EXHIBIT 1.1
Shares
▇▇▇▇▇▇.▇▇▇, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
August ___, 1999
CIBC World Markets Corp.
ING Barings LLC
Prudential Securities
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLC
c/o CIBC World Markets Corp.
As Representatives of the Several Underwriters
World Financial Center
New York, New York 10281
On behalf of the Several Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
EMusic, Inc. a Delaware corporation (the "Company"), and the
stockholders of the Company named on Schedule III to this Agreement (each a
"Selling Stockholder" and collectively, the "Selling Stockholders"), propose to
sell to you and the other underwriters named on Schedule I to this Agreement
(the "Underwriters"), for whom you are acting as Representatives, an aggregate
of shares (the "Firm Shares") of the Company's Common Stock, (the
"Common Stock"). The Company proposes to issue and sell shares of
its authorized and unissued Common Stock (the "Company Shares") and the Selling
Stockholders propose to sell an aggregate of shares of the Company's
authorized and outstanding Common Stock (the "Selling Stockholders Shares") to
the Underwriters. In addition, the Company proposes to grant to the several
Underwriters, an option to purchase up to an additional shares (the
"Option Shares") of Common Stock from them for the purpose of covering over-
allotments in connection with the sale of the Firm Shares. The Firm Shares and
the Option Shares are together called the "Shares."
1. Sale and Purchase of the Shares.
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On the basis of the representations, warranties and agreements
contained in, and subject to the terms and conditions of, this Agreement:
(a) The Company agrees to sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from the
Company, at $_____ per share (the "Initial Price"), the number of Company Shares
set forth opposite the name of such Underwriter on Schedule I to this Agreement.
(b) The Selling Stockholders agrees to sell to each of the
Underwriters, and each of the Underwriters agree, severally and not jointly, to
purchase from the Selling Stockholders at the Initial Price, the number of
Selling Stockholders Shares set forth opposite the name of such Underwriter on
Schedule I to this Agreement.
(c) The Company grants to the several Underwriters an option to
purchase all or any part of the Option Shares at the Initial Price. The number
of Option Shares to be purchased by each Underwriter shall be the same
percentage (adjusted by the Representatives to eliminate fractions) of the total
number of Option Shares to be purchased by the Underwriters as such Underwriter
is purchasing of the Firm Shares. Such option may be exercised only to cover
over-allotments in the sales of the Firm Shares by the Underwriters and may be
exercised in whole or in part at any time on or before 12:00 noon, New York City
time, on the business day before the Firm Shares Closing Date (as defined
below), and on one or more occasions thereafter within 30 days after the date of
this Agreement, in each case upon written or telegraphic notice, or verbal or
telephonic notice confirmed by written or telegraphic notice, by the
Representatives to the Company no later than 12:00 noon, New York City time, on
the business day before the Firm Shares Closing Date or at least two business
days before the Option Shares Closing Date (as defined below), as the case may
be, setting forth the number of Option Shares to be purchased and the time and
date (if other than the Firm Shares Closing Date) of such purchase.
2. Delivery and Payment. Delivery by the Company and the Selling
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Stockholders of the Firm Shares to the Representatives for the respective
accounts of the Underwriters, and payment of the purchase price by wire transfer
payable in same day funds to the Company and the Selling Stockholders, shall
take place at the offices of CIBC World Markets Corp., at CIBC ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., New York
City time, on the third full business day following the first day the Shares are
traded, or at such time on such other date, not later than 10 business days
after the date of this Agreement, as shall be agreed upon by the Company and the
Representatives (such time and date of delivery and payment are called the "Firm
Shares Closing Date"); provided, however, that if the Company has not made
available to the Representatives copies of the Prospectus within the time
provided in Section 7(a)(v) hereof the Representatives may, in their sole
discretion, postpone the Closing Date until no later than two (2) full business
days following delivery of copies of the Prospectus to the Representatives. If
the Representatives so elect, delivery of the Firm Shares may be made by credit
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representative.
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In the event the option with respect to the Option Shares is
exercised, delivery by the Company of the Option Shares to the Representatives
for the respective accounts of the Underwriters and payment of the purchase
price by wire transfer, payable in same day funds to the Selling Stockholders
and the Company, as applicable, shall take place at the offices of CIBC World
Markets Corp. specified above at the time and on the date or dates (which may be
the same date as, but in no event shall be earlier than, the Firm Shares Closing
Date) specified in the notice referred to in Section 1(c) (such time and date of
delivery and payment are called the "Option Shares Closing Date"). The Firm
Shares Closing Date and the Option Shares Closing Date are called, individually,
a "Closing Date" and, together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, on the day of notice of exercise of the option as described in
Section l(c) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. Registration Statement and Prospectus; Public Offering. The
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Company has prepared in conformity with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the published rules and
regulations thereunder (the "Rules") adopted by the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No. 333-
83685), including a preliminary prospectus relating to the Shares, and has filed
with the Commission the Registration Statement (as hereinafter defined) and such
amendments thereof as may have been required to the date of this Agreement.
Copies of such Registration Statement (including all amendments thereto) to and
of the related preliminary prospectus have heretofore been delivered by the
Company to you.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date (as hereinafter defined) and the date of this Agreement
as the Representatives deem advisable. The Company hereby confirms that the
Underwriters and dealers have been authorized to distribute or cause to be
distributed each preliminary prospectus and are authorized to distribute the
Prospectus (as from time to time amended or supplemented if the Company
furnishes amendments or supplements thereto to the Underwriters).
4. Representations and Warranties of the Company and the Selling
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Stockholders. The Company and the Selling Stockholders hereby, jointly and
------------
severally, represent and warrant to each Underwriter as follows:
(a) If the registration statement relating to the Shares has
been declared effective under the Securities Act by the Commission, the Company
will prepare and promptly file with the Commission the information omitted from
the registration statement pursuant to Rule 430A(a) or, if the Representatives,
on behalf of the several Underwriters, shall agree to the utilization of Rule
434 of the Rules, the information required to be included in any term sheet
filed pursuant to Rule 434(b) or (c), as applicable, of the Rules pursuant to
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subparagraph (1), (4) or (7) of Rule 424(b) of the Rules or as part of a post-
effective amendment to the registration statement (including a final form of
prospectus). If the registration statement relating to the Shares has not been
declared effective under the Securities Act by the Commission, the Company will
prepare and promptly file an amendment to the registration statement, including
a final form of prospectus, or, if the Representatives, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules, the
information required to be included in any term sheet filed pursuant to Rule
434(b) or (c), as applicable, of the Rules. The term "Registration Statement" as
used in this Agreement shall mean such registration statement, including
consolidated financial statements, schedules and exhibits, in the form in which
it became or becomes, as the case may be, effective (including, if the Company
omitted information from the registration statement pursuant to Rule 430A(a) or
files a term sheet pursuant to Rule 434 of the Rules, the information deemed to
be a part of the registration statement at the time it became effective pursuant
to Rule 430A(b) or Rule 434(d) of the Rules) and, in the event of any amendment
thereto or the filing of any abbreviated registration statement pursuant to Rule
462(b) of the Rules relating thereto after the effective date of such
registration statement (the "Effective Date"), shall also mean (from and after
the effectiveness of such amendment or the filing of such abbreviated
registration statement) such registration statement as so amended, together with
any such abbreviated registration statement. The term "Prospectus" as used in
this Agreement shall mean the prospectus relating to the Shares as included in
such Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the
Rules); provided, however, that if in reliance on Rule 434 of the Rules and with
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the consent of the Representatives, on behalf of the several Underwriters, the
Company shall have provided to the Underwriters a term sheet pursuant to Rule
434(b) or (c), as applicable, prior to the time that a confirmation is sent or
given for purposes of Section 2(10)(a) of the Securities Act, the term
"Prospectus" shall mean the "prospectus subject to completion" (as defined in
Rule 434(g) of the Rules) last provided to the Underwriters by the Company and
circulated by the Underwriters to all prospective purchasers of the Shares
(including the information deemed to be a part of the Registration Statement at
the time it became effective pursuant to Rule 434(d) of the Rules).
