1
EXHIBIT 1.1
7,500,000 SHARES
XXXX.XXX, INC.
COMMON STOCK, $0.0001 PAR VALUE
UNDERWRITING AGREEMENT
June __, 2001
CREDIT SUISSE FIRST BOSTON CORPORATION
XXXXXXX XXXXX XXXXXX INC.
US BANCORP XXXXX XXXXXXX,
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. XxXx.xxx, Inc., a Delaware corporation ("COMPANY")
proposes to issue and sell 2,500,000 shares ("COMPANY SECURITIES") of its Common
stock, $0.0001 par value ("SECURITIES"), and the stockholder listed in Schedule
A hereto ("SELLING STOCKHOLDER") proposes to sell 5,000,000 outstanding shares
("SELLING STOCKHOLDER SECURITIES") of the Securities (such 7,500,000 shares of
Securities being hereinafter referred to as the "FIRM SECURITIES"). The Company
also proposes to sell to the Underwriters, at the option of the Underwriters,
not more than _________ additional shares of its Securities, and the Selling
Stockholder also proposes to sell to the Underwriters, at the option of the
Underwriters, not more than _________ additional outstanding shares of the
Company's Securities, as set forth below (such 1,125,000 additional shares being
hereinafter referred to as the "OPTIONAL SECURITIES"). The Firm Securities and
the Optional Securities are herein collectively called the "OFFERED SECURITIES".
The Company and the Selling Stockholder hereby agree with the several
Underwriters named in Schedule B hereto ("UNDERWRITERS") as follows:
2. Representations and Warranties of the Company and the Selling
Stockholder. (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) A registration statement (No. 333-62352) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("COMMISSION") and either (A) has
been declared effective under the Securities Act of 1933 ("ACT") and is
not proposed to be amended or (B) is proposed to be amended by amendment
or post-effective amendment. If such registration statement (the
"INITIAL REGISTRATION STATEMENT") has been declared effective, either
(A) an additional
2
registration statement (the "ADDITIONAL REGISTRATION STATEMENT")
relating to the Offered Securities may have been filed with the
Commission pursuant to Rule 462(b) ("RULE 462(b)") under the Act and, if
so filed, has become effective upon filing pursuant to such Rule and the
Offered Securities all have been duly registered under the Act pursuant
to the initial registration statement and, if applicable, the additional
registration statement or (B) such an additional registration statement
is proposed to be filed with the Commission pursuant to Rule 462(b) and
will become effective upon filing pursuant to such Rule and upon such
filing the Offered Securities will all have been duly registered under
the Act pursuant to the initial registration statement and such
additional registration statement. If the Company does not propose to
amend the initial registration statement or if an additional
registration statement has been filed and the Company does not propose
to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent amendment (if
any) to each such registration statement has been declared effective by
the Commission or has become effective upon filing pursuant to Rule
462(c) ("RULE 462(c)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement,
"EFFECTIVE TIME" with respect to the initial registration statement or,
if filed prior to the execution and delivery of this Agreement, the
additional registration statement means (A) if the Company has advised
the Representatives that it does not propose to amend such registration
statement, the date and time as of which such registration statement, or
the most recent post-effective amendment thereto (if any) filed prior to
the execution and delivery of this Agreement, was declared effective by
the Commission or has become effective upon filing pursuant to Rule
462(c), or (B) if the Company has advised the Representatives that it
proposes to file an amendment or post-effective amendment to such
registration statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment, as
the case may be, is declared effective by the Commission. If an
additional registration statement has not been filed prior to the
execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, "EFFECTIVE TIME" with
respect to such additional registration statement means the date and
time as of which such registration statement is filed and becomes
effective pursuant to Rule 462(b). "EFFECTIVE DATE" with respect to the
initial registration statement or the additional registration statement
(if any) means the date of the Effective Time thereof. The initial
registration statement, as amended at its Effective Time, including all
material incorporated by reference therein, including all information
contained in the additional registration statement (if any) and deemed
to be a part of the initial registration statement as of the Effective
Time of the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("RULE
430A(b)") under the Act, is hereinafter referred to as the "INITIAL
REGISTRATION STATEMENT". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the
3
"ADDITIONAL REGISTRATION STATEMENT". The Initial Registration Statement
and the Additional Registration are hereinafter referred to collectively
as the "REGISTRATION STATEMENTS" and individually as a "REGISTRATION
STATEMENT". The form of prospectus relating to the Offered Securities,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("RULE 424(b)") under the Act or (if no such filing is
required) as included in a Registration Statement, including all
material incorporated by reference in such prospectus, is hereinafter
referred to as the "PROSPECTUS". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of
the Act and the rules and regulations of the Commission ("RULES AND
REGULATIONS") and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (B) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed or will conform, in all respects to the
requirements of the Act and the Rules and Regulations and did not
include, or will not include, any untrue statement of a material fact
and did not omit, or will not omit, to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and (C) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at
the time of filing of the Prospectus pursuant to Rule 424(b) or (if no
such filing is required) at the Effective Date of the Additional
Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all respects
to the requirements of the Act and the Rules and Regulations, and
neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules and
Regulations, neither of such documents will include any untrue statement
of a material fact or will omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and no Additional Registration Statement has been or will be
filed. The two preceding sentences do not apply to statements in or
omissions from a Registration Statement or the Prospectus based upon
written information furnished to the Company by any Underwriter through
the Representatives specifically for use therein, it being understood
and agreed that the only such information is that described as such in
Section 7(c) hereof.
(iii) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate
4
power and authority to carry on its business as described in the
Prospectus and to own, lease and operate its properties, and is duly
qualified and is in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company (a "MATERIAL ADVERSE EFFECT").
(iv) Each subsidiary of the Company has been duly incorporated
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus; and each subsidiary of the Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct
of its business requires such qualification; all of the issued and
outstanding capital stock of each subsidiary of the Company has been
duly authorized and validly issued and is fully paid and nonassessable;
and the capital stock of each subsidiary owned by the Company, directly
or through subsidiaries, is owned free from liens, encumbrances and
defects.
