties in this
subparagraph (iii) shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information herein or otherwise furnished in writing to the
Company by or on behalf of the Underwriters for use in the Registration
Statement or the Prospectus.
Each of the Registration Statement and any Rule 462(b)
registration statement has become effective under the Securities Act and no
stop order suspending the effectiveness of the Registration Statement or
any Rule 462(b) registration statement has been issued under the Securities
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.
(d) The Stock, when issued and sold to the Underwriters as provided
herein, will be duly and validly issued, fully paid and nonassessable and
conforms to the description thereof in the Prospectus. No further approval
or authority of the stockholders or the Board of Directors of the Company
will be required for the issuance and sale of the Stock as contemplated
herein.
(e) Prior to the Closing Date the Stock to be issued and sold by the
Company will be authorized for listing by the Nasdaq National Market upon
official notice of issuance.
(f) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, the accountants who certified the
consolidated financial statements included in the Registration Statement
are independent public accountants as required by the Securities Act and
the rules and regulations promulgated thereunder.
(g) The consolidated financial statements included in the
Registration Statement and the Prospectus, together with the related notes,
present fairly the financial position of the Company and its subsidiaries
at the dates indicated and the consolidated statement of operations,
stockholders' equity and cash flows of the Company and its subsidiaries for
the periods specified; said consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved,
except to the extent specifically noted in such statements. The selected
consolidated financial data and the summary consolidated financial data
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included in the Prospectus present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited
consolidated financial statements included in the Registration Statement.
(h) Except as otherwise disclosed in the Registration Statement, all
of the issued and outstanding capital stock of each subsidiary of the
Company has been duly authorized and validly issued, is 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, other than the pledge to Charter Financial,
Inc. under the Master Loan and Security Agreement No. 4339, the pledge to
Silicon Valley Bank under the Loan and Security Agreement dated as of June
10, 1999 and the right of first refusal granted under Section 5.16 of the
Share Purchase Agreement dated as of October 30, 1999 among the Company,
Acorn Information Services, Inc. and the shareholders named therein; none
of the outstanding shares of capital stock of any subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of such
subsidiary. The only subsidiaries of the Company are the subsidiaries
listed on Exhibit 21.1 to the Registration Statement.
(i) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except insofar as indemnification
and contribution provisions may be limited by applicable law or equitable
principles and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
(j) Neither the Company nor any of its subsidiaries is in violation
of its Certificate or Articles of Incorporation or By-laws or 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 any of its subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (the "Agreements and Instruments"),
other than defaults that would not, individually or in the aggregate, have
a Material Adverse Effect; and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated in
this Agreement and in the Registration Statement (including the issuance
and sale of the Stock and the use of the proceeds from the sale of the
Stock as described in the Prospectus under the caption
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"Use of Proceeds") and compliance by the Company with its obligations under
this Agreement 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 any subsidiary pursuant to, the Agreements and
Instruments, nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any subsidiary or, to the best
knowledge of the Company, 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 any subsidiary or any of their 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 any subsidiary.
(k) No labor dispute with the employees of the Company or any
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 any subsidiary's principal suppliers,
manufacturers, customers or contractors.
(l) 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 any subsidiary, which is required to be
disclosed in the Registration Statement (other than as disclosed therein)
or which might reasonably be expected to have a Material Adverse Effect or
to materially and adversely affect the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder.
(m) There are no contracts or 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.
(n) Except as described in the Registration Statement or the
Prospectus, the Company together with its subsidiaries owns and possesses
all right, title and interest in and to, or has duly licensed from third
parties a valid, enforceable right to use, all patents, patent rights,
licenses,
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inventions, copyrights, know-how (including trade secrets and other
unpatented or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names (herein called
Patent and Proprietary Rights) currently employed by it in connection with
its business. Except as described in the Registration Statement or the
Prospectus, neither the Company nor any of its subsidiaries has received
any notice of or is otherwise aware of any infringement or misappropriation
of or conflict with asserted rights of others with respect to any Patent or
Proprietary Rights, or of any facts which would render any Patent or
Proprietary Rights invalid or inadequate to protect the interest of the
Company or its subsidiaries therein.
(o) 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 under this Agreement, in connection with the
offering, issuance or sale of the Securities hereunder or thereunder or the
consummation of the transactions contemplated by this Agreement, except
such as have been already obtained or as may be required under the
Securities Act or the rules and regulations promulgated thereunder or state
securities laws.
(p) Except as described in the Prospectus, the Company and its
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations ("Governmental Licenses") issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct
the business now operated by them; the Company and its subsidiaries are in
compliance with the terms and conditions of all such Governmental Licenses;
all of the Governmental Licenses are valid and in full force and effect;
and neither the Company nor any of its subsidiaries has received any notice
of proceedings relating to the revocation or modification of any such
Governmental Licenses.
(q) The Company and its subsidiaries 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 are described in the Prospectus; and all of the
leases and subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the Company or
any of its subsidiaries holds properties described in the Prospectus, are
in full force and effect, and neither the Company nor any 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 any subsidiary under any
7
of the leases or subleases mentioned above, or affecting or questioning the
rights of the Company or such subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.
(r) Except as described in the Registration Statement, and to the
best knowledge of the Company, (A) neither the Company nor any of its
subsidiaries 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 ("Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials ("Environmental Laws"), (B)
the Company and its subsidiaries 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 any of its subsidiaries and (D) there are no events or
circumstances that might 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 its subsidiaries relating to Hazardous Materials or any
Environmental Laws.
(s) Based upon the letter from Chase Securities Inc. dated February
15, 2000 relating to the inadvisability of including secondary sales of
Common Stock in the Registration Statement, there are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or, except as disclosed
in the Prospectus, otherwise registered by the Company under the Securities
Act.