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus referred to in the immediately preceding
sentence (whether or not such revised prospectus is required to be filed with
the Commission pursuant to Rule 424(b) of the Rules), the term "Prospectus"
shall refer to such revised prospectus from and after the time it is first
provided to the Underwriters for such use. If in reliance on Rule 434 of the
Rules and with the consent of the Representatives, on behalf of the several
Underwriters, the Company shall have provided to the Underwriters a term sheet
pursuant to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Securities
Act, the Prospectus and the term sheet, together, will not be materially
different from the prospectus in the Registration Statement.
On the Effective Date, the Registration Statement complied, and on the date
of the Prospectus, on the date any post-effective amendment to the Registration
Statement shall become effective, on the date any supplement or amendment to the
Prospectus is filed with the Commission and on each Closing Date, the
Registration Statement and the Prospectus (and any amendment thereof or
supplement thereto) will comply, in all material respects, with the
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applicable provisions of the Securities Act and the Rules and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder; the Registration Statement did not, as
of the Effective Date, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading; and on the other dates referred to above neither the
Registration Statement nor the Prospectus, nor any amendment thereof or
supplement thereto, will contain any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. When any related preliminary prospectus was
first filed with the Commission (whether filed as part of the Registration
Statement or any amendment thereto or pursuant to Rule 424(a) of the Rules) and
when any amendment thereof or supplement thereto was first filed with the
Commission, such preliminary prospectus as amended or supplemented complied in
all material respects with the applicable provisions of the Securities Act and
the Rules and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, the Company and the Selling
Stockholders make no representation or warranty as to the statements contained
under the caption "Underwriting" in the Prospectus. The Company and the Selling
Stockholders acknowledge that the statements referred to in the previous
sentence constitute the only information furnished in writing by the
Representatives on behalf of the several Underwriters specifically for inclusion
in the Registration Statement, any preliminary prospectus or the Prospectus.
(b) The consolidated financial statements of the Company and its
subsidiaries (including all notes and schedules thereto) included in the
Registration Statement and Prospectus present fairly, in all material respects,
the financial position, the results of operations and cash flows and the
stockholders' equity and the other information purported to be shown therein of
the Company and its subsidiaries at the respective dates and for the respective
periods to which they apply; and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made. The selected and
summary consolidated financial and operational data included in the Registration
Statement present fairly, in all material respects, the information shown
therein and have been compiled on a basis consistent with the audited financial
statements. No other financial statements or schedules are required to be
included in the Registration Statement.
(c) PricewaterhouseCoopers LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are and, during the periods
covered by their reports, were independent public accountants as required by the
Securities Act and the Rules.
(d) The Company has been duly incorporated and is validly
existing as corporation in good standing under the laws of the State of Delaware
and each of the Company's subsidiaries have been duly incorporated and are
validly existing as a corporation in good standing under the laws of the State
of California or Delaware. The Company has no subsidiaries or subsidiaries and
does not control, directly or indirectly, any corporation, partnership, joint
venture, association or other business organization other than the subsidiaries
listed in
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Exhibit 21.1 to the Registration Statement. Each of the Company and its
subsidiaries are duly qualified and in good standing as foreign corporations in
each jurisdiction in which the character or location of its assets or properties
(owned, leased or licensed) or the nature of its businesses makes such
qualification necessary except for such jurisdictions where the failure to so
qualify would not have a material adverse effect on the assets or properties,
business, results of operations or financial condition of the Company and its
subsidiaries, taken as a whole. Except as disclosed in the Registration
Statement and the Prospectus, neither the Company nor its subsidiaries own,
lease or license any asset or property or conduct any businesses outside the
United States of America. Each of the Company and its subsidiaries have all
requisite corporate power and authority, and all n ecessary authorizations,
approvals, consents, orders, licenses, certificates and permits of and from all
governmental or regulatory bodies or any other person or entity, to own, lease
and license its assets and properties and conduct its businesses as now being
conducted and as described in the Registration Statement and the Prospectus
except for such authorizations, approvals, consents, orders, material licenses,
certificates and permits the failure to so obtain would not have a material
adverse effect upon the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole, and the Company has all such corporate power and
authority, and such authorizations, approvals, consents, orders, licenses,
certificates and permits to enter into, deliver and perform this Agreement and
to issue and sell the Shares (except as may be required under the Securities Act
and state and foreign Blue Sky laws).
(e) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration Statement
and Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries, taken as a
whole. Neither the Company, its subsidiaries nor the Selling Stockholders have
received any notice of, and neither the Company, its subsidiaries nor the
Selling Stockholders has any knowledge of, any infringement of or conflict with
asserted rights of the Company or its subsidiaries by others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights which, singularly or in the aggregate, might
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries, taken as a whole; and neither the Company nor its subsidiaries
have received any notice of, and neither the Company, its subsidiaries, nor the
Selling Stockholders has any knowledge of, any infringement of or conflict with
asserted rights of others with respect to any patent, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, might have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries, taken as a whole.
(f) Each of the Company and its subsidiaries has good title to
each of the items of personal property which are reflected in the financial
statements referred to in Section 4(b) or are referred to in the Registration
Statement and the Prospectus as being owned by it and valid and enforceable
leasehold interests in each of the items of real and personal
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property which are referred to in the Registration Statement and the Prospectus
as being leased by it, in each case free and clear of all liens, encumbrances,
claims, security interests and defects, other than those described in the
Registration Statement and the Prospectus and those which do not and will not
have a material adverse effect upon the assets or properties, business, results
of operations or financial condition of the Company and its subsidiaries, taken
as a whole.
(g) There is not any pending or, to the best of the Company's
and the Selling Stockholders' knowledge, threatened action, suit, claim or
proceeding against the Company or its subsidiaries, any of their respective
officers or any of their respective properties, assets or rights before any
court, government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or its subsidiaries, or over their respective
officers or properties or otherwise which (i) might result in any material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries, taken as a
whole, or might materially and adversely affect their properties, assets or
rights, (ii) might prevent consummation of the transactions contemplated hereby
or (iii) is required to be disclosed in the Registration Statement or Prospectus
and is not so disclosed.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as described
therein, (i) there has not been any material adverse change in the assets or
properties, business, results of operations, prospects or condition (financial
or otherwise), of the Company and its subsidiaries, taken as a whole, whether or
not arising from transactions in the ordinary course of business; (ii) neither
the Company nor its subsidiaries have sustained any material loss or
interference with its assets, businesses or properties (whether owned or leased)
from fire, explosion, earthquake, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or any court or legislative or
other governmental action, order or decree; and (iii) since the date of the
latest balance sheet included in the Registration Statement and the Prospectus,
except as reflected therein, neither the Company nor its subsidiaries have (a)
issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, except such liabilities or obligations incurred
in the ordinary course of business, (b) entered into any transaction not in the
ordinary course of business or (c) declared or paid any dividend or made any
distribution on any shares of its stock or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or otherwise acquire any shares of its
stock.