(v) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
granted or issued by the Company relating to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of the
Company, except as otherwise disclosed in, incorporated into, or
contemplated by the Registration Statement and except for options
granted since April 30, 2001 not in excess of the number of options
reserved and available for grant as disclosed in the Registration
Statement, and except for option and warrant exercises since April 30,
2001.
(vi) All the outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and
non-assessable and are not subject to any preemptive rights pursuant to
the Company's Certificate of Incorporation or Bylaws or applicable
federal, California or Delaware law or any agreement or instrument to
which the Company is a party or by which the Company or its property is
bound; and the Company Securities have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of the Company Securities will not be
subject to any preemptive rights.
(vii) The authorized capital stock of the Company conforms, in
all material respects, as to legal matters to the description thereof
contained in the Prospectus.
(viii) The Securities are listed on the Nasdaq Stock Market's
National Market.
(ix) The Company is not in violation of its charter or bylaws
or, except as would not have a Material Adverse Effect, in default in
the performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage,
5
lease or other agreement or instrument to which the Company is a party
or by which the Company or its property is bound.
(x) The execution, delivery and performance of this Agreement by
the Company, the compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated hereby will
not (i) require any consent, approval, authorization or other order of,
or qualification with, any court or governmental body or agency (except
such as may be required under the securities or Blue Sky laws of the
various states or by the National Association of Securities Dealers,
Inc.), (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or bylaws of the Company
or, except as would not have a Material Adverse Effect, any indenture,
loan agreement, mortgage, lease or other agreement or instrument to
which the Company is a party or by which the Company or its property is
bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company or its property or
(iv) result in the suspension, termination or revocation of any
Authorization (as defined below) of the Company or any other impairment
of the rights of the holder of any such Authorization.
(xi) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(xii) To the Company's knowledge, the Company owns or possesses,
or can acquire on reasonable terms, all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade
names ("INTELLECTUAL PROPERTY") currently employed by it in connection
with the business now operated by it except where the failure to own or
possess or otherwise be able to acquire such intellectual property would
not, singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operation of the
Company; and except as disclosed in the Registration Statement
(specifically including, but not limited to, the disclosure under the
caption "Risk Factors--We may not be able to protect our Internet domain
name or intellectual property rights upon which our business relies; We
face risks of claims from third parties for intellectual property
infringement and other matters that could adversely affect our
business"), the Company has not received any notice of infringement of
or conflict with asserted rights of others with respect to any of such
intellectual property which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a material
adverse effect on the business, prospects, financial condition or
results of operations of the Company.
(xiii) No relationship, direct or indirect, exists between or
among the Company, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company, on the other hand,
which is required by the Securities Exchange Act of 1934,
6
as amended (the "'34 ACT"), to be described in any periodic report or
filing pursuant thereto which is not so described.
(xiv) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(xv) There are no legal or governmental proceedings pending or,
to the Company's knowledge, threatened to which the Company is or is
reasonably likely to be a party or to which any of its property is or is
reasonably likely to be subject that are required to be described in the
Registration Statement or the Prospectus and are not so described; nor
are there any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not so described or filed as required.
(xvi) The Company has such permits, licenses, consents,
exemptions, franchises, authorizations and other approvals (each, an
"AUTHORIZATION") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals as are necessary to own, lease,
license and operate its properties and to conduct its business, except
where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a material
adverse effect on the business, prospects, financial condition or
results of operations of the Company. Each such Authorization is valid
and in full force and effect and the Company is in compliance with all
the terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect
thereto; and no event has occurred (including, without limitation, the
receipt of any notice from any authority or governing body) which allows
or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after
notice or lapse of time or both, would result in any other impairment of
the rights of the holder of any such Authorization; and such
Authorizations contain no restrictions that are burdensome to the
Company; except where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction would not, singly or in the aggregate,
have a Material Adverse Effect.
(xvii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xviii) Ernst & Young, LLP are independent public accountants
with respect to the Company as required by the Act.
7
(xix) The financial statements included in and incorporated into
the Registration Statement and the Prospectus (and any amendment or
supplement thereto), together with related schedules and notes, present
fairly the consolidated financial position, results of operations and
changes in financial position of the Company on the basis stated therein
at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as
disclosed therein; the supporting schedules, if any, included in or
incorporated into the Registration Statement present fairly in
accordance with generally accepted accounting principles the information
required to be stated therein; and the other financial and statistical
information and data set forth in or incorporated into the Registration
Statement and the Prospectus (and any amendment or supplement thereto)
are, in all material respects, accurately presented and prepared.
(xx) The Company is not and, after giving effect to the offering
and sale of the Company Securities and the application of the proceeds
thereof as described in the Prospectus, will not be, required to
register as an "investment company" under the Investment Company Act of
1940, as amended.
(xxi) Except as disclosed in the Registration Statement, or
except as such rights have been duly waived in writing, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with
the Offered Securities registered pursuant to the Registration
Statement.
(xxii) Since the respective dates as of which information is
given in the Prospectus other than as set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material adverse
change or any development involving a prospective material adverse
change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company (ii) there has not
been any material adverse change or any development involving a
prospective material adverse change in the capital stock or in the
long-term debt of the Company, and (iii) the Company has not incurred
any material liability or obligation, direct or contingent.
(xxiii) Each certificate signed by any officer of the Company
and delivered to the Underwriters or counsel for the Underwriters shall
be deemed to be a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(xxiv) The documents of the Company incorporated by reference in
the Prospectus, at the time they were or hereafter are filed with the
Commission, complied with and will comply in all material respects with
the requirements of the '34 Act, and the rules and regulations
thereunder, and, when read together and with the other information in
the Prospectus, at the time the Registration Statement became, and any
amendments thereto
8
become, effective, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
(b) The Selling Stockholder represents and warrants to,
and agrees with, the several Underwriters that:
(i) The Selling Stockholder has and on each Closing Date
hereinafter mentioned will have valid and unencumbered title to the
Offered Securities to be delivered by the Selling Stockholder on such
Closing Date and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Offered
Securities to be delivered by the Selling Stockholder on such Closing
Date hereunder; and upon the delivery of and payment for the Offered
Securities on each Closing Date hereunder the several Underwriters will
acquire valid and unencumbered title to the Offered Securities to be
delivered by the Selling Stockholder on such Closing Date.