(t) The Company and each of its subsidiaries have filed all necessary
federal, state, local and foreign income, payroll, franchise and other tax
returns (after giving effect to extensions) and have paid all taxes shown
as due thereon or with respect to any of its properties, and there is
8
no tax deficiency that has been, or to the knowledge of the Company is
likely to be, asserted against the Company, any of its subsidiaries or any
of their properties or assets.
(u) The Company and each of its subsidiaries is insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as is reasonably prudent in the business in which it is
engaged or proposed to engage after giving effect to the transactions
described in the Prospectus; and the Company does not have any reason to
believe that it will not be able to renew its existing insurance coverage
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business.
(v) 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 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) To the best of the Company's knowledge, neither the Company nor
any employee or agent of the Company has made any payment of funds of the
Company or received or retained any funds in violation of any law, rule or
regulation, including, without limitation, the Foreign Corrupt Practices
Act.
(x) To the best of the Company's knowledge, the Company has paid all
material tariff, custom, import, export and other duties required to be
paid by it (if any) in connection with the exportation of products from the
country of manufacture, the importation of products into the United States,
the exportation of products from the United States and the importation of
products into another country and has provided all appropriate authorities
with the requisite information, all of which, to the best of the Company's
knowledge, is true and correct, necessary for the proper determination of
the foregoing.
(y) The Company and each member of its Control Group (as defined
below) is in compliance in all material respects with all presently
applicable provisions of the U.S. Employee Retirement Income Security
9
Act of 1974, as amended ("ERISA"), and the regulations and published
interpretations thereunder; no "reportable event" (as defined in ERISA and
the regulations and published interpretations thereunder) has occurred with
respect to any material "pension plan" (as defined in ERISA and the
regulations and published interpretations thereunder) established or
maintained by the Company or any member of its Control Group; neither the
Company nor any member of its Control Group has incurred nor expects to
incur any material liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Section 412
or 4971 of the U.S. Internal Revenue Code of 1986, as amended (the "Code");
and each material "pension plan" established or maintained by the Company
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and has received a favorable
determination letter as to its qualification and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification. For purposes of this subsection, "Control Group" is defined
to include any entity which is part of a group which includes the Company
and is treated as a single employer under Section 414 of the Code.
(z) Except as disclosed under "Underwriting" in the Prospectus, the
Company has not incurred any liability for any finder's fees or similar
payments in connection with the transactions contemplated hereby.
(aa) The statements (A) in the Prospectus under the captions
"Capitalization", "Related Party Transactions" and "Description of Capital
Stock" and (B) in the Registration Statement in Items 14 and 15, in each
case insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein.
(bb) The Company has not offered, or caused Chase Securities Inc. or
Wit Capital Corporation to offer, Stock to any person pursuant to the
Directed Stock Program 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.
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3. Purchase of the Stock by the Underwriters.
(a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Company
agrees to issue and sell 4,500,000 shares of the Underwritten Stock to
the several Underwriters and each of the Underwriters agrees to
purchase from the Company the respective aggregate number of shares of
Underwritten Stock set forth opposite its name in Schedule I. The
price at which such shares of Underwritten Stock shall be sold by the
Company and purchased by the several Underwriters shall be $___ per
share. In making this Agreement, each Underwriter is contracting
severally and not jointly; except as provided in paragraphs (b) and
(c) of this Section 3, the agreement of each Underwriter is to
purchase only the respective number of shares of the Underwritten
Stock specified in Schedule I.
(b) If for any reason 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 8 or 9
hereof) to purchase and pay for the number of shares of the Stock
agreed to be purchased by such Underwriter or Underwriters, the
Company shall immediately give notice thereof to you, and the non-
defaulting Underwriters shall have the right within 24 hours after the
receipt by you of such notice to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed
upon between you and such purchasing Underwriter or Underwriters and
upon the terms herein set forth, all or any part of the shares of the
Stock which such defaulting Underwriter or Underwriters agreed to
purchase. If the non-defaulting Underwriters fail so to make such
arrangements with respect to all such shares and portion, the number
of shares of the Stock which each non-defaulting Underwriter is
otherwise obligated to purchase under this Agreement shall be
automatically increased on a pro rata basis to absorb the remaining
shares and portion which the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting
Underwriters shall not be obligated to purchase the shares and portion
which the defaulting Underwriter or Underwriters agreed to purchase if
the aggregate number of such shares of the Stock exceeds 10% of the
total number of shares of the Stock which all Underwriters agreed to
purchase hereunder. If the total number of shares of the Stock which
the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding
sentences, the Company shall have the right, within 24 hours next
succeeding the 24-hour period above referred to, to make arrangements
with other underwriters or purchasers satisfactory to you for purchase
of such shares and portion on the terms
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herein set forth. In any such case, either you or the Company shall
have the right to postpone the Closing Date determined as provided in
Section 5 hereof for not more than seven business days after the date
originally fixed as the Closing Date pursuant to said Section 5 in
order that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If
neither the non-defaulting Underwriters nor the Company shall make
arrangements within the 24-hour periods stated above for the purchase
of all the shares of the Stock which the defaulting Underwriter or
Underwriters agreed to purchase hereunder, this Agreement shall be
terminated without further act or deed and without any liability on
the part of the Company to any non-defaulting Underwriter and without
any liability on the part of any non-defaulting Underwriter to the
Company. Nothing in this paragraph (b), and no action taken hereunder,
shall relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions
herein set forth, the Company grants an option to the several
Underwriters to purchase, severally and not jointly, up to 675,000
shares in the aggregate of the Option Stock from the Company at the
same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-
allotments in the sale of the Underwritten Stock by the Underwriters
and may be exercised in whole or in part at any time (but not more
than once) on or before the thirtieth day after the date of this
Agreement upon written or telegraphic notice by you to the Company
setting forth the aggregate number of shares of the Option Stock as to
which the several Underwriters are exercising the option. Delivery of
certificates for the shares of Option Stock, and payment therefor,
shall be made as provided in Section 5 hereof. The number of shares of
the Option Stock to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Stock to be
purchased by the several Underwriters as such Underwriter is
purchasing of the Underwritten Stock, as adjusted by you in such
manner as you deem advisable to avoid fractional shares.