(i) There is no document or contract required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed as required. Each
agreement listed in the Exhibits to the Registration Statement is in full force
and effect and is valid and enforceable by and against the Company or its
subsidiaries in accordance with its terms, assuming the due authorization,
execution and d elivery thereof by each of the other parties thereto, except (A)
as such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles and (B) to the extent that rights to indemnity or
contribution under this Agreement may be limited by Federal or state securities
laws or the public policy underlying such laws. Except as disclosed in the
Registration Statement, neither the Company nor its subsidiaries, nor to the
best of the Company's, its subsidiaries and the Selling Stockholders' knowledge,
is any other party in default in the observance or performance
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of any term or obligation to be performed by it under any such agreement, and no
event has occurred which with notice or lapse of time or both would constitute
such a default, in any such case which default or event would have a material
adverse effect on the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole. No default exists, and no event has occurred
which with notice or lapse of time or both would constitute a default, in the
due performance and observance of any term, covenant or condition, by the
Company or its subsidiaries of any other agreement or instrument to which the
Company or its subsidiaries are a party or by which it or its properties or
business may be bound or affected which default or event would have a material
adverse effect on the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole.
(j) Neither the Company nor its subsidiaries are in violation of
any term or provision of its respective charter or by-laws or of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation, where the
consequences of such violation would have a material adverse effect on the
assets or properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company and its subsidiaries, taken as a whole.
(k) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale by the
Company, sale by the Selling Stockholders, of the Shares) will give rise to a
right to terminate or accelerate the due date of any payment due under, or
conflict with or result in the breach of any term or provision of, or constitute
a default (or an event which with notice or lapse of time or both would
constitute a default) under, or require any consent or waiver under, or result
in the execution or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company or its subsidiaries pursuant to the terms
of, any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or its subsidiaries are a party or by which it or any of its
properties or businesses is bound, or any franchise, license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or its
subsidiaries or violate any provision of the charter or by-laws of the Company
or its subsidiaries, except (1) for such consents or waivers which have already
been obtained and are in full force and effect or (2) where the failure to
obtain such consents or waivers, either singly or in the aggregate, would not
have a material adverse effect on the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole.
(l) The Company has an authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus. All of the
outstanding shares of Common Stock have been duly and validly issued, are fully
paid and nonassessable and were not issued in violation of or subject to any
preemptive rights. None of such Shares were issued in violation of any
preemptive or other similar right. The Shares, when issued and sold pursuant to
this Agreement, will be duly and validly issued, fully paid and nonassessable,
and will not be issued in violation of or subject to any preemptive rights. None
of such Shares will be issued in violation of any preemptive or other similar
rights. Except as disclosed in the Registration Statement and the Prospectus,
there is no outstanding option, warrant or other right calling for the issuance
of, and there is no commitment, plan or arrangement to issue, any share of stock
of
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the Company or any security convertible into, or exercisable or exchangeable
for, such stock. The Common Stock and the Shares conform in all material
respects to all statements in relation thereto contained in the Registration
Statement and the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights. All the outstanding shares of
capital stock of the Company's subsidiaries have been duly and validly
authorized and issued and are fully paid and nonassessable, and, except as
otherwise set forth in the Prospectus, all outstanding shares of capital stock
of the subsidiaries are owned by the Company free and clear of any security
interests, claims, liens or encumbrances.
(m) Each officer and director of the Company, the Selling
Stockholders and each person set forth in Schedule II hereto has agreed in
writing that such person will not, for a period of 90 days from the date that
the Registration Statement is declared effective by the Commission (the "Lock-up
Period"), offer to sell, contract to sell, or otherwise sell, dispose of, loan,
pledge or grant any rights with respect to (collectively, a "Disposition") any
shares of Common Stock, any options or warrants to purchase any shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock (collectively, "Securities") now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts, provided
the donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners or stockholders of such person, provided that
the distributees thereof agree in writing to be bound by the terms of this
restriction, or (iii) with the prior written consent of the Representatives. The
foregoing restriction has been expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than such holder. Such prohibited hedging or other transactions
would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from Securities.
Furthermore, such person has also agreed and consented to the entry of stop
transfer instructions with the Company's transfer agent against the transfer of
the Securities held by such person except in compliance with this restriction.
The Company has provided to counsel for the Underwriters a complete and accurate
list of all securityholders of the Company and the number and type of securities
held by each securityholder. The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the agreements
pursuant to which its officers, directors and stockholders have agreed to such
or similar restrictions (the "Lock-up Agreements") presently in effect or
effected hereby. The Company hereby represents and warrants that it will not
release any of its officers, directors or other stockholders from any lock-up
agreements currently existing or hereafter effected without the prior written
consent of the Representatives.
(n) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and performance of
this Agreement and the issuance and sale of the Shares by the Company. This
Agreement has been duly and validly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding
9
obligation of the Company enforceable against the Company in accordance with its
terms, except (A) as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
and (B) to the extent that rights to indemnity or contribution under this
Agreement may be limited by Federal and state securities laws or the public
policy underlying such laws.
(o) The Company is not involved in any labor dispute nor, to the
knowledge of the Company and the Selling Stockholders, is any such dispute
threatened, which dispute would have a material adverse effect on the assets or
properties, business, results of operations, prospects or condition (financial
or otherwise) of the Company and its subsidiaries, taken as a whole.
(p) No transaction has occurred between or among the Company and
any of its officers or directors or any affiliate or affiliates of any such
officer or director that is required to be described in and is not described in
the Registration Statement and the Prospectus.
(q) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of any of the Shares.
(r) The Company has filed all Federal, state, local and foreign
tax returns which are required to be filed through the date hereof, or has
received extensions thereof, and has paid all taxes shown on such returns and
all assessments received by it to the extent that the same are material and have
become due, except where the failure to make such filing or payment would not
have a material adverse effect on the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole.
(s) The Shares have been duly authorized for quotation on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System.
(t) Neither the Company nor its subsidiaries do business with
the government of Cuba or with any person or entity located in Cuba.
(u) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its subsidiaries are in compliance with
all rules, laws and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to its business, except where a
failure to comply with such rules, laws and regulations would not have a
material adverse effect on the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole, (ii) neither the Company nor its
subsidiaries have received notice from any governmental authority or third party
of an asserted claim under Environmental Laws, which claim is required to be
disclosed in the Registration Statement and the Prospectus, (iii) neither the
Company nor its subsidiaries will
10
be required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, if any, leased or
occupied by the Company or its subsidiaries have been designated as a Superfund
site pursuant to the Comprehensive Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. (S) 9601, et seq.), or otherwise designated as a
-- ---
contaminated site under applicable state or local law.
(v) Each of the Company and its subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(w) There are no issues related to the Company's, or
subsidiaries', preparedness for the Year 2000 that (i) are of a character
required to be described or referred to in the Registration Statement or by the
Securities Act which have not been accurately described in the Registration
Statement or Prospectus or (ii) might reasonably be expected to result in a
material adverse effect on the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of the Company and
its subsidiaries, taken as a whole or that might materially affect their
properties, assets or rights. All internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
and each Constituent Component (as defined below) of those products of the
Company and its subsidiaries fully comply with Year 2000 Qualification
Requirements. "Year 2000 Qualifications Requirements" means that the internal
computer systems and each Constituent Component (as defined below) of those
systems and all computer-related products and each Constituent Component (as
defined below) of those products of the Company and its subsidiaries (i) have
been reviewed to confirm that they store, process (including sorting and
performing mathematical operations, calculations and computations), input and
output data containing date and information correctly regardless of whether the
date contains dates and times before, on or after January 1, 2000, (ii) have
been designated to ensure date and time entry recognition and calculations, and
date data interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iv) accurately process any date rollover, and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration. The Company
has inquired of material vendors as to their preparedness for the Year 2000 and
has disclosed in the Registration Statement or Prospectus any issues that might
reasonably be expected to result in a material adverse effect on the assets or
properties, business, results of operations, prospects or condition (financial
or otherwise) of the Company and its subsidiaries, taken as a whole.