(ii) The Selling Stockholder has read the contents of any
Registration Statement and the Prospectus, and the Selling Stockholder
has no knowledge of any facts or circumstances that indicate, and the
Selling Stockholder has no reason to believe, that any Registration
Statement (when such Registration Statement became or will become
effective) or the Prospectus (when filed pursuant to Rule 424(b))
contained or will contain any untrue statement of a material fact or
omitted or will omit any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(iii) Statements containing information pertaining to the
Selling Stockholder and the Offered Securities to be offered and sold by
the Selling Stockholder hereunder set forth in the Prospectus under the
captions "Principal and Selling Stockholders" and "Risk Factors --
Future sales of our common stock by our stockholders may depress our
stock price" are and will be true and accurate in all material respects
and such statements do not omit any material fact necessary to make such
statements not misleading.
(iv) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Selling Stockholder
and any person that would give rise to a valid claim against the Selling
Stockholder or any Underwriter for a brokerage commission, finder's fee
or other like payment in connection with this offering.
(v) The Selling Stockholder is not and, after giving effect to
the offering and sale of the Offered Securities to be sold by the
Selling Stockholder will not be, required to register as an "investment
company" under the Investment Company Act of 1940, as amended, or
"controlled" by an "investment company" under that act.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and the Selling
Stockholder agree, severally and not jointly, to sell to each
9
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company and the Selling Stockholder, at a purchase price of $_________
per share, that number of Firm Securities (rounded up or down, as determined by
Credit Suisse First Boston Corporation ("CSFBC") in its discretion, in order to
avoid fractions) obtained by multiplying 2,500,000 Firm Securities in the case
of the Company and the number of Firm Securities set forth opposite the name of
the Selling Stockholder in Schedule A hereto, in each case by a fraction the
numerator of which is the number of Firm Securities set forth opposite the name
of such Underwriter in Schedule B hereto and the denominator of which is the
total number of Firm Securities.
The Company and the Selling Stockholder will deliver the Firm Securities
to the Representatives for the accounts of the Underwriters, against payment of
the purchase price in Federal (same day) funds by official bank check or checks
or wire transfer to an account at a bank acceptable to CSFBC drawn to the order
of _________ in the case of _________ shares of Firm Securities and _________ in
the case of _________ shares of Firm Securities, at the office of _________, at
_________ A.M., New York time, on _________, or at such other time not later
than seven full business days thereafter as CSFBC and the Company determine,
such time being herein referred to as the "FIRST CLOSING DATE". For purposes of
Rule 15c6-1 under the '34 Act, the First Closing Date (if later than the
otherwise applicable settlement date) shall be the settlement date for payment
of funds and delivery of securities for all the Offered Securities sold pursuant
to the offering. The certificates for the Firm Securities so to be delivered
will be in definitive form, in such denominations and registered in such names
as CSFBC requests and will be made available for checking and packaging at the
office of _________ at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company and the
Selling Stockholder from time to time not more than 30 days subsequent to the
date of the Prospectus, the Underwriters may purchase all or less than all of
the Optional Securities at the purchase price per Security to be paid for the
Firm Securities. The Company and the Selling Stockholder agree, severally and
not jointly, to sell to the Underwriters the respective numbers of Optional
Securities obtained by multiplying the number of shares specified in any such
notice by a fraction the numerator of which is _________ in the case of the
Company and _________ in the case of the Selling Stockholder and the denominator
of which is the total number of Optional Securities (subject to adjustment by
CSFBC to eliminate fractions). Such Optional Securities shall be purchased from
the Company and the Selling Stockholder for the account of each Underwriter in
the same proportion as the number of Firm Securities set forth opposite such
Underwriter's name bears to the total number of Firm Securities (subject to
adjustment by CSFBC to eliminate fractions) and may be purchased by the
Underwriters only for the purpose of covering over-allotments made in connection
with the sale of the Firm Securities. No Optional Securities shall be sold or
delivered unless the Firm Securities previously have been, or simultaneously
are, sold and delivered. The right to purchase the Optional Securities or any
portion thereof may be exercised from time to time and to the extent not
previously exercised may be surrendered and terminated at any time upon notice
by CSFBC to the Company and the Selling Stockholder.
Each time for the delivery of and payment for the Optional Securities,
being herein referred
10
to as an "OPTIONAL CLOSING DATE", which may be the First Closing Date (the First
Closing Date and each Optional Closing Date, if any, being sometimes referred to
as a "CLOSING DATE"), shall be determined by CSFBC but shall be not later than
five full business days after written notice of election to purchase Optional
Securities is given. The Company and the Selling Stockholder will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of ________ in the case of _________ Optional Securities and _________
in the case of _________ Optional Securities at the office of _________. The
certificates for the Optional Securities being purchased on each Optional
Closing Date will be in definitive form, in such denominations and registered in
such names as CSFBC requests upon reasonable notice prior to such Optional
Closing Date and will be made available for checking and packaging at the office
of _________ at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company and the Selling Stockholder. The
Company agrees with the several Underwriters and the Selling Stockholder that:
(a) If the Effective Time of the Initial Registration Statement
is prior to the execution and delivery of this Agreement, the Company will file
the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC, subparagraph
(4)) of Rule 424(b) not later than the earlier of (A) the second business day
following the execution and delivery of this Agreement or (B) the fifteenth
business day after the Effective Date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing
pursuant to Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and an
additional registration statement is necessary to register a portion of the
Offered Securities under the Act but the Effective Time thereof has not occurred
as of such execution and delivery, the Company will file the additional
registration statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b) on or
prior to 10:00 P.M., New York time, on the date of this Agreement or, if
earlier, on or prior to the time the Prospectus is printed and distributed to
any Underwriter, or will make such filing at such later date as shall have been
consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration statement as
filed or the related prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the Prospectus and will not effect
such amendment or supplementation without CSFBC's consent, which consent shall
not be unreasonably withheld; and the Company will also advise CSFBC promptly of
the effectiveness of each Registration Statement (if its Effective Time is
subsequent to the execution and delivery of this Agreement) and of any amendment
or supplementation of a Registration
11
Statement or the Prospectus and of the institution by the Commission of any stop
order proceedings in respect of a Registration Statement and will use its best
efforts to prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with sales by
any Underwriter or dealer, any event occurs as a result of which the Prospectus
as then amended or supplemented would include an 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 is necessary at any time to amend the Prospectus to comply
with the Act, the Company will promptly notify CSFBC of such event and will
promptly prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an amendment
which will effect such compliance. Neither CSFBC's consent to, nor the
Underwriters' delivery of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability
Date (as defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12 months
beginning after the Effective Date of the Initial Registration Statement (or, if
later, the Effective Date of the Additional Registration Statement) which will
satisfy the provisions of Section 11(a) of the Act. For the purpose of the
preceding sentence, "AVAILABILITY DATE" means the 45th day after the end of the
fourth fiscal quarter following the fiscal quarter that includes such Effective
Date, except that, if such fourth fiscal quarter is the last quarter of the
Company's fiscal year, "AVAILABILITY DATE" means the 90th day after the end of
such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (one of which will be manually signed and will
include all exhibits), each related preliminary prospectus, and, so long as a
prospectus relating to the Offered Securities is required to be delivered under
the Act in connection with sales by any Underwriter or dealer, the Prospectus
and all amendments and supplements to such documents, in each case in such
quantities as CSFBC requests. The Prospectus shall be so furnished on or prior
to 3:00 P.M., New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other such documents shall be so furnished as soon
as available. The Company and the Selling Stockholder will pay the expenses of
printing and distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as required
for the distribution.