4. Offering by Underwriters.
(a) The terms of the initial public offering by the Underwriters
of the Stock to be purchased by them shall be as set forth in the
Prospectus. The Underwriters may from time to time change the public
offering price after the closing of the initial public offering and
increase or decrease the concessions and discounts to dealers as they
may determine.
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(b) The information set forth in the last paragraph on the front
cover page and under "Underwriting" in the Registration Statement, any
Preliminary Prospectus and the Prospectus relating to the Stock filed
by the Company (insofar as such information relates to the
Underwriters) constitutes the only information furnished by the
Underwriters to the Company for inclusion in the Registration
Statement, any Preliminary Prospectus, and the Prospectus, and you on
behalf of the respective Underwriters represent and warrant to the
Company that the statements made therein are correct.
5. Delivery of and Payment for the Stock.
(a) Delivery of certificates for the shares of the Underwritten
Stock and the Option Stock (if the option granted by Section 3(c)
hereof shall have been exercised not later than 7:00 a.m., San
Francisco time, on the date two business days preceding the Closing
Date), and payment therefor, shall be made at the office of ▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, at 7:00 a.m.,
San Francisco time, on the fourth business day after the date of this
Agreement, or at such time on such other day, not later than seven
full business days after such fourth business day, as shall be agreed
upon in writing by the Company and you. The date and hour of such
delivery and payment (which may be postponed as provided in Section
3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be
exercised after 7:00 a.m., San Francisco time, on the date two
business days preceding the Closing Date, delivery of certificates for
the shares of Option Stock, and payment therefor, shall be made at the
office of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, at 7:00 a.m., San Francisco time, on the third business day
after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be
made to the Company or its order by one or more wire transfers in same
day funds. Such payment shall be made upon delivery of certificates
for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for
the Stock to be delivered to you shall be registered in such name or
names and shall be in such denominations as you may request at least
one business day before the Closing Date, in the case of Underwritten
Stock, and at least one business day prior to the purchase thereof, in
the case of the Option Stock. Such certificates will be made available
to the Underwriters for inspection,
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checking and packaging at the offices of Lewco Securities Corporation,
▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on the business day prior to the
Closing Date or, in the case of the Option Stock, by 3:00 p.m., New
York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date or any later date on which Option Stock is
purchased for the account of such Underwriter. Any such payment by you shall not
relieve such Underwriter from any of its obligations hereunder.
6. Further Agreements of the Company. The Company covenants and
agrees as follows:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A and (ii) not file any amendment to
the Registration Statement or supplement to the Prospectus of which
you shall not previously have been advised and furnished with a copy
or to which you shall have reasonably objected in writing or which is
not in compliance with the Securities Act or the rules and regulations
of the Commission.
(b) The Company will promptly notify each Underwriter in the
event of (i) the request by the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, (ii) the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement,
(iii) the institution or notice of intended institution of any action
or proceeding for that purpose, (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Stock for sale in any jurisdiction, or (v) the receipt by it of
notice of the initiation or threatening of any proceeding for such
purpose. The Company will make every reasonable effort to prevent the
issuance of such a stop order and, if such an order shall at any time
be issued, to obtain the withdrawal thereof at the earliest possible
moment.
(c) The Company will (i) on or before the Closing Date, deliver
to you a signed copy of the Registration Statement as originally filed
and of each amendment thereto filed prior to the time the Registration
Statement becomes effective and, promptly upon the filing thereof, a
14
signed copy of each post-effective amendment, if any, to the
Registration Statement (together with, in each case, all exhibits
thereto unless previously furnished to you) and will also deliver to
you, for distribution to the Underwriters, a sufficient number of
additional conformed copies of each of the foregoing (but without
exhibits) so that one copy of each may be distributed to each
Underwriter, (ii) as promptly as possible deliver to you and send to
the several Underwriters, at such office or offices as you may
designate, as many copies of the Prospectus as you may reasonably
request, and (iii) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many
additional copies of the Prospectus and as many copies of any
supplement to the Prospectus and of any amended prospectus, filed by
the Company with the Commission, as you may reasonably request for the
purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event
relating to or affecting the Company, or of which the Company shall be
advised in writing by you, shall occur as a result of which it is
necessary, in the opinion of counsel for the Company or of counsel for
the Underwriters, to supplement or amend the Prospectus in order to
make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser of the Stock, the
Company will forthwith prepare and file with the Commission a
supplement to the Prospectus or an amended prospectus so that the
Prospectus as so supplemented or amended will not contain 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 existing at the time such Prospectus is delivered to
such purchaser, not misleading. If, after the initial public offering
of the Stock by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by
reason of changes in general market conditions or otherwise, you will
advise the Company in writing of the proposed variation, and, if in
the opinion either of counsel for the Company or of counsel for the
Underwriters such proposed variation requires that the Prospectus be
supplemented or amended, the Company will forthwith prepare and file
with the Commission a supplement to the Prospectus or an amended
prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by
the several Underwriters to use the Prospectus, as from time to time
amended or supplemented, in connection with the sale of the Stock in
accordance with
15
the applicable provisions of the Securities Act and the applicable
rules and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company
will submit to you, for your information, a copy of any post-effective
amendment to the Registration Statement and any supplement to the
Prospectus or any amended prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in
the qualification of the Stock for offer and sale under the securities
or blue sky laws of such jurisdictions as you may designate and,
during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, in keeping such qualifications
in good standing under said securities or blue sky laws; 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
in any jurisdiction in which it is not so qualified. The Company will,
from time to time, prepare and file such statements, reports, and
other documents as are or may be required to continue such
qualifications in effect for so long a period as you may reasonably
request for distribution of the Stock.
(g) During a period of five years commencing with the date
hereof, the Company will furnish to you, and to each Underwriter who
may so request in writing, copies of all periodic and special reports
furnished to shareholders of the Company and of all information,
documents and reports filed with the Commission.