(x) Neither the Company nor its subsidiaries have any knowledge
that any of the activities or types of conduct enumerated below have been or may
have been engaged
11
in, either directly or indirectly, at any time since the founding of the
Company: (a) any bribes or kickbacks to government officials or their relatives,
or any other payments to such persons, whether or not legal, to obtain or retain
business or to receive favorable treatment with regard to business; (b) any
bribes or kickbacks to persons other than government officials, or to relatives
of such persons, or any other payments to such persons or their relatives,
whether or not legal, to obtain or retain business or to receive favorable
treatment with regard to business; (c) any contributions, whether or not legal,
made to any political party, political candidate or holder of governmental
office; (d) any bank accounts, funds or pools of funds created or maintained
without being reflected on the corporate books of account, or as to which the
receipts and disbursements therefrom have not been reflected on such books; (e)
any receipts or disbursements, the actual nature of which has been "disguised"
or intentionally misrecorded on the corporate books of account of the Company or
its subsidiaries; (f) any fees paid to consultants or commercial agents that
exceeded the reasonable value of the services purported to have been rendered;
or (g) any payments or reimbursements made to personnel of the Company or its
subsidiaries for the purposes of enabling them to expend time or to make
contributions or payments of the kind or for the purpose referred to in subparts
(a)-(f) above.
[Add representations and warranties regarding resale prospectus.]
5. The Selling Stockholders represents and warrants to each
Underwriter that:
(a) The Selling Stockholders now has and on the Firm Share
Closing Date and the Option Share Closing Date (if applicable) will have valid
marketable title to the Shares to be sold by such Selling Stockholders, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest other than pursuant to this Agreement; and upon delivery of such Shares
hereunder and payment of the purchase price as herein contemplated, each of the
Underwriters will obtain valid marketable title to the Shares purchased by it
from such Selling Stockholders, free and clear of any pledge, lien, security
interest pertaining to such Selling Stockholders or such Selling Stockholders'
property, encumbrance, claim or equitable interest, including any liability for
estate or inheritance taxes, or any liability to or claims of any creditor,
devisee, legatee or beneficiary of such Selling Stockholders.
(b) All consents, approvals, authorizations and orders required
for the execution and delivery by or on behalf of such Selling Stockholders of
this Agreement and the sale and delivery of the Selling Stockholders Shares
under this Agreement (other than, at the time of the execution hereof (if the
Registration Statement has not yet been declared effective by the Commission),
the issuance of the order of the Commission declaring the Registration Statement
effective and such consents, approvals, authorizations or orders as may be
necessary under state or other securities or Blue Sky laws) have been obtained
and are in full force and effect; such Selling Stockholders has full legal
right, power and authority to enter into and perform its obligations under this
Agreement and to sell, assign, transfer and deliver the Shares to be sold by
such Selling Stockholders under this Agreement.
Such Selling Stockholders will not, during the Lock-up Period, effect
the Disposition of any Securities now owned or hereafter acquired directly by
such Selling Stockholders or with respect to which such Selling Stockholders has
or hereafter acquires the
12
power of disposition, otherwise than to Securities (i) to be sold in the
Offering, (ii) transferred as a gift or gifts (provided that any donee thereof
agrees in writing to be bound by the terms hereof), (iii) transferred or
bequested to immediate family members or a trust established for their benefit
(provided that any such transferee thereof agrees in writing to be bound by the
terms hereof) or (iv) with the prior written consent of the Representatives. The
foregoing restriction is expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than the Selling Stockholders. Such prohibited hedging or other
transactions would including, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Such Selling Stockholders also agrees and consents to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the securities held by such Selling Stockholders except in
compliance with this restriction.
(c) Such Selling Stockholders has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(d) Such Selling Stockholders has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(e) All information furnished by or on behalf of such Selling
Stockholders relating to such Selling Stockholders and the Selling Stockholders
Shares that is set forth in the Registration Statement or the Prospectus is, and
at the time the Registration Statement became or becomes, as the case may be,
effective and at all times subsequent thereto up to and on the Closing Date was
or will be, true, correct and complete, and does not, and at the time the
Registration Statement became or becomes, as the case may be, effective and at
all times subsequent thereto up to and on the Closing Date will not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make such information not misleading, in light
of the circumstances under which they were made.
(f) Such Selling Stockholders will review the Prospectus and
will comply with all agreements and satisfy all conditions on its part to be
complied with or satisfied pursuant to this Agreement on or prior to the Closing
Date and will advise the Representatives prior to the Closing Date if any
statement to be made on behalf of such Selling Stockholders in the certificate
contemplated by Section 6 would be inaccurate if made as of the Closing Date.
(g) Such Selling Stockholders does not have, or has waived prior
to the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Shares that are to be sold
by the Company to the Underwriters pursuant to this Agreement; such Selling
Stockholders does not have, or has waived prior to the date hereof, any
registration right or other similar right to participate in the offering made by
the Prospectus,
13
other than such rights of participation as have been satisfied by the
participation of such Selling Stockholders in the transactions to which this
Agreement relates in accordance with the terms of this Agreement; and such
Selling Stockholders does not own any warrants, options or similar rights to
acquire, and does not have any right or arrangement to acquire, any capital
stock, rights, warrants, options or other securities from the Company, other
than those described in the Registration Statement and the Prospectus.
6. Conditions of the Underwriters' Obligations. The obligations of
-------------------------------------------
the Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 7(a) of this Agreement.
(b) No order preventing or suspending the use of any preliminary
prospectus or the Prospectus shall have been or shall be in effect and no order
suspending the effectiveness of the Registration Statement shall be in effect
and no proceedings for such purpose shall be pending before or threatened by the
Commission, and any requests for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of the counsel to
the Representatives.
(c) The representations and warranties of the Company, its
subsidiaries and the Selling Stockholders contained in this Agreement and the
representations and warranties of the Company and its subsidiaries in the
certificates delivered pursuant to Section 6(d) shall be true and correct in all
material respects when made and on and as of each Closing Date as if made on
such date, and the Company shall have performed all covenants and agreements and
satisfied all the conditions contained in this Agreement required to be
performed or satisfied by it at or before such Closing Date.
(d) The Representatives shall have received on each Closing Date
a certificate, addressed to the Representatives and dated such Closing Date, of
the chief executive or chief operating officer and the chief financial officer
or chief accounting officer of the Company to the effect that, and you shall be
satisfied that:
(i) The representations and warranties of the Company in
this Agreement are true and correct in all material respects, as if made on and
as of the Closing Date and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and
at all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Securities Act and the Rules and in all material respects
14
conformed to the requirements of the Securities Act and the Rules, the
Registration Statement, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, since the
Effective Date, there has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries, taken as a whole, (b) any transaction that is material to the
Company and its subsidiaries, taken as a whole, except transactions entered into
in the ordinary course of business, (c) any obligation, direct or contingent,
that is material to the Company and its subsidiaries, taken as a whole, incurred
by the Company or its subsidiaries, except obligations incurred in the ordinary
course of business, (d) any change in the capital stock or outstanding
indebtedness of the Company or its subsidiaries that is material to the Company
and its subsidiaries, taken as a whole, (e) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company or its
subsidiaries, or (f) any loss or damage (whether or not insured) to the property
of the Company or its subsidiaries which has been sustained or will have been
sustained which has a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries, taken as a whole.