(g) During the period of three years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a copy
of its annual report to stockholders for such year; and the Company will furnish
to the Representatives as soon as available, a copy of each report and any
12
definitive proxy statement of the Company filed with the Commission under the
'34 Act or mailed to stockholders.
(h) For a period of 90 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, or file with
the Commission a registration statement under the Act relating to, any
additional shares of its Securities or securities convertible into or
exchangeable or exercisable for any shares of its Securities, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of CSFBC, except issuances of
Securities pursuant to the conversion or exchange of convertible or exchangeable
securities or the exercise of warrants or options, in each case outstanding on
the date hereof, grants of employee stock options pursuant to the terms of a
plan in effect on the date hereof, issuances of Securities pursuant to the
exercise of such options or issuances of Securities pursuant to the Company's
dividend reinvestment plan. Notwithstanding the preceding sentence, during such
period, the Company may offer and/or sell Securities or securities convertible
or exercisable into such Securities (in one or more steps) in an acquisition of
another corporation or entity; provided that (i) such Securities do not exceed,
in the aggregate, 10% of the outstanding Securities as of the date hereof,
including the Offered Securities, and (ii) the acquisition is effected pursuant
to an agreement providing that (A) the recipients of any securities of the
Company issued pursuant thereto agree to be bound by lock-up restrictions
substantially similar to the agreements to be entered into by the executive
officers and directors of the Company hereunder and in form and substance
reasonably satisfactory to the Underwriters, (B) certificates representing any
securities of the Company issued pursuant thereto bear restrictive legends
referring to the lock-up provisions contained in the agreement and (C)
appropriate stop-transfer instructions with respect to any securities of the
Company issued pursuant thereto be supplied to the Company's stock transfer
agent.
(i) The Company and the Selling Stockholder agree with the
several Underwriters that the Company and the Selling Stockholder will pay all
expenses incident to the performance of the obligations of the Company and the
Selling Stockholder, as the case may be, under this Agreement, for any filing
fees and other expenses (including fees and disbursements of counsel) in
connection with qualification of the Offered Securities for sale under the laws
of such jurisdictions as CSFBC designates and the printing of memoranda relating
thereto, for the filing fee incident to the review by the National Association
of Securities Dealers, Inc. of the Offered Securities, for any travel expenses
of the Company's officers and employees and any other expenses of the Company in
connection with attending or hosting meetings (including without limitation, any
fees and expenses related to any electronic or "virtual" roadshow) with
prospective purchasers of the Offered Securities, for any transfer taxes on the
sale by the Selling Stockholder of the Offered Securities to the Underwriters
and for expenses incurred in distributing preliminary prospectuses and the
Prospectus (including any amendments and supplements thereto) to the
Underwriters. Except as provided in this paragraph (i), Section 7 and Section 9
hereof, the Underwriters shall pay their own expenses, including the fees and
disbursements of their counsel. Nothing provided in this paragraph (i) shall
prevent the Company and the Selling Stockholder from agreeing as between
themselves on the allocation of expenses incurred in connection with the
offering.
13
(j) To use reasonable efforts to list for quotation the Offered
Securities on the Nasdaq Stock Market's National Market and to maintain the
listing of the Offered Securities on the Nasdaq Stock Market's National Market.
(k) To use reasonable efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date or any Optional Closing Date, as the case may
be, and to satisfy all conditions precedent to the delivery of the Offered
Securities.
(l) The Selling Stockholder will comply with the terms and
conditions of the lock-up agreement executed by the Selling Stockholder as of
June 4, 2001.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholder herein, to the
accuracy of the statements of Company officers made pursuant to the provisions
hereof, to the performance by the Company and the Selling Stockholder of their
obligations hereunder and to the following additional conditions precedent:
(a) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this Agreement,
shall be on or prior to the date of this Agreement or, if the Effective Time of
the Initial Registration Statement is subsequent to the execution and delivery
of this Agreement, shall be prior to the filing of the amendment or
post-effective amendment to the registration statement to be filed shortly prior
to such Effective Time), of Ernst & Young LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating, among other things,
that:
(i) in their opinion the financial statements audited by them
and included in the Registration Statements comply as to form in all
material respects with the applicable accounting requirements of the Act
and the '34 Act and the related Rules and Regulations;
(ii) they have read the minutes of meetings of the shareholders
and the Board of Directors of the Company through June 1, 2001 and have
carried out other procedures to June 1, 2001 as follows:
(A) with respect to the three-month periods ended March
31, 2001 and 2000 they have:
(1) performed the procedures specified by the
American Institute of Certified Public Accountants for a
review of interim financial information as described in
SAS 71, Interim Financial Information, on the unaudited
condensed consolidated financial statements for these
periods, included in the Company's Quarterly Report on
Form 10-Q for the quarter
14
ended March 31, 2001 and also included in the
Registration Statement; and
(2) inquired of certain officials of the Company
who have responsibility for financial and accounting
matters as to whether the unaudited condensed
consolidated financial statements referred to under
Section 6(a)(ii)(A)(1) comply as to form in all material
respects with the applicable accounting requirements of
the '34 Act as it applies to Form 10-Q and the related
rules and regulations adopted by the Commission.
