_______________ SHARES
CRUEL WORLD, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
DATED _________, 2000
TABLE OF CONTENTS
PAGE
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................2
(a) Effective Registration Statement...............................................................2
(b) Contents of Registration Statement.............................................................2
(c) Distribution of Offering Material By the Company...............................................2
(d) Due Incorporation..............................................................................2
(e) No Subsidiaries................................................................................3
(f) Underwriting Agreement.........................................................................3
(g) Description of Capital Stock and Other Capital Stock Matters...................................3
(h) Authorized Stock...............................................................................3
(i) Validly Issued Shares..........................................................................3
(j) No Default.....................................................................................3
(k) No Conflict....................................................................................4
(l) No Material Adverse Change.....................................................................4
(m) Independent Accountants........................................................................4
(n) Preparation of the Financial Statements........................................................4
(o) Legal Proceedings; Exhibits....................................................................4
(p) Compliance with Securities Act.................................................................4
(q) Not an Investment Company......................................................................5
(r) Compliance with Laws...........................................................................5
(s) No Environmental Costs.........................................................................5
(t) No Registration Rights.........................................................................5
(u) Cuban Business Statute.........................................................................5
(v) Absence of Material Charges....................................................................5
(w) Good Title to Properties.......................................................................6
(x) Intellectual Property Rights...................................................................6
(y) No Labor Disputes..............................................................................6
(z) Insurance......................................................................................6
(aa) Governmental Permits...........................................................................6
(bb) Accounting Controls............................................................................6
(cc) Stock Exchange Listing.........................................................................7
(dd) Year 2000 Compliance...........................................................................7
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
(ee) [Directed Share Program........................................................................7
(ff) Tax Law Compliance.............................................................................7
(gg) Related Party Transactions.....................................................................7
2. PURCHASE AND SALE AGREEMENTS................................................................8
(a) Firm Shares.....................................................................................8
(b) Additional Shares...............................................................................8
(c) Market Standoff Provision.......................................................................8
(d) Terms of Public Offering........................................................................9
3. PAYMENT AND DELIVERY........................................................................9
(a) Firm Shares.....................................................................................9
(b) Additional Shares...............................................................................9
(c) Delivery of Certificates........................................................................9
4. COVENANTS OF THE COMPANY....................................................................9
(a) Furnish Copies of Registration Statement and Prospectus.........................................9
(b) Notification of Amendments or Supplements.......................................................9
(c) Filings of Amendments or Supplements...........................................................10
(d) Blue Sky Laws..................................................................................10
(e) Earnings Statement.............................................................................10
(f) Use of Proceeds................................................................................10
(g) Transfer Agent.................................................................................10
(h) Periodic Reporting Obligations.................................................................10
(i) [Directed Share Program........................................................................10
(j) Exchange Act Compliance........................................................................11
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS................................................11
(a) Effective Registration Statement...............................................................11
(b) Rule 462 Registration Statement................................................................11
(c) Prospectus Filed with Commission...............................................................11
(d) No Stop Order..................................................................................11
(e) No NASD Objection..............................................................................11
(f) No Debt Downgrading............................................................................11
(g) No Material Adverse Change.....................................................................12
ii
TABLE OF CONTENTS
(CONTINUED)
PAGE
(h) Officer's Certificate..........................................................................12
(i) Opinion of Company Counsel.....................................................................12
(j) Opinion of Underwriters Counsel................................................................12
(k) Accountant's Comfort Letter....................................................................12
(l) Lock-Up Agreements.............................................................................13
(m) Additional Documents...........................................................................13
6. EXPENSES...................................................................................13
7. INDEMNITY AND CONTRIBUTION.................................................................14
(a) Indemnification of the Underwriters............................................................14
(b) Indemnification by the Underwriters............................................................14
(c) Indemnification Procedures.....................................................................15
(d) [Indemnification for Directed Share Program....................................................16
(e) Contribution Agreement.........................................................................16
(f) Contribution Amounts...........................................................................17
(g) Survival of Provisions.........................................................................17
8. EFFECTIVENESS..............................................................................17
9. TERMINATION................................................................................17
10. DEFAULTING UNDERWRITERS....................................................................18
11. COUNTERPARTS...............................................................................19
12. HEADINGS; TABLE OF CONTENTS................................................................19
13. NOTICES....................................................................................19
14. SUCCESSORS.................................................................................19
15. PARTIAL UNENFORCEABILITY...................................................................19
16. GOVERNING LAW..............................................................................19
17. ENTIRE AGREEMENT...........................................................................20
18. AMENDMENTS.................................................................................20
19. SOPHISTICATED PARTIES......................................................................20
SCHEDULE A
List of Underwriters
iii
TABLE OF CONTENTS
(CONTINUED)
PAGE
EXHIBITS
Exhibit A - Form of Legal Opinion of Company Counsel
Exhibit B - Form of Lockup Agreement
iv
___________, 2000
Xxxxxx Xxxxxx Partners LLC
[Underwriter]
[Underwriter]
As representatives for the several Underwriters
c/o Thomas Xxxxxx Partners LLC
Xxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
INTRODUCTION. Cruel World, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to the several underwriters named in
SCHEDULE A hereto (the "UNDERWRITERS") an aggregate of ____________ shares of
the common stock, par value $0.001 per share, of the Company (the "FIRM
SHARES").