(h) Not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the Effective
Date, the Company will make generally available to its security
holders an earnings statement in accordance with Section 11(a) of the
Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to
the performance of its obligations under this Agreement, including all
costs and expenses incident to (i) the preparation, printing and
filing with the Commission and the National Association of Securities
Dealers, Inc. (the "NASD") of the Registration Statement, any
Preliminary Prospectus and the Prospectus, (ii) the furnishing to the
Underwriters of copies of any Preliminary Prospectus and of the
several documents required by paragraph (c) of this Section 6 to be so
furnished, (iii) the printing of this Agreement and related documents
delivered to the Underwriters, (iv) the preparation, printing and
filing of all supplements and amendments to the
16
Prospectus referred to in paragraph (d) of this Section 6, (v) the
furnishing to you and the Underwriters of the reports and information
referred to in paragraph (g) of this Section 6 and (vi) the printing
and issuance of stock certificates, including the transfer agent's
fees.
(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements
(including counsel fees and disbursements and cost of printing
memoranda for the Underwriters) paid by or for the account of the
Underwriters or their counsel in qualifying the Stock under state
securities or blue sky laws and in the review of the offering by the
NASD.
(k) The Company hereby agrees that, without the prior written
consent of Chase Securities Inc. on behalf of the Underwriters (such
consent not to be unreasonably withheld), the Company will not, for a
period of 180 days following the commencement of the public offering
of the Stock by the Underwriters, directly or indirectly, (i) sell,
offer, contract to sell, make any short sale, pledge, 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 shares of Common Stock or any securities convertible
into or exchangeable or exercisable for or any rights to purchase or
acquire Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences
or ownership of Common Stock, whether any such 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 Stock to be sold to the
Underwriters pursuant to this Agreement, (B) shares of Common Stock
issued by the Company upon the exercise of options granted under the
stock option plans of the Company (the "Option Plans") or upon the
exercise of warrants outstanding as of the date hereof, all as
described under the caption "Capitalization" in the Preliminary
Prospectus, and (C) grants or options to purchase Common Stock granted
under the Option Plans.
(l) If at any time during the 25-day period after the
Registration Statement becomes effective any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which in your opinion the market price for the Stock has been or is
likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising
the Company to the effect set forth above, forthwith prepare, consult
with you concerning the substance of,
17
and disseminate a press release or other public statement, reasonably
satisfactory to you and to counsel to the Company, responding to or
commenting on such rumor, publication or event.
(m) The Company is familiar with the Investment Company Act of
1940, as amended, and has in the past conducted its affairs, and will
in the future conduct its affairs, in such a manner to ensure that the
Company was not and will not be an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(n) The Company agrees to place stop transfer orders on any
Directed Stock that has been sold to Participants subject to the three
month restriction on sale, transfer, assignment, pledge or
hypothecation imposed by NASD Regulation, Inc. under its
Interpretative Material 2110-1 on free-riding and withholding to the
extent necessary to ensure compliance with the three month
restrictions.
(o) The Company agrees to comply with all applicable securities
and other applicable laws, rules and regulations in each jurisdiction
in which the Directed Stock is offered in connection with the Directed
Stock Program.
7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer
thereof) who controls any Underwriter within the meaning of Section 15
of the Securities Act from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified
parties or any of them may become subject under the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or the common law or otherwise, and the Company agrees to reimburse
each such Underwriter and controlling person for any legal or other
expenses (including, except as otherwise hereinafter provided,
reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against
any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding which may be
brought against, the respective indemnified parties, in each case
arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (including the Prospectus as part thereof and any Rule
462(b)
18
registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement), or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the
Prospectus (as amended or as supplemented if the Company shall have
filed with the Commission any amendment thereof or supplement thereto)
or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that (1) the indemnity agreements of the Company contained in
this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was
made in reliance upon and in conformity with information furnished as
herein stated or otherwise furnished in writing to the Company by or
on behalf of any Underwriter for use in any Preliminary Prospectus or
the Registration Statement or the Prospectus or any such amendment
thereof or supplement thereto and (2) the indemnity agreement
contained in this paragraph (a) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Stock which is the subject thereof (or to the
benefit of any person controlling such Underwriter) if at or prior to
the written confirmation of the sale of such Stock a copy of the
Prospectus (or the Prospectus as amended or supplemented) was not sent
or delivered to such person and the untrue statement or omission of a
material fact contained in such Preliminary Prospectus was corrected
in the Prospectus (or the Prospectus as amended or supplemented)
unless the failure is the result of noncompliance by the Company with
paragraph (c) of Section 6 hereof. The indemnity agreements of the
Company contained in this paragraph (a) and the representations and
warranties of the Company contained in Section 2 hereof shall remain
operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the
delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its officers who signs the Registration
Statement on his own behalf or pursuant to a power of attorney, each
of its directors, each other Underwriter and each person (including
each partner or officer thereof) who controls the Company or any such
other Underwriter within the meaning of Section 15 of the Securities
Act, from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or
any of them may become
19
subject under the Securities Act, the Exchange Act, or the common law
or otherwise and to reimburse each of them for any legal or other
expenses (including, except as otherwise hereinafter provided,
reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against
any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding which may be
brought against, the respective indemnified parties, in each case
arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement) or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading or (ii) any untrue statement or alleged untrue statement of
a material fact contained in the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any
amendment thereof or supplement thereto) or the omission or alleged
omission to state therein a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, if such statement or omission was made
in reliance upon and in conformity with information furnished as
herein stated or otherwise furnished in writing to the Company by or
on behalf of such indemnifying Underwriter for use in the Registration
Statement or the Prospectus or any such amendment thereof or
supplement thereto. The indemnity agreement of each Underwriter
contained in this paragraph (b) shall remain operative and in full
force and effect regardless of any investigation made by or on behalf
of any indemnified party and shall survive the delivery of and payment
for the Stock.