(B) with respect to the period from April 1, 2001 to
June 1, 2001, they have:
(1) read the unaudited consolidated trial
balance as of April 30, 2001 furnished to them by the
Company, officials of the Company having advised them
that no consolidated trial balance as of any date or for
any period subsequent to April 30, 2001 was available;
and
(2) inquired of certain officials of the Company
who have responsibility for financial and accounting
matters as to whether the unaudited consolidated trial
balance referred to under Section 6(a)(ii)(B)(1) is
stated on a basis substantially consistent with that of
the audited consolidated financial statements included
in the Registration Statement.
(iii) they have read the Current Report on Form 8-K dated June
5, 2001, incorporated by reference in the Registration Statement and
have carried out other procedures to June 1, 2001 as follows:
(A) with respect to the three-month period ended March
31, 2000 they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review
of interim financial information as described in SAS 71, Interim
Financial Information, on the unaudited condensed financial
statements for this period, included in the Company's Current
Report on Form 8-K dated June 5, 2001 incorporated by reference
in the Registration Statement; and
(B) they have:
(1) read the unaudited pro forma condensed
combined statement of operations for the year ended
December 31, 2000 incorporated by reference in the
Registration Statement;
(2) inquired of certain officials of the Company
who have responsibility for financial and accounting
matters as to the basis for their
15
determination of the pro forma adjustments and whether
the unaudited pro forma condensed combined statement of
operations referred to in Section 6(iii)(B)(1) complies
as to form in all material respects with the applicable
requirements of Rule 11-02 of Regulation S-X; and
(3) proved the arithmetic accuracy of the
application of the pro forma adjustments to the
historical amounts in the unaudited pro forma condensed
financial statements.
(iv) they have read the Current Report on Form 8-K/A dated
January 31, 2000 and the Current Report on Form 8-K dated May 3, 2000
incorporated by reference in the Registration Statement and have carried
out other procedures to June 1, 2001 in that they have:
(A) they have read the unaudited pro forma condensed
combined statement of operations for the year ended December 31,
1999 incorporated by reference in the Registration Statements;
(B) inquired of certain officials of the Company who
have responsibility for financial and accounting matters as to
the basis for their determination of the pro forma adjustments,
and whether the unaudited pro forma condensed combined statement
of operations referred to in Section 6(iv) complies as to form
in all material respects with the applicable requirements of
Rule 11-02 of Regulation S-X; and
(C) proved the arithmetic accuracy of the application of
the pro forma adjustments to the historical amounts in the
unaudited pro forma condensed combined financial statements.
(v) nothing came to their attention as a result of the foregoing
procedures that caused them to believe that:
(A) any material modifications should be made to the
unaudited condensed consolidated financial statements described
in Section 6(ii)(A)(1) above, included in the Registration
Statements, for them to be in conformity with generally accepted
accounting principles;
(B) the unaudited condensed consolidated financial
statements discussed in Section 6(ii)(A)(1) above do not comply
as to form in all material respects with the applicable
accounting requirements of the `34 Act as it applies to Form
10-Q and the related rules and regulations adopted by the
Commission; or
(C) (1) at April 30, 2001, there was any change in the
capital stock, increase in long-term debt or decrease in
consolidated net current assets or shareholders' equity of the
consolidated companies as compared with the amounts shown in the
16
March 31, 2001 unaudited condensed consolidated balance sheet
included in the Registration Statement; or (2) for the period
from April 1, 2001 to April 30, 2001, there was any decrease, as
compared with the corresponding period in the preceding year, in
consolidated revenues or in the total or per-share amounts of
consolidated net loss, except in all instances for changes,
increases, or decreases that the Registration Statements
disclose have occurred or may occur and except for increased
common shares outstanding resulting from employee option
exercises of approximately 6,800 shares; decreases in
consolidated net current assets from $41,310,000 at March 31,
2001 to $40,231,000 at April 30, 2001; and decreases in
shareholders' equity from $82,644,000 at March 31, 2001 to
$80,656,000 at April 30, 2001.
(vi) nothing came to their attention as a result of the
procedures specified in Sections 6(iii) and 6(iv) that caused them to
believe that the unaudited pro forma condensed combined financial
information referred to in Section 6(iii)(B)(1) and Section 6(iv)
incorporated by reference in the Registration Statements do not comply
as to form in all material respects with the applicable requirements of
Rule 11-02 of Regulation S-X and that the pro forma adjustments have not
been properly applied to the historical amounts in the compilation of
the unaudited pro forma condensed combined financial information.
(vii) they have inquired of certain officials of the Company who
have responsibility for financial and accounting matters as to whether:
(a) at June 1, 2001 there was any change in the capital stock, increase
in long-term debt of the Company as compared with the amounts shown on
the March 31, 2001 unaudited condensed consolidated balance sheet
included in the Registration Statements, or (b) for the period from
April 1, 2001 to June 1, 2001, there were any decreases, as compared
with the corresponding period in the preceding year, in consolidated
revenues, and that on the basis of these inquiries and their reading of
the minutes as described in Section 6(ii) above, nothing came to their
attention that caused them to believe that there was any such change,
increase, or decrease, except in all instances for changes, increases,
or decreases that the Registration Statements disclose have occurred or
may occur and except for increased common shares outstanding resulting
from employee option exercises of approximately 202,000 shares.
(viii) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements (in each case to
the extent that such dollar amounts, percentages and other financial
information are derived from the general accounting records of the
Company and its subsidiaries subject to the internal controls of the
Company's accounting system or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a
reading of such general accounting records and other procedures
specified in such letter and have found such dollar amounts, percentages
and other financial information to be in agreement with such results,
except as otherwise specified in such letter.