(e) The Representatives shall have received on the Effective
Date and on each Closing Date a signed letter from PricewaterhouseCoopers LLP
addressed to the Representatives and dated the Effective Date, and each such
Closing Date, in form and substance reasonably satisfactory to the
Representatives, confirming that they are independent accountants within the
meaning of the Securities Act and the Rules, and shall:
(i) represent that they are independent auditors with
respect to the Company within the meaning of the Securities Act and the
applicable published Rules;
(ii) set forth their opinion with respect to their
examination of the balance sheet of the Company as of June 30, 1999 and related
statements of operations, stockholders' equity, and cash flows for the twelve
(12) months ended June 30, 1999;
(iii) state that PricewaterhouseCoopers LLP has performed
the procedures set out in Statement on Auditing Standards No. 71 ("SAS 71") for
a review of interim financial information and providing the report of
PricewaterhouseCoopers LLP as described in SAS 71 on the financial statements
for the first-quarter period ended March 31, 1999 (the "Quarterly Financial
Statements");
(iv) state that in the course of such review, nothing came
to their attention that leads them to believe that any material modifications
need to be made to any
15
of the Quarterly Financial Statements in order for them to be in compliance with
generally accepted accounting principles consistently applied across the periods
presented; and
(v) address other matters agreed upon by
PricewaterhouseCoopers LLP and you. In addition, you shall have received from
PricewaterhouseCoopers LLP a letter addressed to the Company and made available
to you for the use of the Underwriters stating that their review of the
Company's system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of their examination of the Company's
financial statements as of June 30, 1999, did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
References to the Registration Statement and the Prospectus in this
paragraph (e) are to such documents as amended and supplemented at the date of
the letter.
(f) The Representatives shall have received on each Closing Date
from ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Friedenrich LLP, counsel for the Company, an opinion,
addressed to the Representatives and dated such Closing Date, in the form
attached hereto as Annex A.
-------
To the extent deemed advisable by such counsel, they may rely as to
matters of fact on certificates of responsible officers of the Company and
public officials and on the opinions of other counsel satisfactory to the
Representatives as to matters which are governed by laws other than the laws of
the State of California, the General Corporation Law of the State of Florida and
the Federal laws of the United States. Copies of such certificates and other
opinions shall be furnished to the Representatives and counsel for the
Underwriters.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the Representatives and representatives of the
independent certified public accountants of the Company, at which conferences
the contents of the Registration Statement and the Prospectus and related
matters were discussed and, although such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus (except as
specified in the foregoing opinion), on the basis of the foregoing, no facts
have come to the attention of such counsel which lead such counsel to believe
that the Registration Statement at the time it became effective (except with
respect to the financial statements and notes and schedules thereto and other
financial data, as to which such counsel need express no belief) 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 as amended or supplemented (except with respect to the
financial statements and notes schedules thereto and other financial data, as to
which such counsel need make no statement) on the date thereof contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives and their counsel.
16
(h) The Representatives shall have received on each Closing
Date, a certificate addressed to each representative, and dated such Closing
Date, of the chief executive officer or president of the Company's subsidiaries
to the effect that the financial statements of the Company's subsidiaries (the
"Subsidiaries Financial Statements") (i) are in accordance with the books and
records of the Company, on a consolidated basis (the "Consolidated Company")
(ii) are true, correct and complete and present fairly the financial condition
of the Consolidated Company, at the date or dates therein indicated and the
results of operations for the period or periods therein specified, (iii)
disclose all of the Consolidated Company's material debts, liabilities and
obligations of any nature, whether due or to become due, owing to the operations
of the subsidiaries, as of their respective dates (including, without
limitation, absolute liabilities, accrued liabilities and contingent
liabilities) to the extent such debts, liabilities and obligations are required
to be disclosed in accordance with generally accepted accounting principles, and
(iv) have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis, except for the omission of
notes thereto and normal year-end adjustments.
7. Covenants of the Company and the Selling Stockholders.
-----------------------------------------------------
(a) The Company covenants and agrees as follows:
(i) The Company will use its best efforts to cause the
Registration Statement and any amendment thereto, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; the Company will use its best efforts
to cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules as may be required subsequent to the date the Registration Statement is
declared effective to become effective as promptly as possible; the Company will
notify you, promptly after it shall receive notice thereof, of the time when the
Registration Statement, any subsequent amendment to the Registration Statement
or any abbreviated registration statement has become effective or any supplement
to the Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules, the Company will provide evidence
satisfactory to you that the Prospectus contains such information and has been
filed, within the time period prescribed, with the Commission pursuant to
subparagraph (1) or (4) of Rule 424(b) of the Rules or as part of a post-
effective amendment to such Registration Statement as originally declared
effective which is declared effective by the Commission; if the Company files a
term sheet pursuant to Rule 434 of the Rules, the Company will provide evidence
satisfactory to you that the Prospectus and term sheet meeting the requirements
of Rule 434(b) or (c), as applicable, of the Rules, have been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (7) of Rule
424(b) of the Rules; if for any reason the filing of the final form of
Prospectus is required under Rule 424(b)(3) of the Rules, it will provide
evidence satisfactory to you that the Prospectus contains such information and
has been filed with the Commission within the time period prescribed; it will
notify you promptly of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; promptly upon your request, it will prepare and file with the
Commission any amendments or supplements to the Registration Statement or
Prospectus which, in the reasonable opinion of counsel for the several
Underwriters, may be necessary or advisable in connection with the distribution
of the Shares by the Underwriters; it
17
will promptly prepare and file with the Commission, and promptly notify you of
the filing of, any amendments or supplements to the Registration Statement or
Prospectus which may be necessary to correct any statements or omissions, if, at
any time when a prospectus relating to the Shares is required to be delivered
under the Securities Act, any event shall have occurred as a result of which the
Prospectus or any other prospectus relating to the Shares as then in effect
would include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in case any
Underwriter is required to deliver a prospectus nine (9) months or more after
the effective date of the Registration Statement in connection with the sale of
the Shares, it will prepare promptly upon request, but at the expense of such
Underwriter, such amendment or amendments to the Registration Statement and such
prospectus or prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Securities Act; and it will file no
amendment or supplement to the Registration Statement or Prospectus which shall
not previously have been submitted to you a reasonable time prior to the
proposed filing thereof or to which you shall reasonably object in writing,
subject, however, to compliance with the Securities Act and the Rules and the
provisions of this Agreement. The Company shall use its best efforts to prevent
the issuance of any stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
(ii) The Company will advise you, promptly after it shall
receive notice or obtain knowledge of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued
(iii) If, at any time when a prospectus relating to the
Shares is required to be delivered under the Securities Act and the Rules, any
event occurs as a result of which the Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall be
necessary to amend or supplement the Prospectus to comply with the Securities
Act or the Rules, the Company promptly shall prepare and file with the
Commission, subject to this Section 7, an amendment or supplement which shall
correct such statement or omission or an amendment which shall effect such
compliance.
(iv) The Company shall make generally available to its
security holders and to the Representatives as soon as practicable, but not
later than 45 days after the end of the 12-month period beginning at the end of
the fiscal quarter of the Company during which the Effective Date occurs (or 90
days if such 12-month period coincides with the Company's fiscal year), an
earning statement (which need not be audited) of the Company, covering such 12-
month period, which shall satisfy the provisions of Section 11(a) of the
Securities Act or Rule 158 of the Rules.
(v) The Company will furnish to you, as soon as
available, and, in the case of the Prospectus and any term sheet or abbreviated
term sheet under Rule 434, in no event later than the first (1st) full business
day following the first day that Shares are traded,
18
copies of the Registration Statement (two of which will be signed and which will
include all exhibits), each Preliminary Prospectus, the Prospectus and any
amendments or supplements to such documents, including any prospectus prepared
to permit compliance with Section 10(a)(3) of the Securities Act, all in such
quantities as you may from time to time reasonably request. Notwithstanding the
foregoing, if the Representatives, on behalf of the several Underwriters, shall
agree to the utilization of Rule 434 of the Rules, the Company shall provide to
you copies of a Preliminary Prospectus updated in all respects through the date
specified by you in such quantities as you may from time to time reasonably
request.