(c) Each party indemnified under the provision of paragraphs (a)
and (b) of this Section 7 agrees that, upon the service of a summons
or other initial legal process upon it in any action or suit
instituted against it or upon its receipt of written notification of
the commencement of any investigation or inquiry of, or proceeding
against, it in respect of which indemnity may be sought on account of
any indemnity agreement contained in such paragraphs, it will promptly
give written notice (the "Notice") of such service or notification to
the party or parties from whom indemnification may be sought
hereunder. No indemnification provided for in such paragraphs shall be
available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action,
suit, investigation, inquiry or proceeding to which the Notice would
have related and was prejudiced by the failure to give the
20
Notice, but the omission so to notify such indemnifying party or parties of
any such service or notification shall not relieve such indemnifying party
or parties from any liability which it or they may have to the indemnified
party for contribution or otherwise than on account of such indemnity
agreement. Any indemnifying party shall be entitled at its own expense to
participate in the defense of any action, suit or proceeding against, or
investigation or inquiry of, an indemnified party. Any indemnifying party
shall be entitled, if it so elects within a reasonable time after receipt
of the Notice by giving written notice (the "Notice of Defense") to the
indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to
the indemnified party or parties; provided, however, that (i) if the
indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action,
suit, investigation, inquiry or proceeding or that there may be legal
defenses available to such indemnified party or parties different from or
in addition to those available to the indemnifying party or parties, then
counsel for the indemnified party or parties shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be
necessary to protect the interests of the indemnified party or parties and
(ii) in any event, the indemnified party or parties shall be entitled to
have counsel chosen by such indemnified party or parties participate in,
but not conduct, the defense. If, within a reasonable time after receipt of
the Notice, an indemnifying party gives a Notice of Defense and the counsel
chosen by the indemnifying party or parties is reasonably satisfactory to
the indemnified party or parties, the indemnifying party or parties will
not be liable under paragraphs (a) through (c) of this Section 7 for any
legal or other expenses subsequently incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding, except that (A) the indemnifying party or parties
shall bear the legal and other expenses incurred in connection with the
conduct of the defense as referred to in clause (i) of the proviso to the
preceding sentence and (B) the indemnifying party or parties shall bear
such other expenses as it or they have authorized to be incurred by the
indemnified party or parties. If, within a reasonable time after receipt of
the Notice, no Notice of Defense has been given, the indemnifying party or
parties shall be responsible for any legal or other expenses incurred by
the indemnified party or parties in connection with the defense of the
action, suit, investigation, inquiry or proceeding.
21
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in paragraph (a) or (b) of this
Section 7 (i) in such proportion as is appropriate to reflect the relative
benefits received by each indemnifying party from the offering of the Stock
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 indemnifying party in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, or
actions in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Underwriters shall be deemed to be in the same respective proportions as
the total net proceeds from the offering of the Stock received by the
Company and the total underwriting discount received by the Underwriters,
as set forth in the table on the cover page of the Prospectus, bear to the
aggregate public offering price of the Stock. 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 each
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be 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 into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Stock purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in
22
this paragraph (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect
of which indemnification may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act is a
party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of such Underwriter
and each such controlling person from all liability arising out of such
claim, action, suit or proceeding.
8. Directed Share Program Indemnification. (a) The Company agrees to
indemnify and hold harmless each of Chase Securities Inc. and Wit Capital
Corporation and each person (including each partner or officer thereof) who
controls Chase Securities Inc. or Wit Capital Corporation within the meaning of
Section 15 of the Securities Act from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Securities Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or the common law or otherwise,
and the Company agrees to reimburse Chase Securities Inc., Wit Capital
Corporation and such controlling person for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any material prepared by the
Company or with the prior written consent of the Company and counsel for the
Company for distribution to Participants in connection with the Directed Stock
Program, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make
23
the statements therein not misleading, (ii) the failure of any Participant to
pay for and accept delivery of Directed Stock that the Participant has agreed to
purchase, or (iii) the Directed Stock Program other than losses, claims, damages
or liabilities (or expenses relating thereto) that are finally judicially
determined to have resulted from bad faith or gross negligence of Chase
Securities Inc., Wit Capital Corporation or such controlling person; provided,
however, that the indemnity agreement contained in this Section 8(a) with
respect to any Preliminary Prospectus shall not inure to the benefit of Chase
Securities Inc. or Wit Capital Corporation from whom the person asserting any
such losses, claims, damages, liabilities or expenses purchased the Stock which
is the subject thereof (or to the benefit of any person controlling Chase
Securities Inc. or Wit Capital Corporation) if at or prior to the written
confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with Section 6(c) hereof. The indemnity agreements of the Company
contained in this Section 8(a) and the representations and warranties of the
Company contained in Section 2 hereof shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Directed
Stock.