17
For purposes of this subsection and subsection (b) below, (i) if the Effective
Time of the Initial Registration Statements is subsequent to the execution and
delivery of this Agreement, "REGISTRATION STATEMENTS" shall mean the initial
registration statement as proposed to be amended by the amendment or
post-effective amendment to be filed shortly prior to its Effective Time, (ii)
if the Effective Time of the Initial Registration Statements is prior to the
execution and delivery of this Agreement but the Effective Time of the
Additional Registration Statement is subsequent to such execution and delivery,
"REGISTRATION STATEMENTS" shall mean the Initial Registration Statement and the
additional registration statement as proposed to be filed or as proposed to be
amended by the post-effective amendment to be filed shortly prior to its
Effective Time, and (iii) "PROSPECTUS" shall mean the prospectus included in the
Registration Statements. All financial statements and schedules included in
material incorporated by reference into the Prospectus shall be deemed included
in the Registration Statements for purposes of this subsection and subsection
(b) below.
(b) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this Agreement,
shall be on or prior to the date of this Agreement or, if the Effective Time of
the Initial Registration Statement is subsequent to the execution and delivery
of this Agreement, shall be prior to the filing of the amendment or
post-effective amendment to the registration statement to be filed shortly prior
to such Effective Time), of Xxxxx, Xxxxxxxx & Co. LLP confirming that, as of
December 6, 1999 and during the period covered by the balance sheet of Cadabra
Inc. ("CADABRA") as of December 31, 1998 and the statement of operations,
shareholders' equity and cash flows for the year ended December 31, 1998, they
were independent public accountants with respect to Cadabra within the meaning
of the Act and the applicable published Rules and Regulations thereunder and
stating that the financial statements of Cadabra audited by them and
incorporated by reference in the Registration Statements comply as to form in
all material respects with generally accepted accounting principles.
(c) If the Effective Time of the Initial Registration Statement
is not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the date
of this Agreement or such later date as shall have been consented to by CSFBC.
If the Effective Time of the Additional Registration Statement (if any) is not
prior to the execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of this
Agreement or, if earlier, the time the Prospectus is printed and distributed to
any Underwriter, or shall have occurred at such later date as shall have been
consented to by CSFBC. If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Prospectus shall have been filed with the Commission in accordance with the
Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing
Date, no stop order suspending the effectiveness of a Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Selling Stockholder, the Company or the
Representatives, shall be contemplated by the Commission.
(d) Subsequent to the execution and delivery of this Agreement,
there shall not
18
have occurred (i) any change, or any development or event involving a
prospective change, in the condition (financial or other), business, properties
or results of operations of the Company and its subsidiaries taken as one
enterprise which, in the judgment of a majority in interest of the Underwriters
including the Representatives, is material and adverse and makes it impractical
or inadvisable to proceed with completion of the public offering or the sale of
and payment for the Offered Securities; (ii) any downgrading in the rating of
any debt securities of the Company by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the Act), or
any public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any material
suspension or material limitation of trading in securities generally on the New
York Stock Exchange or Nasdaq Stock Market's National Market, or any setting of
minimum prices for trading on such exchange, or any suspension of trading of any
securities of the Company on any exchange or in the over-the-counter market;
(iv) any banking moratorium declared by U.S. Federal or New York authorities; or
(v) any outbreak or escalation of major hostilities in which the United States
is involved, any declaration of war by Congress or any other substantial
national or international calamity or emergency if, in the judgment of a
majority in interest of the Underwriters including the Representatives, the
effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(e) The Representatives shall have received an opinion, dated
such Closing Date, of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, counsel for the Company, to the effect that:
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of
Delaware, has the corporate power and authority to own its property and
to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing as a foreign
corporation in California;
(ii) all the outstanding shares of capital stock of the Company
issued from the date of the Company's inception until June 18, 1999 have
been duly authorized and validly issued, are fully paid and
non-assessable and are not subject to any preemptive rights pursuant to
the Company's Certificate of Incorporation or Bylaws or applicable
federal, California or Delaware law or, to such counsel's knowledge, any
agreement or instrument required to be filed as an exhibit to the
Registration Statement or as an exhibit to any periodic report or filing
pursuant to the '34 Act, or pursuant to the Stockholder's Rights
Agreements for the Series A, B, C & D Preferred Stock of the Company
dated September 15, 1997, May 7, 1998, July 31, 1998 and April 14, 1999,
respectively (the "FINANCING DOCUMENTS"), except such rights as have
been duly waived in writing or exercised;
(iii) the Company Securities have been duly authorized and, when
issued and delivered to the Underwriters against payment therefor as
provided by this Agreement,
19
will be validly issued, fully paid and non-assessable, and the issuance
of such Company Securities will not be subject to any preemptive rights
pursuant to the Company's Certificate of Incorporation or Bylaws or
applicable federal or California law or Delaware corporate law or, to
such counsel's knowledge, any agreement or instrument;
(iv) the Company is not required to register as an "investment
company" under the Investment Company Act of 1940, as amended;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) the authorized capital stock of the Company conforms as to
legal matters, in all material respects, to the description thereof
contained in the Prospectus;
(vii) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to such counsel's knowledge, pending
before or contemplated by the Commission;
(viii) the statements under the captions "Risk Factors--Our
charter documents and change of control severance agreements with our
management will make it more difficult to acquire us; Future sales of
our common stock by our stockholders may depress our stock price",
insofar as such statements constitute a summary of the legal matters,
documents or proceedings referred to therein, fairly present, in all
material respects, the information called for with respect to such legal
matters, documents and proceedings;
(ix) to such counsel's knowledge, the Company is not in
violation of its charter or bylaws;
(x) the execution, delivery and performance of this Agreement by
the Company, the compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated by this
Agreement will not (A) require any consent, approval, authorization or
other order of, or qualification with, any court or governmental body or
agency customarily applicable to these types of transactions (except
such as may be required under the securities or Blue Sky laws of the
various states or any applicable foreign jurisdictions), (B) conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, the charter or bylaws of the Company or any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
filed as an Exhibit to the Registration Statement, to which the Company
is a party or by which the Company or its property is bound, or the
Financing Documents or (C) violate or conflict with any applicable law
or any rule or regulation customarily applicable to these types of
transactions, or, to such counsel's knowledge, any judgment, order or
decree of any court or any governmental body or agency having
jurisdiction over the Company or its property;
(xi) such counsel does not know of any legal or governmental
proceedings pending or
20
threatened in writing to which the Company is or might reasonably likely
be a party or to which any of its property is or could be subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described, or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement or as an exhibit to any periodic report or
filing pursuant to the '34 Act that are not so described or filed as
required; and
(xii) to such counsel's knowledge and except as disclosed in the
Registration Statement or otherwise waived in writing, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with
the Offered Securities registered pursuant to the Registration
Statement; and
In addition, such counsel shall state that although such counsel
has not passed upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus and has not made any independent check or
verification thereof, such counsel has participated in the preparation of the
Registration Statement and the Prospectus and in conferences with certain
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, and Representatives and the
Underwriters' counsel at which the contents of the Registration Statement and
the Prospectus were discussed, and on the basis of and subject to the foregoing,
such counsel believes that (i) as of its effective date and as of the Closing
Date, the Registration Statement or any amendment thereto (other than the
financial statements and related schedules and the financial and statistical
data derived from such financial statements or schedules, as to which such
counsel need express no opinion) contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, or (ii) as of
its issue date or as of the Closing Date, the Prospectus or any amendment or
supplement thereto (other than the financial statements and related schedules
and the financial and statistical data derived from such financial statements or
schedules, as to which such counsel need express no opinion) contained any
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. In addition, such
counsel shall confirm that each of the Registration Statement and the
Prospectus, and each amendment or supplement thereto (other than the financial
statements and related schedules and the financial and statistical data derived
from such financial statements or schedules, as to which such counsel need
express no opinion) as of their respective effective or issue dates, complied as
to form in all material respects with the requirements of the Act and the Rules
and Regulations.
The opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx described in
Section 6(e) above shall be rendered to you at the request of the Company and
shall so state therein.
21
(f) The Representatives shall have received from Xxxxxx Xxxxxxx,
Esq., General Counsel of the Company, an opinion, dated such Closing Date, to
the effect that all the outstanding shares of capital stock of the Company
issued from June 18, 1999 until such Closing Date have been duly authorized and
validly issued, are fully paid and non-assessable and are not subject to any
preemptive rights pursuant to the Company's Certificate of Incorporation or
Bylaws or applicable federal, California or Delaware law or any agreement or
instrument to which the Company is a party or by which the Company or its
property is bound.
(g) The Representatives shall have received an opinion, dated
such Closing Date, of Xxxxxx & Xxxxxxx LLP, counsel for the Selling Stockholder,
to the effect that:
(i) Upon physical delivery of the Selling Stockholder Securities
to the Representatives for the accounts of the several Underwriters in
the State of New York, the registration of the Securities in the names
of the several Underwriters upon registration of transfer by the issuer
thereof, and payment therefor in accordance with the terms of the
Underwriting Agreement, each of the several Underwriters will become the
registered "protected purchaser" (as defined in Section 8-303(a) of the
New York UCC) of the Selling Stockholder Securities registered in each
such Underwriter's name, free of any "adverse claim" (as defined in
Section 8-102(a)(1) of the New York UCC);
(ii) no consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required to be
obtained or made by the Selling Stockholder for the consummation of the
transactions contemplated by this Agreement in connection with the sale
of the Offered Securities sold by the Selling Stockholder, except such
as have been obtained and made under the Act and such as may be required
under state securities laws; provided that such counsel need express no
opinion regarding the Investment Company Act of 1940, as amended;
(iii) the execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, (i) any order, solely as identified in a
certificate by the Selling Stockholder that is certified by an officer
of the Selling Stockholder as being true and complete (a "SELLING
STOCKHOLDER CERTIFICATE"), of any governmental agency or body or any
court having jurisdiction over the Selling Stockholder or any of its
properties, or (ii) any material agreement or instrument, solely as
identified in a Selling Stockholder Certificate, to which the Selling
Stockholder is a party or by which the Selling Stockholder is bound or
to which any of the properties of the Selling Stockholder is subject, or
(iii) the charter or by-laws of the Selling Stockholder;
(iv) the execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute, rule or regulation of any
governmental agency or body; provided that such counsel need express no
opinion regarding the Investment Company Act of 1940, as amended; and
22
(v) this Agreement has been duly authorized, executed and
delivered by the Selling Stockholder.
(h) The Representatives shall have received from Fried, Frank,
Harris, Xxxxxxx & Xxxxxxxx, special counsel for the Selling Stockholder, an
opinion, dated such Closing Date, to the effect that the Selling Stockholder is
not, and after giving effect to the offering and sale of the Offered Securities
to be sold by the Selling Stockholder will not be, required to register as an
"investment company" under the Investment Company Act of 1940, as amended, or
"controlled" by an "investment company" under that act.
(i) The Representatives shall have received from O'Melveny &
Xxxxx LLP, counsel for the Underwriters, such opinion or opinions, dated such
Closing Date, with respect to the incorporation of the Company, the validity of
the Offered Securities delivered on such Closing Date, the Registration
Statements, the Prospectus and other related matters as the Representatives may
require, and the Selling Stockholder and the Company shall have furnished to
such counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(j) The Representatives shall have received a certificate, dated
such Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to the
best of their knowledge after reasonable investigation, shall state that: the
representations and warranties of the Company in this Agreement are true and
correct; the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of subparagraphs (1)
and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of
the applicable filing fee in accordance with Rule 111(a) or (b) under the Act,
prior to the time the Prospectus was printed and distributed to any Underwriter;
and, subsequent to the date of the most recent financial statements in the
Prospectus, there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole except as set forth in or
contemplated by the Prospectus or as described in such certificate.
(k) The Representatives shall have received a letter, dated such
Closing Date, of Ernst & Young LLP which meets the requirements of subsection
(a) of this Section, except that the specified date referred to in such
subsection will be a date not more than three days prior to such Closing Date
for the purposes of this subsection.
(l) On or prior to the date of this Agreement, the
Representatives shall have received lockup letters from each of executive
officers and directors of the Company.