The Company also proposes to issue and sell to the several
Underwriters not more than an additional ____________ shares of its common
stock, $0.001 par value per share (the "ADDITIONAL SHARES"), if and to the
extent that you shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 3 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "SHARES". The shares of common
stock, $0.001 par value per share, of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"COMMON STOCK". Xxxxxx Xxxxxx Partners LLC has agreed to act as representatives
of the several Underwriters (in such capacity, the "REPRESENTATIVES") in
connection with the offering and sale of the Shares.
The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement on Form S-1 (file no.
333-_____), including a prospectus, relating to the Shares. The registration
statement as amended at the time it becomes effective, including the information
(if any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), is hereinafter referred to as the "REGISTRATION
STATEMENT"; the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "PROSPECTUS". If the Company has filed a
registration statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"),
then any reference herein to the term "REGISTRATION STATEMENT" shall be deemed
to include such Rule 462 Registration Statement. All references in this
Agreement to the Registration Statement, the Rule 462 Registration Statement, a
preliminary prospectus, the Prospectus, or any amendments
or supplements to any of the foregoing, shall include any copy thereof filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval System ("XXXXX").
[As part of the offering contemplated by this Agreement,
Xxxxxx Xxxxxx Partners has agreed to reserve out of the Shares set forth
opposite its name on SCHEDULE A to this Agreement, up to ______________ shares,
for sale to the Company's employees, officers, and directors and other parties
associated with the Company (collectively, "PARTICIPANTS"), as set forth in the
Prospectus under the heading "Underwriting" (the "DIRECTED SHARE PROGRAM"). The
Shares to be sold by Xxxxxx Xxxxxx Partners pursuant to the Directed Share
Program (the "DIRECTED SHARES") will be sold by Xxxxxx Xxxxxx Partners pursuant
to this Agreement at the public offering price. Any Directed Shares not orally
confirmed for purchase by any Participants by the end of the first business day
after the date on which this Agreement is executed will be offered to the public
by Xxxxxx Xxxxxx Partners as set forth in the Prospectus.]
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to and agrees with each of the Underwriters that:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
has become effective; no stop order suspending the effectiveness of the
Registration Statement is in effect, and no proceedings for such purpose are
pending before or threatened by the Commission.
(b) CONTENTS OF REGISTRATION STATEMENT. (i) The Registration
Statement, when it became effective, did not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) the Registration Statement
and the Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and the applicable rules
and regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The Company
has not distributed and will not distribute, prior to the later of the Option
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) DUE INCORPORATION. The Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, 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 in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
2
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company.
(e) NO SUBSIDIARIES. The Company has no subsidiaries.
(f) UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by the Company, and is a valid and binding
agreement of the Company, enforceable in accordance with its terms, except as
rights to indemnification hereunder may be limited by applicable law and except
as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(g) DESCRIPTION OF CAPITAL STOCK AND OTHER CAPITAL STOCK MATTERS.
The authorized capital stock of the Company conforms as to legal matters to the
description thereof contained in the Prospectus. 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 the Registration
Statement.
(h) AUTHORIZED STOCK. All of the outstanding shares of capital
stock of the Company prior to the issuance of the Shares to be sold by the
Company have been duly authorized and are validly issued, fully paid,
non-assessable and not subject to any preemptive or similar rights.
(i) VALIDLY ISSUED SHARES. The Shares to be sold by the Company
have been duly authorized and, when issued and delivered in accordance with the
terms of this Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive or similar
rights.
(j) NO DEFAULT. The Company is not in violation of its charter or
by-laws or in default in the performance of any obligation, agreement, covenant
or condition contained in any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Company, to which the
Company is a party or by which the Company or its property is bound.
(k) NO CONFLICT. The execution and delivery by the Company of, and
the performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law or the certificate of incorporation
or by-laws of the Company or any agreement or other instrument binding upon the
Company that is material to the Company, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company, and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company of
its obligations under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Shares.
(l) NO MATERIAL ADVERSE CHANGE. There has not occurred any
material adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or in the earnings,
business, operations or prospects of the
3
Company from that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(m) INDEPENDENT ACCOUNTANTS. [________________], who have
expressed their opinion with respect to the consolidated financial statements
(which term as used in this Agreement includes the related notes thereto) [and
supporting schedules] filed with the Commission as a part of the Registration
Statement and included in the Prospectus, are independent public or certified
public accountants as required by the Securities Act.
(n) PREPARATION OF THE FINANCIAL STATEMENTS. The consolidated
financial statements filed with the Commission as a part of the Registration
Statement and included in the Prospectus present fairly the financial position
of the Company as of and at the dates indicated and the results of its
operations and cash flows for the periods specified. [The supporting schedules
included in the Registration Statement present fairly the information required
to be stated therein.] Such consolidated financial statements [and supporting
schedules] have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved, except
as may be expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus under the
captions "Prospectus Summary-Summary Financial Information," "Selected Financial
Data" and "Capitalization" fairly present the information set forth therein on a
basis consistent with that of the audited financial statements contained in the
Registration Statement.