(b) Each party indemnified under the provisions of Section 8(a) (an
"indemnified DSP party") agrees that, upon the service of a summons or
other initial legal process upon it in any action or suit instituted
against it or upon its receipt of written notification of the commencement
of any investigation or inquiry of, or proceeding against, it in respect of
which indemnity may be sought on account of any indemnity agreement
contained in such paragraphs, it will promptly give Notice of such service
or notification to the party or parties from whom indemnification may be
sought hereunder. No indemnification provided for in such paragraphs shall
be available to any party who shall fail so to give the Notice if the party
to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related
and was prejudiced by the failure to give the Notice, but the omission so
to notify such indemnifying party or parties of any such service or
notification shall not relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified DSP party for
contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in
the defense of any action, suit or proceeding against, or investigation or
inquiry of, an indemnified DSP party. Any indemnifying
24
party shall be entitled, if it so elects within a reasonable time after
receipt of the Notice by giving a Notice of Defense to the indemnified DSP
party, to assume (alone or in conjunction with any other indemnifying party
or parties) the entire defense of such action, suit, investigation, inquiry
or proceeding, in which event such defense shall be conducted, at the
expense of the indemnifying party or parties, by counsel chosen by such
indemnifying party or parties and reasonably satisfactory to the
indemnified DSP party or parties; provided, however, that (i) if the
indemnified DSP party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of
the indemnified DSP party or parties in conducting the defense of such
action, suit, investigation, inquiry or proceeding or that there may be
legal defenses available to such indemnified DSP party or parties different
from or in addition to those available to the indemnifying party or
parties, then counsel for the indemnified DSP party or parties shall be
entitled to conduct the defense to the extent reasonably determined by such
counsel to be necessary to protect the interests of the indemnified DSP
party or parties and (ii) in any event, the indemnified DSP party or
parties shall be entitled to have counsel chosen by such indemnified DSP
party or parties participate in, but not conduct, the defense. If, within a
reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified DSP party or parties,
the indemnifying party or parties will not be liable under paragraph (a) of
this Section 8 for any legal or other expenses subsequently incurred by the
indemnified DSP party or parties in connection with the defense of the
action, suit, investigation, inquiry or proceeding, except that (A) the
indemnifying party or parties shall bear the legal and other expenses
incurred in connection with the conduct of the defense as referred to in
clause (i) of the proviso to the preceding sentence and (B) the
indemnifying party or parties shall bear such other expenses as it or they
have authorized to be incurred by the indemnified DSP party or parties. If,
within a reasonable time after receipt of the Notice, no Notice of Defense
has been given, the indemnifying party or parties shall be responsible for
any legal or other expenses incurred by the indemnified DSP party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.
(c) If the indemnification provided for in Section 8(a) is
unavailable or insufficient to hold harmless an indemnified DSP party under
Section 8(a), then each indemnifying party, in lieu of indemnifying such
indemnified DSP party, shall contribute to the amount paid or payable by
such indemnified DSP party as a result of the losses, claims,
25
damages or liabilities referred to in Section 8(a) (i) in such proportion
as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Directed Stock 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 indemnifying party in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, or actions in
respect thereof, as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and Chase
Securities Inc. and Wit Capital Corporation, on the other hand, shall be
deemed to be in the same respective proportions as the total net proceeds
from the offering of the Directed Stock received by the Company and the
total underwriting discount received by Chase Securities Inc. and Wit
Capital Corporation bears to the aggregate public offering price of the
Directed Stock. 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 each indemnifying party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission.
The Company, Chase Securities Inc. and Wit Capital Corporation agree that
it would not be just and equitable if contributions pursuant to this paragraph
(c) were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the first sentence of this paragraph (c). The amount paid by an
indemnified DSP party as a result of the losses, claims, damages or liabilities,
or actions in respect thereof, referred to in the first sentence of this
paragraph (c) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified DSP party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (c). Notwithstanding the provisions of this paragraph
(c), Chase Securities Inc. and Wit Capital Corporation shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Directed Stock purchased by Chase Securities Inc. and Wit Capital Corporation.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice
26
of such service to the party or parties from whom contribution may be sought,
but the omission so to notify such party or parties of any such service shall
not relieve the party from whom contribution may be sought from any obligation
it may have hereunder or otherwise (except as specifically provided in paragraph
(b) of this Section 8).
(d) The Company will not, without the prior written consent of Chase
Securities Inc. and Wit Capital Corporation, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not Chase Securities Inc. or Wit Capital
Corporation or any person who controls Chase Securities Inc. or Wit Capital
Corporation within the meaning of Section 15 of the Securities Act is a
party to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of Chase Securities
Inc. and Wit Capital Corporation and each such controlling person from all
liability arising out of such claim, action, suit or proceeding.
9. Termination. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company if after the
date of this Agreement trading in the Common Stock shall have been suspended, or
if there shall have occurred (i) the engagement in hostilities or an escalation
of major hostilities by the United States or the declaration of war or a
national emergency by the United States on or after the date hereof, (ii) any
outbreak of hostilities or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
calamity, crisis or change in economic or political conditions in the financial
markets of the United States would, in the Underwriters' reasonable judgment,
make the offering or delivery of the Stock impracticable, (iii) suspension of
trading in securities generally or a material adverse decline in value of
securities generally on the New York Stock Exchange, the American Stock
Exchange, The Nasdaq Stock Market, or limitations on prices (other than
limitations on hours or numbers of days of trading) for securities on either
such exchange or system, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of, or
commencement of any proceeding or investigation by, any court, legislative body,
agency or other governmental authority which in the Underwriters' reasonable
opinion materially and adversely affects or will materially or adversely affect
the business or operations of the Company, (v) declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in the Underwriters' reasonable opinion has a
material adverse effect on the securities
27
markets in the United States. If this Agreement shall be terminated pursuant to
this Section 8, there shall be no liability of the Company to the Underwriters
and no liability of the Underwriters to the Company; provided, however, that in
the event of any such termination the Company agrees to indemnify and hold
harmless the Underwriters from all costs or expenses incident to the performance
of the obligations of the Company under this Agreement, including all costs and
expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
10. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company of all its obligations to be performed hereunder at
or prior to the Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and
no proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder
and the validity and form of the certificates representing the Stock, all
corporate proceedings and other legal matters incident to the foregoing,
and the form of the Registration Statement and of the Prospectus (except as
to the financial statements contained therein), shall have been approved at
or prior to the Closing Date by ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the
Underwriters.