The Selling Stockholder and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with
23
any conditions to the obligations of the Underwriters hereunder, whether in
respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any who controls such Underwriter within the meaning of Section 15 of
the Act, against any losses, claims, damages or liabilities, joint or several,
to which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related preliminary
prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each Underwriter
for any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that with
respect to any untrue statement or alleged untrue statement in or omission or
alleged omission from any preliminary prospectus, the indemnity agreement
contained in this subsection (a) shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased the Offered Securities concerned, to the extent that a
prospectus relating to such Offered Securities was required to be delivered by
such Underwriter under the Act in connection with such purchase and any such
loss, claim, damage or liability of such Underwriter results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Offered Securities to such person, a copy of
the Prospectus (exclusive of material incorporated by reference) if the Company
had previously furnished copies thereof to such Underwriter; provided, further,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below.
(b) The Selling Stockholder will indemnify and hold harmless
each Underwriter, its partners, directors and officers and each person who
controls such Underwriter within the meaning of Section 15 of the Act, against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact pertaining to the Selling Stockholder or the Offered Securities to
be offered and sold by the Selling Stockholder hereunder set forth under the
captions "Principal and Selling Stockholders" and "Risk Factors -- Future sales
of our common stock by our stockholders may depress our stock price" in any
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or any related preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact pertaining to the
Selling Stockholder or the Offered Securities to be offered and sold by the
Selling
24
Stockholder hereunder required to be stated therein or necessary to make the
statements in such sections not misleading or (ii) the breach of any
representation, warranty or agreement set forth in Section 2(b)(ii) hereof, and
will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from any preliminary prospectus,
the indemnity agreement contained in this subsection (b) shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased the Offered Securities concerned, to
the extent that a prospectus relating to such Offered Securities was required to
be delivered by such Underwriter under the Act in connection with such purchase
and any such loss, claim, damage or liability of such Underwriter results from
the fact that there was not sent or given to such person, at or prior to the
written confirmation of the sale of such Offered Securities to such person, a
copy of the Prospectus (exclusive of material incorporated by reference) if the
Company had previously furnished copies thereof to such Underwriter; provided,
further, that the liability under this subsection (b) of the Selling Stockholder
shall be limited to an amount equal to the aggregate gross proceeds to the
Selling Stockholder from the sale of Securities sold by the Selling Stockholder
hereunder.
(c) Each Underwriter will severally and not jointly indemnify
and hold harmless the Company, its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the Act, and
the Selling Stockholder, its directors and officers and each person, if any, who
controls the Selling Stockholder within the meaning of Section 15 of the Act,
against any losses, claims, damages or liabilities to which the Company or the
Selling Stockholder may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement, the Prospectus, or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Company and the Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Underwriter consists of
the following information in the Prospectus furnished on behalf of each
Underwriter: the concession and reallowance figures appearing in the fourth
textual paragraph under the caption "Underwriting" and the statements concerning
stabilization activities appearing in the ninth textual paragraph (including
sub-paragraphs) and tenth textual paragraph under the caption "Underwriting."
(d) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under subsection (a), (b) or (c) above, notify the indemnifying
25
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under subsection (a), (b) or (c) above. In
case any such action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such (i) settlement
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action and (ii) does not
include a statement as to, or an admission of, fault, culpability or a failure
to act by or on behalf of an indemnified party.
(e) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a), (b) or (c)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholder on the one hand and the
Underwriters on the other from the offering of the Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Stockholder on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholder on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholder bear to
the total underwriting discounts and commissions received by the Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Selling Stockholder or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (e) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (e). Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at
26
which the Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and the Selling Stockholder
under this Section shall be in addition to any liability which the Company and
the Selling Stockholder may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has signed a
Registration Statement and to each person, if any, who controls the Company or
the Selling Stockholder within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Stockholder for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Stockholder for the purchase of such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholder, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Stockholder, of the Company or its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to
27
the results thereof, made by or on behalf of any Underwriter, the Selling
Stockholder, the Company or any of their respective Representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company and the Selling Stockholder shall
remain responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Company, the Selling
Stockholder, and the Underwriters pursuant to Section 7 shall remain in effect,
and if any Offered Securities have been purchased hereunder the representations
and warranties in Section 2 and all obligations under Section 5 shall also
remain in effect. If the purchase of the Offered Securities by the Underwriters
is not consummated for any reason other than solely because of the termination
of this Agreement pursuant to Section 8 or the occurrence of any event specified
in clause (iii), (iv) or (v) of Section 6(d), the Company and the Selling
Stockholder will, jointly and severally, reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory
Group, or, if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at 00 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx Xxxxx, Attention: Chief
Executive Officer, or, if sent to the Selling Stockholder will be mailed,
delivered or telegraphed and confirmed to it at Xxxx Xxxxx' idealab!, Attention:
Chief Executive Officer, 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000;
provided, however, that any notice to an Underwriter pursuant to Section 7 will
be mailed, delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives
and successors and the officers and directors and controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives will be binding
upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out
28
of or relating to this Agreement or the transactions contemplated hereby.
29
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement among the
Selling Stockholder, the Company and the several Underwriters in accordance with
its terms.
Very truly yours,
XXXX XXXXX' IDEALAB!
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
XXXX.XXX, INC.
By:
------------------------------------
Name: Xxx Xxxxxx
Title: Chief Executive Officer
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above
written.
CREDIT SUISSE FIRST BOSTON CORPORATION
XXXXXXX XXXXX BARNEY INC.
US BANCORP XXXXX XXXXXXX
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By:
---------------------------------
Name:
Title:
Acting on behalf of itself and as the
Representatives of the several
Underwriters.
30
SCHEDULE A
NUMBER OF NUMBER OF
FIRM OPTIONAL
SECURITIES TO SECURITIES TO
SELLING STOCKHOLDER BE SOLD BE SOLD
------------------- ------------- -------------
Xxxx Xxxxx' idealab! 5,000,000
--------- ---------
Total...................................................... 5,000,000
========= =========
31
SCHEDULE B
NUMBER OF
FIRM SECURITIES
UNDERWRITER TO BE PURCHASED
----------- ---------------
Credit Suisse First Boston Corporation.........................
Xxxxxxx Xxxxx Xxxxxx Inc.
US Bancorp Xxxxx Xxxxxxx
----------------
Total....................................
================