(o) LEGAL PROCEEDINGS; EXHIBITS. There are no legal or
governmental proceedings pending or threatened to which the Company is a party
or to which any of the properties of the Company is subject that are required to
be described in the Registration Statement or the Prospectus and are not so
described or 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 described or
filed as required.
(p) COMPLIANCE WITH SECURITIES ACT. Each preliminary prospectus
filed as part of the Registration Statement as originally filed or as part of
any amendment thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.
(q) NOT AN INVESTMENT COMPANY. The Company is not and, after
giving effect to the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
(r) COMPLIANCE WITH LAWS. The Company (i) is in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) has received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) is in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive
4
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
individually or in the aggregate, have a material adverse effect on the
Company.
(s) NO ENVIRONMENTAL COSTS. There are no costs or liabilities
associated with Environmental Laws (including, without limitation, any capital
or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties) which would, individually or in the aggregate, have a material
adverse effect on the Company.
(t) NO REGISTRATION RIGHTS. There are no contracts, agreements or
understandings between the Company and any person granting such person the right
to require the Company to file a registration statement under the Securities Act
with respect to any securities of the Company or to require the Company to
include such securities with the Shares registered pursuant to the Registration
Statement other than as described in the Registration Statement and as have been
waived in writing in connection with the offering contemplated hereby.
(u) CUBAN BUSINESS STATUTE. The Company has complied with all
provisions of Section 517.075, Florida Statutes relating to doing business with
the Government of Cuba or with any person or affiliate located in Cuba.
(v) ABSENCE OF MATERIAL CHARGES. Subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus, (i) the Company has not incurred any material liability or
obligation, direct or contingent, nor entered into any material transaction not
in the ordinary course of business; (ii) the Company has not purchased any of
its outstanding capital stock, nor declared, paid or otherwise made any dividend
or distribution of any kind on its capital stock other than ordinary and
customary dividends; and (iii) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company, except in each
case as described in the Prospectus.
(w) GOOD TITLE TO PROPERTIES. The Company has good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by it which is material to the business of the Company,
in each case free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus or such as do not materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company; and any real property and buildings held under
lease by the Company are held under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company.
(x) INTELLECTUAL PROPERTY RIGHTS. The Company owns or possesses,
or can acquire on reasonable terms, all material 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 currently employed by
it in connection with the business now operated by it, and the Company
5
has not received any notice of infringement of or conflict with asserted rights
of others with respect to any of the foregoing which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a material adverse effect on the Company.
(y) NO LABOR DISPUTES. No material labor dispute with the
employees of the Company exists, or, to the knowledge of the Company, is
imminent; and the Company is not aware of any existing, threatened or imminent
labor disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could have a material adverse effect on the
Company.
(z) INSURANCE. The Company is insured by the insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which it is engaged;
and the Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a material adverse effect on the Company.
(aa) GOVERNMENTAL PERMITS. The Company possesses all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct its business, and the Company has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a material adverse effect on the Company.
(bb) ACCOUNTING CONTROLS. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(cc) STOCK EXCHANGE LISTING. The Common Stock has been approved for
listing on the Nasdaq National Market System, subject only to official notice of
issuance.
(dd) YEAR 2000 COMPLIANCE. The Company has reviewed its operations
and that of any third parties with which the Company has a material relationship
to evaluate the extent to which the business or operations of the Company will
be affected by the Year 2000 Problem. As a result of such review, the Company
has no reason to believe, and does not believe, that the Year 2000 Problem will
have a material adverse effect on the Company or result in any material loss or
interference with the Company's business or operations. The "YEAR 2000 PROBLEM"
as used herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of mechanical or
electrical systems of any kind will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000.
6
(ee) [DIRECTED SHARE PROGRAM. The Company represents and warrants
to Xxxxxx Xxxxxx Partners that (i) the Registration Statement, the Prospectus
and any preliminary prospectus comply, and any further amendments or supplements
thereto will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary prospectus, as amended
or supplemented, if applicable, are distributed in connection with the Directed
Share Program, and that (ii) no authorization, approval, consent, license,
order, registration or qualification of or with any government, governmental
instrumentality or court, other than such as have been obtained, is necessary
under the securities laws and regulations of foreign jurisdictions in which the
Directed Shares are offered outside the United States.]
(ff) TAX LAW COMPLIANCE. The Company has filed all necessary
federal, state and foreign income and franchise tax returns or has properly
requested extensions thereof and has paid all taxes required to be paid by it
and, if due and payable, any related or similar assessment, fine or penalty
levied against it. The Company has made adequate charges, accruals and reserves
in the applicable financial statements referred to in Section 1(n) above in
respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Company has not been finally
determined.
(gg) RELATED PARTY TRANSACTIONS. There are no business
relationships or related-party transactions involving the Company or any other
person required to be described in the Prospectus which have not been described
as required.