(c) You shall have received from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C.,
counsel for the Company, an opinion, addressed to the Underwriters and
dated the Closing Date, covering the matters set forth in Annex A hereto
and if Option Stock is purchased at any date after the Closing Date,
additional opinions from each such counsel, addressed to the Underwriters
and dated such later date, confirming that the statements expressed as of
the Closing Date in such opinions remain valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true
and correct and neither the Registration Statement nor the Prospectus
omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, respectively, not
misleading, (ii) since the Effective Date, no event has occurred which
should have been set forth in a supplement or amendment to the Prospectus
which has not been set forth in such a supplement or amendment, (iii) since
the
28
respective dates as of which information is given in the Registration
Statement in the form in which it originally became effective and the
Prospectus contained therein, there has not been any material adverse
change or any development involving a prospective material adverse change
in or affecting the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of business, and,
since such dates, except in the ordinary course of business, neither the
Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein,
(iv) neither the Company nor any of its subsidiaries has any material
contingent obligations which are not disclosed in the Registration
Statement and the Prospectus, (v) there are not any pending or known
threatened legal proceedings to which the Company or any of its
subsidiaries is a party or of which property of the Company or any of its
subsidiaries is the subject which are material and which are not disclosed
in the Registration Statement and the Prospectus, (vi) there are not any
franchises, contracts, leases or other documents which are required to be
filed as exhibits to the Registration Statement which have not been filed
as required, (vii) the representations and warranties of the Company herein
are true and correct in all material respects as of the Closing Date or any
later date on which Option Stock is to be purchased, as the case may be,
and (viii) there has not been any material change in the market for
securities in general or in political, financial or economic conditions
from those reasonably foreseeable as to render it impracticable in your
reasonable judgment to make a public offering of the Stock, or a material
adverse change in market levels for securities in general (or those of
companies in particular) or financial or economic conditions which render
it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any later date
on which Option Stock is purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and the
Chief Financial Officer of the Company, stating that the respective signers
of said certificate have carefully examined the Registration Statement in
the form in which it originally became effective and the Prospectus
contained therein and any supplements or amendments thereto, and that the
statements included in clauses (i) through (vii) of paragraph (d) of this
Section 9 are true and correct.
(f) You shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and
29
any later date on which Option Stock is purchased, confirming that they are
independent public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published rules and
regulations thereunder and based upon the procedures described in their
letter delivered to you concurrently with the execution of this Agreement
(the "Original Letter"), but carried out to a date not more than three
business days prior to the Closing Date or such later date on which Option
Stock is purchased (i) confirming, to the extent true, that the statements
and conclusions set forth in the Original Letter are accurate as of the
Closing Date or such later date, as the case may be, and (ii) setting forth
any revisions and additions to the statements and conclusions set forth in
the Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of the Original Letter or
to reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties
of the Company or any of its subsidiaries which, in your sole judgment,
makes it impractical or inadvisable to proceed with the public offering of
the Stock or the purchase of the Option Stock as contemplated by the
Prospectus.
(g) You shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP a letter
stating that they considered the Company's system of internal accounting
controls, to the extent they deemed necessary in establishing the nature,
scope, timing and extent of the audit tests applied in connection with the
audit of the Company's financial statements as at December 31, 1999, did
not disclose any weakness in internal controls that they considered to be
material weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the qualification
referred to in paragraph (f) of Section 6 hereof.
(i) Prior to the Closing Date, the Stock to be issued and sold by the
Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have received from all
directors, officers, and beneficial holders of more than 1% of the
outstanding Common Stock and all other securityholders of the Company
holding more than 1% of the Company's Common Stock (on an as converted, as
exercised or as exchanged basis) agreements, in form
30
reasonably satisfactory to Chase Securities Inc., stating that without the
prior written consent of Chase Securities Inc. on behalf of the
Underwriters, such person or entity will not, for a period of 180 days
following the commencement of the public offering of the Stock by the
Underwriters, directly or indirectly, (i) sell, offer, contract to sell,
make any short sale, pledge, 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 shares of Common Stock
or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or (ii) enter into any swap
or other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such 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.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Underwriters,
shall reasonably be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the transactions
contemplated hereby.
11. Conditions of the Obligation of the Company. The obligation of the
Company to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
31
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company by giving notice to
you. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof.
12. Reimbursement of Certain Expenses. In addition to its other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 12 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of the Company and the several Underwriters and, with respect to
the provisions of Section 7 hereof, the several parties (in addition to the
Company and the several Underwriters) indemnified under the provisions of said
Section 7, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Stock from any of the several Underwriters.
14. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Chase Securities Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Chief Executive Officer. All notices given
by telegraph shall be promptly confirmed by letter.
32
15. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of
paragraph[s] (k) [and (l)] of Section 6 hereof shall be of no further force or
effect.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.
Please sign and return to the Company the enclosed duplicates of this
letter, whereupon this letter will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
ETINUUM, INC.
By_________________________
Name:
Title:
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
CHASE SECURITIES INC.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, INC.
U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇
SOUNDVIEW TECHNOLOGY GROUP, INC.
By Chase Securities Inc.
By________________________________
Name:
Title:
33
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
34
SCHEDULE I
UNDERWRITERS
Number of Shares
Underwriters to be Purchased
------------ ---------------
Chase Securities Inc. ........................
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. .....................
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇....................
SoundView Technology Group, Inc. .............
Total.................................... ----------------
================
35
ANNEX A
Matters to be Covered in the Opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C.
Counsel for the Company
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified as a foreign
corporation and in good standing in each state of the United States of America
in which its ownership or leasing of property requires such qualification
(except where the failure to be so qualified would not have a Material Adverse
Effect), and has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement;
all the issued and outstanding capital stock of each of the subsidiaries of the
Company has been duly authorized and validly issued and is fully paid and
nonassessable, and is owned by the Company free and clear of all liens,
encumbrances and security interests (other than the lien of Charter Financial,
Inc. pursuant to its Master Loan and Security Agreement dated by Charter
Financial, Inc. on October 6, 1999, as amended, the lien of Silicon Valley Bank
pursuant to its Loan and Security Agreement dated June 10, 1999, as amended, and
the right of first refusal as to the stock of Acorn Information Services, Inc.