(vi) The Company will use its best efforts to cooperate
with the Representatives and counsel for the Underwriters in endeavoring to
qualify the Shares for offering and sale under the securities laws of such
jurisdictions as the Representatives may designate and to continue such
qualifications in effect for so long as may be required for purposes of the
distribution of the Shares, except that the Company shall not be required in
connection therewith or as a condition thereof to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction in which it is not otherwise required to be so qualified or to so
execute a general consent to service of process. In each jurisdiction in which
the Shares shall have been qualified as above provided, the Company will make
and file such statements and reports in each year as are or may be required by
the laws of such jurisdiction.
(vii) During a period of five (5) years after the date
hereof, the Company will furnish to its stockholders as soon as practicable
after the end of each respective period, annual reports (including financial
statements audited by independent certified public accountants) and unaudited
quarterly reports of operations for each of the first three quarters of the
fiscal year, and will furnish to the Representatives, and to each other of the
several Underwriters hereunder, upon request (i) concurrently with furnishing
such reports to its stockholders, statements of operations of the Company for
each of the first three (3) quarters in the form furnished to the Company's
stockholders, (ii) concurrently with furnishing to its stockholders, a balance
sheet of the Company as of the end of such fiscal year, together with statements
of operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon of
independent certified public accountants, (iii) as soon as they are available,
copies of all reports (financial or other) mailed to stockholders, (iv) as soon
as they are available, copies of all reports and financial statements furnished
to or filed with the Commission, any securities exchange or the National
Association of Securities Dealers, Inc. ("NASD"), (v) every material press
release and every material news item or article in respect of the Company or its
affairs which was generally released to stockholders or prepared by the Company
or any of its subsidiaries, and (vi) any additional information of a public
nature concerning the Company or its subsidiaries, or its business which you may
reasonably request. During such five (5) year period, if the Company shall have
active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and its
subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiaries which is not so consolidated.
(viii) Without the prior written consent of the
Representatives, for a period of 180 days after the date of this Agreement, the
Company shall not issue, sell or
19
register with the Commission, (except for any registration on Form S-8 or on any
successor form) or otherwise dispose of, directly or indirectly, any equity
securities of the Company (or any securities convertible into or exercisable or
exchangeable for equity securities of the Company), except for the issuance of
the Shares pursuant to the Registration Statement and the issuance of shares or
grant of awards pursuant to the Company's existing stock option plans or bonus
plans. In the event that during this period, (i) any shares are issued pursuant
to the Company's existing stock option plan or bonus plan or (ii) any
registration is effected on Form S-8 or on any successor form, the Company shall
obtain the written agreement of such grantee or purchaser or holder of such
registered securities that, for a period of 180 days after the date of this
Agreement, such person will not, without the prior written consent of the
Representatives, offer for sale, sell, distribute, grant any option for the sale
of, or otherwise dispose of, directly or indirectly, or exercise any
registration rights with respect to, any shares of Common Stock (or any
securities convertible into, exercisable for, or exchangeable for any shares of
Common Stock) owned by such person.
(ix) On or before completion of this offering, the Company
shall make all filings required under applicable securities laws and by the
Nasdaq National Market (including any required registration under the Exchange
Act).
(x) The Company shall cause to be prepared and delivered,
at its expense, within one business day from the effective date of this
Agreement, to the Representatives an "electronic Prospectus" to be used by the
Underwriters in connection with the offering and sale of the Common Shares. As
used herein, the term "electronic Prospectus" means a form of Prospectus, and
any amendment or supplement thereto, that meets each of the following
conditions: (i) it shall be encoded in an electronic format, satisfactory to the
Representatives, that may be transmitted electronically by the Representatives
to offerees and purchasers of the Common Shares for at least the Prospectus
delivery period; (ii) it shall disclose the same information as the paper
Prospectus and Prospectus filed pursuant to ▇▇▇▇▇, except to the extent that
graphic and image material cannot be disseminated electronically, in which case
such graphic and image material shall be replaced in the electronic Prospectus
with a fair and accurate narrative description or tabular representation of such
material, as appropriate; and (iii) it shall be in or convertible into a paper
format or an electronic format, satisfactory to the Representatives, that will
allow investors to store and have continuously ready access to the Prospectus at
any future time, without charge to investors (other than any fee charged for
subscription to the system as a whole and for on-line time). Such electronic
Prospectus may consist of a Rule 434 preliminary prospectus, together with the
applicable term sheet, provided that it otherwise satisfies the format and
conditions described in the immediately preceding sentence. The Company hereby
confirms that it has included or will include in the Prospectus filed pursuant
to ▇▇▇▇▇ or otherwise with the Commission and in the Registration Statement at
the time it was declared effective an undertaking that, upon receipt of a
request by an investor or his or her representative within the Prospectus
delivery period, the Company shall transmit or cause to be transmitted promptly,
without charge, a paper copy of the Prospectus.
(xi) The Company intends to apply the net proceeds from
the sale of the Shares being sold by it in the manner set forth under the
caption "Use of Proceeds" in the Prospectus.
20
(xii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(xiii) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company or any Selling Stockholders to perform any agreement on their respective
parts to be performed hereunder or to fulfill any condition of the Underwriters'
obligations hereunder, or if the Underwriters shall terminate this Agreement
pursuant to Section 10, the Company will reimburse the several Underwriters for
all reasonable out-of-pocket expenses (including fees and disbursements of
Underwriters' Counsel) incurred by the Underwriters in investigating or
preparing to market or marketing the Shares.
(xiv) If at any time during the ninety (90) 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 of the Common 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 and your counsel concerning the
substance of and, unless advised otherwise by your counsel, disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the public offering of the Shares and the performance of the obligations of the
Company under this Agreement including those relating to: (i) the preparation,
printing, filing and distribution of the Registration Statement including all
exhibits thereto, each preliminary prospectus, the Prospectus, all amendments
and supplements to the Registration Statement and the Prospectus, and the filing
and distribution of this Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreement, the Underwriter's Questionnaire and Power of Attorney
and any instruments related to any of the foregoing; (ii) the issuance and
delivery of the Shares hereunder to the several Underwriters, including transfer
taxes, if any, and the cost of all certificates representing the Shares and
transfer agents' and registrars' fees; (iii) the registration or qualification
of the Shares for offer and sale under the securities or Blue Sky laws of the
various jurisdictions referred to in Section 7(a)(vi), including the reasonable
fees and disbursements of counsel for the Underwriters in connection with such
registration and qualification and the preparation, distribution and shipment of
preliminary and supplementary Blue Sky memoranda; (iv) the furnishing (including
costs of shipping and mailing) to the Representatives and to the Underwriters of
copies of each preliminary prospectus, the Prospectus and all amendments or
supplements to the Prospectus, and of the several documents required by this
Section to be so furnished, as may be reasonably requested for use in connection
with the offering and sale of the Shares by the Underwriters or by dealers to
whom Shares may be sold; (v) the filing fees of the National Association of
Securities Dealers, Inc. in connection with its review of the terms of the
public offering; (vi) the furnishing (including costs of shipping and mailing)
to the Representatives and to the Underwriters of copies of all reports and
information required by Section 7(a)(vii); (vii)
21
inclusion of the Shares for quotation on the Nasdaq National Market; (viii) the
fees and disbursements of counsel for the Company; and (ix) all fees and other
charges of the Company's independent certified public accountants. Subject to
the provisions of Section 10, the Underwriters agree to pay, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Underwriters under this Agreement not payable by the Company
pursuant to the preceding sentence, including, without limitation, the fees and
disbursements of counsel for the Underwriters.
8. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
against any and all losses, claims, damages and liabilities, joint or several
(including any reasonable investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other Federal or state law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company herein or (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, the Registration Statement, the electronic
Prospectus or the Prospectus or any amendment thereof or supplement thereto, or
arise out of or are based upon any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that such indemnity shall
not inure to the benefit of any Underwriter (or any person controlling such
Underwriter) on account of any losses, claims, damages or liabilities arising
from the sale of the Shares to any person by such Underwriter if such untrue
statement or omission or alleged untrue statement or omission was made in such
preliminary prospectus, the Registration Statement or the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with information
furnished in writing to the Company by the Representatives on behalf of any
Underwriter specifically for use therein. This indemnity agreement will be in
addition to any liability which the Company and the Selling Stockholders may
otherwise have.
(b) The Selling Stockholders agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any and all losses, claims, damages and liabilities, joint
or several (including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they, or any of them, may
become subject under the Securities Act, the Exchange Act or other Federal or
state law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon (i) any breach of
any representation, warranty, agreement or covenant of the Selling Stockholders
herein or (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus, the Registration Statement, the
electronic Prospectus or the Prospectus or any amendment thereof or supplement
thereto, or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or
22
necessary to make the statements therein not misleading; provided, however, that
such indemnity shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) on account of any losses, claims, damages or
liabilities arising from the sale of the Shares to any person by such
Underwriter if such untrue statement or omission or alleged untrue statement or
omission was made in such preliminary prospectus, the Registration Statement or
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with information furnished in writing to the Company by the
Representatives on behalf of any Underwriter specifically for use therein. This
indemnity agreement will be in addition to any liability which the Company and
the Selling Stockholders may otherwise have. The liability of the Selling
Stockholders under the representations, warranties and agreements contained
herein, under the indemnity agreements contained in the provisions of this
Section 8, and otherwise with respect to the transactions and other matters
contemplated by this Agreement shall be limited to an amount equal to the
initial public offering price of the Shares, if any, sold by the Selling
Stockholders to the Underwriters (minus the amount of the underwriting discount
paid thereon to the Underwriters). The Company and the Selling Stockholders may
agree, as among themselves and without limiting the rights of the Underwriters
under this Agreement, as to the respective amounts of such liability for which
they each shall be responsible.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, the Selling Stockholders and each director of the Company and
each officer of the Company who signs the Registration Statement, to the same
extent as the foregoing indemnity from the Company and the Selling Stockholders
to each Underwriter, but only insofar as such losses, claims, damages or
liabilities arise out of or are based upon (i) any breach of any representation,
warranty, agreement or covenant of such Underwriter herein or (ii) any untrue
statement or omission or alleged untrue statement or omission which was made in
any preliminary prospectus, electronic Prospectus, the Registration Statement or
the Prospectus, or any amendment thereof or supplement thereto, contained in the
last paragraph of the cover page and the statements contained under the caption
"Underwriting" in the Prospectus; provided, however, that the obligation of each
Underwriter to indemnify the Company (including any controlling person, director
or officer thereof) shall be limited to the net proceeds received by the Company
from such Underwriter.
(d) Any party that proposes to assert the right to be
indemnified under this Section 8 will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such action,
suit or proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 8(a) or 8(b) shall be available to any party who shall
fail to give notice as provided in this Section 8(d) if the party to whom notice
was not given was unaware of the proceeding to which such notice would have
related and was prejudiced by the failure to give such notice but the omission
so to notify such indemnifying party of any such action, suit or proceeding
shall not relieve it from any liability that it may have to any indemnified
party for contribution or otherwise than under this Section 8, except to the
extent the indemnifying party is prejudiced as a result of any failure or delay
in providing such notice. In case any such action, suit or proceeding shall be
brought against any indemnified party and it shall notify the
23
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and the approval by the indemnified party of such
counsel, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses, except as provided below and except for the
reasonable costs of investigation subsequently incurred by such indemnified
party in connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment of counsel by such indemnified party has been authorized in writing
by the indemnifying parties, (ii) the indemnified party shall have reasonably
concluded that there may be a conflict of interest between the indemnifying
parties and the indemnified party in the conduct of the defense of such action
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party) or (iii) the
indemnifying parties shall not have employed counsel to assume the defense of
such action within a reasonable time after notice of the commencement thereof,
in each of which cases the fees and expenses of counsel shall be at the expense
of the indemnifying parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without its written
consent.
(e) No indemnification provided for in Section 8(b) by the
Selling Stockholders shall be available to any Underwriter, or any person who
controls any Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (each an "Underwriter Indemnified Party")
until such Underwriter Indemnified Party has first used its best efforts to
pursue and exhaust all remedies (including the enforcement and collection of
judgments or claims against the Company) it may have against the Company under
Section 8(a). Without limiting the generality of the foregoing, an Underwriter
Indemnified Party shall be deemed to have used its best efforts to pursue and
exhaust all remedies it may have against the Company, and may pursue any
remedies it may have against the Selling Stockholders, if (A) such Underwriter
Indemnified Party is in the process of pursuing remedies against the Company and
any of the following events occurs, or, immediately prior to the time at which
such Underwriter Indemnified Party commences the process of pursuing remedies
against the Company, any of the following events has occurred and is continuing:
(1) the Company files a petition, answer or any pleading seeking or acquiescing
in any reorganization, liquidation or other relief under chapter 7 or 11 of the
Bankruptcy Code; (2) the Company seeks or acquiesces in the appointment of a
trustee (other than a trustee appointed solely for purposes of facilitating the
issuance of any debt securities of the Company), receiver or liquidator of all
or part of its assets; or (3) the Company makes a general assignment for the
benefit of its creditors, (B) a court of competent jurisdiction: (1) appoints a
trustee, receiver or liquidator of all or part of the Company's assets; or (2)
determines in any action, suit or proceeding that the Company is insolvent (in
the accounting, bankruptcy, equity or legal definitions), or (C) a court or
arbitration panel of competent jurisdiction enters an order in any action, suit
or proceeding by such Underwriter Indemnified Party for indemnification by the
Company that is adverse to such Underwriter Indemnified Party. Notwithstanding
the foregoing, if, in the reasonable judgment of any Underwriter Indemnified
Party, the applicable statute of limitations for any potential action, suit or
proceeding by such Underwriter Indemnified Party for indemnification against the
Selling
24
Stockholders will expire, such Underwriter Indemnified Party may name the
Selling Stockholders in any action, suit or proceeding to which the Company is
also a party solely for purposes of preserving any rights such Underwriter
Indemnified Party may have to seek indemnification from the Selling Stockholders
after using its best efforts to pursue and exhaust all remedies it may have
against the Company.
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Securities Act and the
Exchange Act.
9. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnification provided for in
Section 8 is due in accordance with its terms but for any reason is held to be
unavailable from the Company, or the Selling Stockholders or the Underwriters,
the Company, the Selling Stockholders and the Underwriters shall contribute to
the aggregate losses, claims, damages and liabilities (including any
investigation, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting any contribution received by the Company or
the Selling Stockholders from persons other than the Underwriters, such as
persons who control the Company within the meaning of the Securities Act,
officers of the Company who signed the Registration Statement and directors of
the Company, who may also be liable for contribution) to which the Company, the
Selling Stockholders and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other from the offering of the Shares or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 8 hereof,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Selling
Stockholders on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholders and
the Underwriters shall be deemed to be in the same proportion as (x) the total
proceeds from the offering (net of underwriting discounts but before deducting
expenses) received by the Company and the Selling Stockholders, respectively, as
set forth in the table on the cover page of the Prospectus, bear to (y) the
underwriting discounts received by the Underwriters, as set forth in the table
on the cover page of the Prospectus. The relative fault of the Company and the
Selling Stockholders or the Underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact related to information supplied by the Company or the Selling Stockholders
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation
25
which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 9, (i) in no case shall any
Underwriter (except as may be provided in the Agreement Among Underwriters) be
liable or responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder, and (ii) the
Company and the Selling Stockholders shall be liable and responsible for any
amount in excess of such underwriting discount; provided, however, that the
-------- -------
Selling Stockholders shall not be liable under this clause (ii) for any amount
in excess of the initial public offering price of the Shares, if any, sold by
the Selling Stockholders to the Underwriters (minus the amount of the
underwriting discount paid thereon to the Underwriters); and provided, further,
-------- -------
that 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. For purposes of
this Section 9, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as such Underwriter, and each person,
if any, who controls the Company within the meaning of the Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to clauses (i) and (ii) in the immediately preceding sentence of this
Section 9. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties under this Section, notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties from whom
contribution may be sought shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this Section, except to the extent the party
or parties from whom contribution is sought have been prejudiced as a result
thereof. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent; provided,
--------
however, that such written consent shall not be unreasonably withheld. The
-------
Underwriter's obligations to contribute pursuant to this Section 9 are several
in proportion to their respective underwriting commitments and not joint.
10. Termination. This Agreement may be terminated with respect to
-----------
the Shares to be purchased on a Closing Date by the Representatives by notifying
the Company and the Selling Stockholders at any time:
(a) in the absolute discretion and judgment of the
Representatives at or before any Closing Date: (i) if on or prior to such date,
any domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Representatives will in the future
materially disrupt, the securities markets; (ii) if there has occurred any new
outbreak or material escalation of hostilities or other calamity or crisis the
effect of which on the financial markets of the United States is such as to make
it, in the judgment of the Representatives, inadvisable to proceed with the
offering; (iii) if there shall be such a material adverse change in general
financial, political or economic conditions or the effect of international
conditions on the financial markets in the United States is such as to make it,
in the judgment of the Representatives, inadvisable or impracticable to market
the Shares; (iv) if trading in the Shares has been suspended by the Commission
or trading generally on the New York Stock Exchange, Inc. or on the American
Stock Exchange, Inc. has been suspended or limited, or minimum or
26
maximum ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities have been required, by said exchanges or by
order of the Commission, the National Association of Securities Dealers, Inc.,
or any other governmental or regulatory authority; or (v) if a banking
moratorium has been declared by any state or Federal authority, or
(b) at or before any Closing Date, that any of the conditions
specified in Section 6 shall not have been fulfilled when and as required by
this Agreement.
If this Agreement is terminated pursuant to any of its provisions,
neither the Company nor the Selling Stockholders shall be under any liability to
any Underwriter, and no Underwriter shall be under any liability to the Company
or the Selling Stockholders, except that (y) if this Agreement is terminated by
the Representatives or the Underwriters pursuant to this Section 10, the Company
will reimburse the Underwriters for all out-of-pocket expenses (including the
reasonable fees and disbursements of their counsel) reasonably incurred by them
in connection with the proposed purchase and sale of the Shares or in
contemplation of performing their obligations hereunder and (z) no Underwriter
who shall have failed or refused to purchase the Shares agreed to be purchased
by it under this Agreement, in circumstances where it was obligated to purchase
such Shares under this Agreement, shall be relieved of liability to the Company
or to the other Underwriters for damages occasioned by its failure or refusal.
11. Substitution of Underwriters. If one or more of the Underwriters
----------------------------
shall fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 10) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representatives may find one or more substitute underwriters
to purchase such Shares or make such other arrangements as the Representatives
may deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date:
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares that all
the Underwriters are obligated to purchase on such Closing Date, then each of
the nondefaulting Underwriters shall be obligated to purchase such Shares on the
terms herein set forth in proportion to their respective obligations hereunder;
provided, that in no event shall the maximum number of Shares that any
Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant
to this Section 11 by more than one-ninth of such number of Shares without the
written consent of such Underwriter; or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, then the Company
shall be entitled to an additional two business days within which it may, but is
not obligated to, find one or more substitute underwriters reasonably
satisfactory to the Representatives to purchase such Shares upon the terms set
forth in this Agreement.
27
In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and without liability
on the part of the Company, except in both cases as provided in Sections 7, 8, 9
and 10. The provisions of this Section shall not in any way affect the
liability of any defaulting Underwriter to the Company or the nondefaulting
Underwriters arising out of such default. A substitute underwriter hereunder
shall become an Underwriter for all purposes of this Agreement.
12. Miscellaneous. The respective agreements, representations,
-------------
warranties, indemnities and other statements of the Company, its subsidiaries or
any of its officers, the Selling Stockholders and of the Underwriters set forth
in or made pursuant to this Agreement shall remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter, the
Selling Stockholders or the Company, or any of their officers, directors or
controlling persons referred to in Sections 8 and 9 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 7(b), 8, 9
and 10 shall survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Selling Stockholders and the Company and their respective
successors and assigns, and, to the extent expressed herein, for the benefit of
persons controlling any of the Underwriters, or the Company, and directors and
officers of the Company, and their respective successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser of
Shares from any Underwriter merely because of such purchase.
All notices and communications hereunder shall be in writing and
mailed or delivered or by telephone or telegraph if subsequently confirmed in
writing, (a) if to the Representatives, c/o CIBC World Markets Corp., CIBC
Oppenheimer Tower, World Financial Center, New York, New York 10281 Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, (b) if to the Selling Stockholders, to the Company as the
Company's address appears on the cover page of the Registration Statement with a
copy to ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Friedenrich LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq. and (c) if to the
Company, to its agent for service as such agent's address appears on the cover
page of the Registration Statement, with a copy to ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Friedenrich
LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇▇▇▇▇, Esq.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
28
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
[Remainder of Page Intentionally Left Blank]
29
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
▇▇▇▇▇▇.▇▇▇ Inc.
By:________________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
Title: Chief Executive Officer
SELLING STOCKHOLDERS
By:________________________________
Name:
The foregoing Agreement is hereby
confirmed and accepted by the
Representatives as of the date
first above written:
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CIBC World Markets Corp. ING Barings LLC
________________________________________ ________________________________________
Acting severally on behalf of itself Acting severally on behalf of itself
and as a representative of the several and as a representative of the several
Underwriters named in Schedule I Underwriters named in Schedule I
annexed hereto. annexed hereto.
CIBC World Markets Corp. ING Barings LLC
By____________________________ By_______________________________
Title: Title:
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30
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Prudential Securities ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLC
________________________________________ ________________________________________
Acting severally on behalf of itself Acting severally on behalf of itself
and as a representative of the several and as a representative of the several
Underwriters named in Schedule I Underwriters named in Schedule I
annexed hereto. annexed hereto.
Prudential Securities ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLC
By___________________________ By_____________________________
Title: Title:
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31
SCHEDULE I
Name Number of Firm Shares to be Purchased
---- ---------------------------------------
Company Shares Selling Stockholders Shares
-------------- ---------------------------
CIBC World Markets Corp.
ING Barings LLC
Prudential Securities
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLC
_______________________________
Total
_______________________________
SCHEDULE II
Stockholders Subject to Lock-Up
SCHEDULE III
Selling Stockholders