2. PURCHASE AND SALE AGREEMENTS.
(a) FIRM SHARES. The Company hereby agrees to sell to the several
Underwriters, and each Underwriter, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees, severally and not jointly, to purchase from the Company at $______ a
share (the "PURCHASE PRICE") the number of Firm Shares (subject to such
adjustments to eliminate fractional shares as you may determine) set forth
opposite the name of such Underwriter in SCHEDULE A hereto.
(b) ADDITIONAL SHARES. On the basis of the representations and
warranties contained in this Agreement, and subject to its terms and conditions,
the Company agrees to sell to the Underwriters the Additional Shares, and the
Underwriters shall have a one-time right to purchase, severally and not jointly,
up to _______________ Additional Shares at the Purchase Price. If you, on behalf
of the Underwriters, elect to exercise such option, you shall so notify the
Company in writing not later than thirty (30) days after the date of this
Agreement, which notice shall specify the number of Additional Shares to be
purchased by the Underwriters and the date on which such shares are to be
purchased. Such date may be the same as the Closing Date (as defined below) but
not earlier than the Closing Date nor later than ten (10) business days after
the date of such notice. Additional Shares may be purchased as provided in
Section 3 hereof solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares. If any Additional Shares are to
be purchased, each Underwriter agrees, severally and not jointly, to purchase
the number of Additional Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
total number of Additional Shares to be purchased as the number of Firm Shares
set forth in
7
SCHEDULE A hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
(c) MARKET STANDOFF PROVISION. The Company hereby agrees that,
without the prior written consent of Xxxxxx Xxxxxx Partners, it will not, during
the period ending 180 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or (ii) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Shares to be sold hereunder or (B) the issuance by the Company of shares of
Common Stock upon the exercise of options or warrants or the conversion of a
security outstanding on the date hereof of which the Underwriters have been
advised in writing and which is described in the Prospectus.
(d) TERMS OF PUBLIC OFFERING. The Company is advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable.
3. PAYMENT AND DELIVERY.
(a) FIRM SHARES. Payment for the Firm Shares to be sold by the
Company shall be made to the Company in immediately available funds against
delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on ____________, 1999, or at
such other time on the same or such other date, not later than _________, 1999,
as shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE".
(b) ADDITIONAL SHARES. Payment for any Additional Shares shall be
made to the Company in immediately available funds in New York City against
delivery of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2(b) or at such other time on the same or on such
other date, in any event not later than ____________, 1999, as shall be
designated in writing by you. The time and date of such payment are hereinafter
referred to as the "OPTION CLOSING DATE".
(c) DELIVERY OF CERTIFICATES. Certificates for the Firm Shares and
Additional Shares shall be in definitive form and registered in such names and
in such denominations as you shall request in writing not later than one (1)
full business day prior to the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and Additional Shares
shall be delivered to you on the Closing Date or the Option Closing Date, as the
case may be, for the respective accounts of the several Underwriters, with any
transfer taxes payable in connection with the transfer of the Shares to the
Underwriters duly paid, against payment of the Purchase Price therefor.
8
4. COVENANTS OF THE COMPANY. In further consideration of the agreements of
the Underwriters herein contained, the Company covenants with each Underwriter
as follows:
(a) FURNISH COPIES OF REGISTRATION STATEMENT AND PROSPECTUS. To
furnish to you, without charge, four (4) signed copies of the Registration
Statement (including exhibits thereto) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without exhibits
thereto) and to furnish to you in New York City, without charge, prior to 10:00
a.m. New York City time on the business day next succeeding the date of this
Agreement and during the period mentioned in Section 4(c) below, as many copies
of the Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) NOTIFICATION OF AMENDMENTS OR SUPPLEMENTS. Before amending or
supplementing the Registration Statement or the Prospectus, to furnish to you a
copy of each such proposed amendment or supplement and not to file any such
proposed amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule 424(b) under
the Securities Act any prospectus required to be filed pursuant to such rule.
(c) FILINGS OF AMENDMENTS OR SUPPLEMENTS. If, during such period
after the first date of the public offering of the Shares as in the opinion of
counsel for the Underwriters the Prospectus is required by law to be delivered
in connection with sales by an Underwriter or dealer (the "PROSPECTUS DELIVERY
PERIOD"), any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to comply
with applicable law, forthwith to prepare, file with the Commission and furnish,
at its own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have been sold by
you on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) BLUE SKY LAWS. To endeavor to qualify the Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) EARNINGS STATEMENT. To make generally available to its
securityholders as soon as practicable, but in any event not later than eighteen
(18) months after the effective date of the Registration Statement (as defined
in Rule 158(c) under the Securities Act), an earnings statement of the Company
(which need not be audited) complying with Section 11(a) of the Securities Act
and the rules and regulations thereunder (including, at the option of the
Company, Rule 158).
9
(f) USE OF PROCEEDS. The Company shall apply the net proceeds from
the sale of the Shares sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(g) TRANSFER AGENT. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Common Stock.
(h) PERIODIC REPORTING OBLIGATIONS. During the Prospectus Delivery
Period, the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act. Additionally, the Company shall file with the Commission such
information on Form 10-Q or Form 10-K as may be required by Rule 463 under the
Securities Act.