set forth in Section 5.16 of the Share Purchase Agreement between the Company,
Acorn Information Services, Inc. and its former shareholders dated October 30,
1999), and to the best of such counsel's knowledge, no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in such subsidiaries are outstanding, other than the rights of the
former shareholders of Acorn Information Services, Inc. as described above in
this paragraph;
(ii) the authorized capital stock of the Company consists of 10,000,000
shares of Preferred Stock, of which there are outstanding . shares, and
100,000,000 shares of Common Stock, $ 0.0001 par value, of which there are
outstanding . shares (including the Underwritten Stock plus the
number of shares of Option Stock issued on the date hereof) [and such additional
number of shares, if any, as may have been issued after . and prior
to the Closing Date, pursuant to . ]; proper corporate proceedings have
been taken validly to authorize such authorized capital stock; all of the
outstanding shares of such capital stock (including the Underwritten Stock and
the shares of Option Stock issued, if any) have been duly and validly issued and
(based in part upon a certificate of an officer of the Company concerning due
receipt of payment for such shares) are fully paid and nonassessable; any Option
Stock purchased after
36
the Closing Date, when issued and delivered to and paid for by the Underwriters
as provided in the Underwriting Agreement, will have been duly and validly
issued and be fully paid and nonassessable; and no preemptive rights of, or
rights of refusal in favor of, stockholders exist with respect to the Stock, or
the issue and sale thereof, pursuant to the Certificate of Incorporation or
Bylaws of the Company and, to the knowledge of such counsel, there are no
contractual preemptive rights that have not been waived, rights of first refusal
or rights of co-sale which exist with respect to the issue and sale of the
Stock;
(iii) the Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus is in effect and no proceedings for that
purpose have been instituted or are pending or contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and with the rules
and regulations of the Commission thereunder;
(v) such counsel has no reason to believe that the Registration Statement
(except as to the financial statements and schedules and other financial or
statistical data contained or incorporated by reference therein, as to which
such counsel need not express any opinion or belief) at the Effective Date
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus (except as to the financial statements
and schedules and other financial or statistical data contained or incorporated
by reference therein, as to which such counsel need not express any opinion or
belief) as of its date or at the Closing Date (or any later date (on or prior to
the date of this opinion) on which Option Stock is purchased), contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(vi) the information required to be set forth in the Registration
Statement in answer to Items 9, 10 (insofar as it relates to such counsel) and
11(c) of Form S-1 is to the best of such counsel's knowledge accurately and
adequately set forth therein in all material respects or no response is required
with respect to such Items, and, the description of the Company's stock option
plans and the options granted and which may be granted thereunder and the
options granted otherwise than under such plans set forth in the Prospectus
accurately and fairly presents, in
37
all material respects, the information required to be shown with respect to said
plans and options to the extent required by the Securities Act and the rules and
regulations of the Commission thereunder;
(vii) the statements (A) in the Prospectus under the captions
"Capitalization," "Related Party Transactions" and "Description of Capital
Stock" and (B) in the Registration Statement in Items 14 and 15, in each case
insofar as such statements constitute summaries of the documents referred to
therein, in all material respects fairly present the information called for with
respect to such documents and fairly summarize the matters referred to therein;
(viii) the Company is not, and after giving effect to the offering and sale
of the Stock and the application of the proceeds thereof as described in the
Prospectus will not be, required to register as an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended;
(ix) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion of
such counsel are of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement, which are not described and filed as required;
(x) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company;
(xi) the issue and sale by the Company of the shares of Stock sold by the
Company as contemplated by the Underwriting Agreement will not conflict with, or
result in a breach of (i) the Certificate of Incorporation or Bylaws of the
Company or any of its subsidiaries or (ii) any agreement or instrument known to
such counsel to which the Company or any of its subsidiaries is a party or any
applicable law or regulation, or so far as is known to such counsel, any order,
writ, injunction or decree, of any jurisdiction, court or governmental
instrumentality; except as to each item in clause (ii) where such conflict or
breach would not have a Material Adverse Effect; and, provided further, that as
to compliance with applicable law or regulation, the limitations and
qualifications on other matters set forth in this opinion which concern
compliance with applicable law or regulation (including, without limitation,
paragraph (v)) apply with equal force and effect to the opinion in this
paragraph on compliance with applicable law or regulation;
(xii) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights, or
had
38
such rights waived, or such rights have expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement;
(xiii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated in the Underwriting Agreement, except (i) such as have been
obtained, including under the Securities Act, and (ii) such as may be required
under state securities or blue sky laws in connection with the purchase and
distribution of the Stock by the Underwriters;
(xiv) the Stock issued and sold by the Company has been duly authorized
for listing by the Nasdaq National Market upon official notice of issuance; and
(xv) (i) such counsel has no knowledge at the Effective Date of any
allegation on the part of any person that the Company is infringing any patent
rights, trade secrets, trademarks, service marks or other proprietary
information or materials of any such person other than a notice from Q.Sys
International, Inc. regarding certain Lucent Technologies, Inc. predictive
dialer technology that the Company does not believe it uses; (ii) to the best of
such counsel's knowledge at the Effective Date there are no legal or
governmental proceedings pending relating to patent rights, trade secrets,
trademarks, service marks or other proprietary information or materials of the
Company other than the processing of ▇▇▇▇ applications, and to such counsel's
knowledge no such proceedings are threatened or contemplated by governmental
authorities or others; (iii) to the best of such counsel's knowledge based upon
its inquiries to Company officers (but without independent analysis), the
Amended and Restated Software Assignment and Grant-Back License, Maintenance and
Support Agreement between the Company and Spider Technologies, Inc. grants the
Company sufficient rights to use the "Software" and "Developed Software" (as
defined therein) for the purposes for which it is used at the Effective Date.
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States, the state of Colorado, or the corporate
law of the state of Delaware, upon opinions of local counsel satisfactory in
form and scope to counsel for the Underwriters. Copies of any opinions so relied
upon shall be delivered to the Representatives and to counsel for the
Underwriters and the foregoing opinion shall also state that counsel knows of no
reason the Underwriters are not entitled to rely upon the opinions of such local
counsel.
39