(i) [DIRECTED SHARE PROGRAM. That in connection with the Directed
Share Program, the Company will ensure that the Directed Shares will be
restricted to the extent required by the National Association of Securities
Dealers, Inc. (the "NASD") or the NASD rules from sale, transfer, assignment,
pledge or hypothecation for a period of three (3) months following the date of
the effectiveness of the Registration Statement. Xxxxxx Xxxxxx Partners will
notify the Company as to which Participants will need to be so restricted. The
Company will direct the transfer agent to place stop transfer restrictions upon
such securities for such period of time. Furthermore, the Company covenants with
Xxxxxx Xxxxxx Partners that the Company will comply with all applicable
securities and other applicable laws, rules and regulations in each foreign
jurisdiction in which the Directed Shares are offered in connection with the
Directed Share Program.]
(j) EXCHANGE ACT COMPLIANCE. During the Prospectus Delivery
Period, the Company will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Age in the manner
and within the time periods required by the Exchange Act.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Company to sell the Shares to the several Underwriters and the several
obligations of the Underwriters to purchase and pay for the Shares on the
Closing Date are subject to the following conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective not later than [__________] (New York City time) on
the date hereof.
(b) RULE 462 REGISTRATION STATEMENT. If the Company elects to rely
upon Rule 462(b), the Company shall file a Rule 462 Registration Statement with
the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462 Registration
Statement or give irrevocable instructions for the payment of such fee pursuant
to Rule 111(b) under the Securities Act.
(c) PROSPECTUS FILED WITH COMMISSION. The Company shall have filed
the Prospectus with the Commission (including the information required by Rule
430A under the Securities Act) in the manner and within the time period required
by Rule 424(b) under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration
10
Statement containing the information required by such Rule 430A, and such
post-effective amendment shall have become effective; or, if the Company elected
to rely upon Rule 434 under the Securities Act and obtained the Representative's
consent thereto, the Company shall have filed a Term Sheet with the Commission
in the manner and within the time period required by such Rule 424(b).
(d) NO STOP ORDER. No stop order suspending the effectiveness of
the Registration Statement, any Rule 462 Registration Statement, or any
post-effective amendment to the Registration Statement, shall be in effect and
no proceedings for such purpose shall have been instituted or threatened by the
Commission.
(e) NO NASD OBJECTION. The NASD shall have raised no objection to
the fairness and reasonableness of the underwriting terms and arrangements.
(f) NO DEBT DOWNGRADING. There shall not have occurred any
downgrading, nor shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act.
(g) NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
change, or any development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business, operations or prospects of
the Company from that set forth in the Prospectus (exclusive of any amendments
or supplements thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
(h) OFFICER'S CERTIFICATE. The Underwriters shall have received on
the Closing Date a certificate, dated the Closing Date and signed by the Chief
Executive Officer and President of the Company, to the effect set forth in
Sections 5(d) and 5(g) above and to the effect that the representations and
warranties of the Company contained in this Agreement are true and correct as of
the Closing Date and that the Company has complied with all of the agreements
and satisfied all of the conditions on its part to be performed or satisfied
hereunder on or before the Closing Date.
(i) OPINION OF COMPANY COUNSEL. The Underwriters shall have
received on the Closing Date an opinion of Wilson, Sonsini, Xxxxxxxx & Xxxxxx,
counsel for the Company, dated the Closing Date, the form of which is attached
hereto as EXHIBIT A. The opinion shall be rendered to the Underwriters at the
request of the Company and shall so state therein. The opinion shall state that
Underwriters Counsel is entitled to rely thereon. Such opinion shall not state
that it is to be governed or qualified by, or that it is otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991) or any comparable state bar accord.
11
(j) OPINION OF UNDERWRITERS COUNSEL. The Underwriters shall have
received on the Closing Date an opinion of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP,
counsel for the Underwriters, dated the Closing Date, covering the matters
referred to in EXHIBIT A, paragraphs (vi), (vii), (ix) (but only as to the
statements in the Prospectus under "Description of Capital Stock" and
"Underwriters") and (xv). With respect to paragraph (xv) of EXHIBIT A, such
counsel may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification, except as
specified.
(k) ACCOUNTANT'S COMFORT LETTER. The Underwriters shall have
received, on each of the date hereof and the Closing Date, a letter dated the
date hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Underwriters, from ___________________, independent public
accountants, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
consolidated financial statements and certain financial information contained in
the Registration Statement and the Prospectus; PROVIDED that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier than the
date hereof.
(l) LOCK-UP AGREEMENTS. The "lock up" agreements, each
substantially in the form of EXHIBIT B hereto, between you and certain
stockholders, officers and directors of the Company, delivered to you on or
before the date hereof, shall be in full force and effect on the Closing Date.
(m) ADDITIONAL DOCUMENTS. On the Closing Date, the Representatives
and counsel for the Underwriters shall have received such information, documents
and opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction of each of the above conditions
on or prior to the Option Closing Date and to the delivery to you on the Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of the
Additional Shares and other matters related to the issuance of the Additional
Shares.
6. EXPENSES. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
12
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or legal investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as contemplated by Section 4(d) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection with such qualification and in connection with
the Blue Sky or legal investment memorandum, (iv) all filing fees and the
reasonable fees and disbursements of counsel to the Underwriters incurred in
connection with the review and qualification of the offering of the Shares by
the NASD, (v) all fees and expenses in connection with the preparation and
filing of the registration statement on Form 8-A relating to the Common Stock
and all costs and expenses incident to listing the Shares on the Nasdaq National
Market, (vi) the cost of printing certificates representing the Shares, (vii)
the costs and charges of any transfer agent, registrar or depositary, (viii) the
costs and expenses of the Company relating to investor presentations on any
"road show" undertaken in connection with the marketing of the offering of the
Shares, including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants engaged
in connection with the road show presentations with the prior approval of the
Company, travel and lodging expenses of the representatives and officers of the
Company and any such consultants, (ix) all expenses in connection with any offer
and sale of the Shares outside of the United States, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with offers and sales outside of the United States, [(x) all
reasonable fees and disbursements of counsel incurred by the Underwriters in
connection with the Directed Share Program and stamp duties, similar taxes or
duties or other taxes, if any, incurred by the Underwriters in connection with
the Directed Share Program] and (xi) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section. It is understood, however, that except as
provided in this Section, Section 7 entitled "Indemnity and Contribution", and
the last paragraph of Section 10 below, the Underwriters will pay all of their
costs and expenses, including fees and disbursements of their counsel and any
advertising expenses connected with any offers they may make.
7. INDEMNITY AND CONTRIBUTION.
(a) INDEMNIFICATION OF THE UNDERWRITERS. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except (i) insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein and (ii) that with respect to any preliminary
13
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage or
liability purchased Shares, or any person controlling such Underwriter, if
copies of the Prospectus were timely delivered to the Underwriter pursuant to
Section 4 and a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of the sale
of the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense.
(b) INDEMNIFICATION BY THE UNDERWRITERS. Each Underwriter agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
directors of the Company, the officers of the Company who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendments or
supplements thereto.
(c) INDEMNIFICATION PROCEDURES. In case any proceeding (including
any governmental investigation) shall be instituted involving any person in
respect of which indemnity may be sought pursuant to this Section 7, such person
(the "INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and (ii) the fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Company, its directors, its officers who sign the Registration Statement and
each person,
14
if any, who controls the Company within the meaning of either such Section, and
that all such fees and expenses shall be reimbursed as they are incurred. In the
case of any such separate firm for the Underwriters and such control persons of
any Underwriters, such firm shall be designated in writing by Xxxxxx Xxxxxx
Partners. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding 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 settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
Notwithstanding anything contained herein to the contrary, if
indemnity may be sought pursuant to Section 7(d) hereof in respect of such
action or proceeding, then in addition to such separate firm for the indemnified
parties, the indemnifying party shall be liable for the reasonable fees and
expenses of not more than one separate firm (in addition to any local counsel)
for Xxxxxx Xxxxxx Partners for the defense of any losses, claims, damages and
liabilities arising out of the Directed Share Program, and all persons, if any,
who control Xxxxxx Xxxxxx Partners within the meaning of either Section 15 of
the Act or Section 20 of the Exchange Act.
(d) [INDEMNIFICATION FOR DIRECTED SHARE PROGRAM. The Company
agrees to indemnify and hold harmless Xxxxxx Xxxxxx Partners and each person, if
any, who controls Xxxxxx Xxxxxx Partners within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act ("XXXXXX XXXXXX PARTNERS
ENTITIES"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) (i)
caused by any untrue statement or alleged untrue statement of a material fact
contained in the prospectus wrapper material prepared by or with the consent of
the Company for distribution in foreign jurisdictions in connection with the
Directed Share Program attached to the Prospectus or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein, when
considered in conjunction with the Prospectus or any applicable preliminary
prospectus, not misleading; (ii) caused by the failure of any Participant to pay
for and accept delivery of the shares which, immediately following the
effectiveness of the Registration Statement, were subject to a properly
confirmed agreement to purchase; or (iii) related to, arising out of, or in
connection with the Directed Share Program, PROVIDED that, the Company shall not
be
15
responsible under this subparagraph (iii) for any losses, claim, damages or
liabilities (or expenses relating thereto) that are finally judicially
determined to have resulted from the bad faith or gross negligence of Xxxxxx
Xxxxxx Partners Entities.]
(e) CONTRIBUTION AGREEMENT. To the extent the indemnification
provided for in this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause 7(e) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 7(e) above but also the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate price
to the public of the Shares. The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(f) CONTRIBUTION AMOUNTS. The Company and the Underwriters agree
that it would not be just or equitable if contribution pursuant to this Section
7 were determined by PRO RATA allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in Section 7(e).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that 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 Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
16
The remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
(g) SURVIVAL OF PROVISIONS. The indemnity and contribution
provisions contained in this Section 7 and the representations, warranties and
other statements of the Company contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any Underwriter or any
person controlling any Underwriter or the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. EFFECTIVENESS. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
9. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York, Delaware or California shall have been declared by
either federal or New York, Delaware or California state authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse, or (v) in the judgment of the Representatives, there shall
have occurred any material adverse change, or any development that could
reasonably be expected to result in a material adverse change, in the condition,
financial or otherwise, or in the earnings, business, operations or prospects,
whether or not arising from transactions in the ordinary course of business, of
the Company and its subsidiaries, taken as a whole, and (b) in the case of any
of the events specified in clauses 9(a)(i) through 9(a)(v), such event,
individually or together with any other such event, makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
10. DEFAULTING UNDERWRITERS. If, on the Closing Date or the Option
Closing Date, as the case may be, any one or more of the Underwriters shall fail
or refuse to purchase Shares that it has or they have agreed to purchase
hereunder on such date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the aggregate number of the Shares to be purchased on such
date, the other Underwriters shall be obligated severally in the proportions
that the number of Firm Shares set forth opposite their respective names in
SCHEDULE A bears to the aggregate number of Firm Shares set forth opposite the
names of all such non-defaulting Underwriters, or in such other proportions as
you may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 10 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date,
17
any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and
the aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven (7) days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. If, on
the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
11. COUNTERPARTS. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
12. HEADINGS; TABLE OF CONTENTS. The headings of the sections of this
Agreement and the table of contents have been inserted for convenience of
reference only and shall not be deemed a part of this Agreement.
13. NOTICES. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
Xxxxxx Xxxxxx Partners LLC
Xxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention:
18
If to the Company:
[Company name/Address]
Facsimile: ( ) __________________
Attention:
Any party hereto may change the address for receipt of
communications by giving written notice to the others.
14. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Underwriters pursuant
to Section 10 hereof, and to the benefit of the officers and directors and
controlling persons referred to in Section 7, and in each case their respective
successors, and no other person will have any right or obligation hereunder. The
term "successors" shall not include any purchaser of the Shares as such from any
of the Underwriters merely by reason of such purchase.
15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof.
18. AMENDMENTS. This Agreement may only be amended or modified in
writing, signed by all of the parties hereto, and no condition herein (express
or implied) may be waived unless waived in writing by each party whom the
condition is meant to benefit.
19. SOPHISTICATED PARTIES. Each of the parties hereto acknowledges
that it is a sophisticated business person who was adequately represented by
counsel during negotiations regarding the provisions hereof, including, without
limitation, the indemnification and contribution provisions of Section 7, and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Section 7 hereto fairly allocate the risks
in light of the ability of the parties to investigate the Company, its affairs
and its business in order to assure that adequate disclosure has been made in
the Registration Statement, any preliminary prospectus and the Prospectus (and
any amendments and supplements thereto), as required by the Securities Act and
the Exchange Act.
19
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
Cruel World, Inc., a Delaware corporation
By:
---------------------------------
Accepted as of the date hereof
Xxxxxx Xxxxxx Partners LLC
Acting severally on behalf
of themselves and the
several Underwriters named
in SCHEDULE A hereto.
By: Xxxxxx Xxxxxx Partners LLC
By:
------------------------------------
Name:
Title:
20
SCHEDULE A
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
----------- ---------------
Xxxxxx Xxxxxx Partners LLC..............................................................
[Underwriter]
[Underwriter]...........................................................................
TOTAL........................................................................
EXHIBIT A
FORM OF LEGAL OPINION OF COMPANY COUNSEL
(i) The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, 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 in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company.
(ii) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(iii) All of the outstanding shares of capital stock of the
Company prior to the issuance of the Shares to be sold by the Company have been
duly authorized and are validly issued, fully paid, non-assessable and not
subject to any preemptive or similar rights.
(iv) The Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive or similar
rights.
(v) The Underwriting Agreement has been duly authorized, executed
and delivered by the Company.
(vi) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Underwriting Agreement
will not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or, to the best of such counsel's
knowledge, any agreement or other instrument binding upon the Company or any of
its subsidiaries that is material to the Company and its subsidiaries, taken as
a whole, or, to the best of such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Company or any subsidiary, and no consent, approval, authorization or order of,
or qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except such
as may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(vii) The statements (A) in the Prospectus under the captions
"Business-Intellectual Property and Licensing Rights," "Description of Capital
Stock," "Shares Eligible for Future Sale" and "Underwriting" and (B) in the
Registration Statement in Items 14 and 15, in each case insofar as such
statements constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with respect to
such legal matters, documents and proceedings and fairly summarize the matters
referred to therein.
A-1
(viii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is 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 that are not described or filed as
required.
(ix) The Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
(x) The Registration Statement has been declared effective by the
Commission under the Securities Act. No stop order suspending the effectiveness
of the Registration Statement has been issued under the Securities Act and no
proceedings for such purpose have been instituted or, to the best knowledge of
such counsel, are pending or are contemplated or threatened by the Commission.
Any required filing of the Prospectus and any supplement thereto pursuant to
Rule 424(b) under the Securities Act has been in the manner and within the time
period required by such Rule 424(b).
(xi) Except as disclosed in the Prospectus, there are no persons
with registration or other similar rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by the Underwriting Agreement, except for such rights as have been
duly waived.
(xii) The Company is not in violation of its charter or by-laws or
any law, administrative regulation or administrative or court decree applicable
to the or is in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any indenture, loan agreement,
mortgage, lease or other agreement that is material to the Company, except in
each such case for such violations or defaults as would not, individually or in
the aggregate, result in a material adverse effect on the Company.
(xiii) Such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and schedules and
other financial and statistical data included therein as to which such counsel
need not express any opinion) comply as to form in all material respects with
the Securities Act and the applicable rules and regulations of the Commission
thereunder, (B) has no reason to believe that (except for financial statements
and schedules and other financial and statistical data as to which such counsel
need not express any belief) the Registration Statement and the prospectus
included therein at the time the Registration Statement became effective
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading and (C) has no reason to believe that (except for financial
statements and schedules and other financial and statistical data as to which
such counsel need not express any belief) the Prospectus contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
A-2
With respect to paragraph (xiii) of EXHIBIT A, such counsel may
state that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but are
without independent check or verification, except as specified.
A-3
EXHIBIT B
_____________, 2000
Xxxxxx Xxxxxx Partners LLC
[Underwriter]
[Underwriter]
As Representatives of the several Underwriters
c/o Thomas Xxxxxx Partners LLC
Xxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
RE: LOCK-UP AGREEMENT (THIS "AGREEMENT")
Ladies and Gentlemen:
The undersigned is an owner of record or beneficially of certain shares
of Common Stock, par value $0.001 per share (the "Common Stock"), of Cruel
World, Inc., a Delaware corporation (the "Company"), or securities convertible
into or exchangeable or exercisable for Common Stock. The undersigned
understands that you, as representatives (the "Representatives"), propose to
enter into an Underwriting Agreement on behalf of the several Underwriters named
in Schedule A to such agreement (collectively, the "Underwriters"), with the
Company providing for a public offering of the Common Stock of the Company
pursuant to a Registration Statement on form S-1 to be filed with the Securities
and Exchange Commission (the "Public Offering"). The undersigned recognizes that
the Public Offering will be of benefit to the undersigned and will benefit the
Company by, among other things, raising additional capital for its operations.
The undersigned acknowledges that you and the other Underwriters are relying on
the representations and agreements of the undersigned contained in this letter
in carrying out the Public Offering and in entering into underwriting
arrangements with the Company with respect to the Public Offering.
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Xxxxxx
Xxxxxx Partners (which consent may be withheld in its sole discretion), it will
not, during the period commencing on the date hereof and ending 180 days after
the date of the final prospectus relating to the Public Offering (the
"Prospectus"), (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. In addition, the undersigned agrees
that, without the prior written consent of Xxxxxx Xxxxxx Partners (which consent
may be withheld in its sole discretion), it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus,
B-1
make any demand for or exercise any right with respect to, the registration of
any shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock. With respect to the Public Offering, the
undersigned waives any registration rights relating to registration under the
Securities Act of any Common Stock owned either of record or beneficially by the
undersigned, including any rights to receive notice of the Public Offering.
The foregoing restrictions are expressly agreed to preclude the
undersigned from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a sale or disposition of the
Common Stock even if such Common Stock would be disposed of by someone other
than the undersigned. Such prohibited hedging or other transactions would
include without limitation any short sale or any purchase, sale or grant of any
right (including without limitation any put option or put equivalent position or
call option or call equivalent position) with respect to any of the Common Stock
or with respect to any security that includes, relates to, or derives any
significant part of its value from such Common Stock.
Notwithstanding the foregoing, the undersigned may transfer shares of
Common Stock (i)) as a bona fide gift or gifts, provided that the donee or
donees thereof agree to be bound by the restrictions set forth herein, (ii) to
any trust for the direct or indirect benefit of the undersigned or the immediate
family of the undersigned, provided that the trustee of the trust agrees to be
bound by the restrictions set forth herein, and provided further that any such
transfer shall not involve a disposition for value, or (iii) to the Underwriters
pursuant to the Underwriting Agreement. For purposes of this Agreement,
"immediate family" shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin. In addition, notwithstanding the foregoing,
if the undersigned is a corporation, the corporation may transfer the capital
stock of the Company to any wholly-owned subsidiary of such corporation;
provided, however, that in any such case, it shall be a condition to the
transfer that the transferee execute an agreement stating that the transferee is
receiving and holding such capital stock subject to the provisions of this
Agreement and there shall be no further transfer of such capital stock except in
accordance with this Agreement, and provided further that any such transfer
shall not involve a disposition for value.
The undersigned understands that whether or not the Public Offering
actually occurs depends on a number of factors, including stock market
conditions. The Public Offering will only be made pursuant to an Underwriting
Agreement, the terms of which are subject to negotiation among the Company and
the Underwriters.
The undersigned agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
transfer of shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock held by the undersigned except in
compliance with the foregoing restrictions.
B-2
This Agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned.
Very truly yours,
----------------------------------------
(Name)
----------------------------------------
(Address)
B-3
