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2,500,000 Common Shares
INNOTRAC CORPORATION
UNDERWRITING AGREEMENT
JULY ___, 1999
BEAR, XXXXXXX & CO. INC.
THE XXXXXXXX-XXXXXXXX COMPANY, LLC
X.X. XXXXXXXX & CO.
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Ladies and Gentlemen:
Innotrac Corporation, a corporation organized and existing under the
laws of the State of Georgia (the "Company"), and the selling shareholders
listed on Schedule II hereto (the "Selling Shareholders"), severally propose,
subject to the terms and conditions stated herein, to issue and sell to the
several underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 2,500,000 shares (the "Firm Shares") of its common stock, par
value $.10 per share (the "Common Stock"). The Firm Shares consist of 2,100,000
shares to be issued and sold by the Company and 400,000 shares to be sold by
the Selling Shareholders. The Company and the Selling Shareholders also
propose, for the sole purpose of covering over-allotments in connection with
the sale of the Firm Shares, at the option of the Underwriters and subject to
the terms and conditions stated herein, to sell up to an additional 375,000
shares (the "Additional Shares") of Common Stock. The Firm Shares and any
Additional Shares purchased by the Underwriters are
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referred to herein as the "Shares." The Shares are more fully described in the
Registration Statement referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and amendments
thereto, on Form S-1 (No. 333-79929), for the registration of the
Shares under the Securities Act of 1933, as amended (the "Act"). Such
registration statement, including the prospectus, financial statements
and schedules, exhibits and all other documents filed as a part
thereof, as amended at the time of effectiveness of the registration
statement, including any information deemed to be a part thereof as of
the time of effectiveness pursuant to paragraph (b) of Rule 430A or
Rule 434 of the Rules and Regulations of the Commission under the Act
(the "Regulations"), is herein called the "Registration Statement,"
and the prospectus, in the form first filed with the Commission
pursuant to Rule 424(b) of the Regulations, or filed as part of the
Registration Statement at the time of effectiveness if no Rule 424(b)
or Rule 434 filing is required, is herein called the "Prospectus." The
term "preliminary prospectus" as used herein means a preliminary
prospectus as described in Rule 430 of the Regulations.
(b) At the time of the effectiveness of the Registration
Statement or the effectiveness of any post-effective amendment to the
Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b) or Rule 434 of the Regulations,
when any supplement to or amendment of the Prospectus is filed with
the Commission and at the Closing Date and the Additional Closing
Date, if any (as hereinafter respectively defined), the Registration
Statement and the Prospectus and any amendments thereof and
supplements thereto complied or will comply in all material respects
with the applicable provisions of the Act and the Regulations and do
not or will not contain an untrue statement of a material fact and do
not or will not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein (i) in
the case of the Registration Statement, not misleading and (ii) in the
case of the Prospectus, in light of the circumstances under which they
were made, not misleading. When any related preliminary prospectus was
first filed with the Commission (whether filed as part of the
registration statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) of the Regulations) and
when any amendment thereof or supplement thereto was first filed with
the Commission, such preliminary prospectus and any amendments thereof
and supplements thereto complied in all material respects with the
applicable provisions of the Act and the Regulations and did not
contain an untrue statement of a material fact and did not omit to
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state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances
under which they were made not misleading. No representation and
warranty is made in this subsection (b), however, with respect to any
information contained in or omitted from the Registration Statement or
the Prospectus or any related preliminary prospectus or any amendment
thereof or supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through the Representatives as herein stated expressly for
use in connection with the preparation thereof. If Rule 434 is used,
the Company will comply with the requirements of Rule 434.
(c) Xxxxxx Xxxxxxxx LLP, who have certified the financial
statements and supporting schedules included in the Registration
Statement, are independent public accountants as required by the Act
and the Regulations.
(d) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as disclosed in the Registration Statement and the Prospectus,
there has been no material adverse change or any development involving
a prospective material adverse change in the business, prospects,
properties, operations, condition (financial or other) or results of
operations of the Company, whether or not arising from transactions in
the ordinary course of business (the effect of each such change or
development being referred to as a "Material Adverse Effect"), and
since the date of the latest balance sheet presented in the
Registration Statement and the Prospectus, the Company has not
incurred or undertaken any liabilities or obligations, direct or
contingent, which are material to the Company, except for liabilities
or obligations which are disclosed in the Registration Statement and
the Prospectus.
(e) This Agreement and the transactions contemplated herein
have been duly and validly authorized by the Company and this
Agreement has been duly and validly executed and delivered by the
Company.
(f) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby
do not (i) conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with notice
or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to,
any agreement, instrument, franchise, license or permit to which the
Company is a party or by which it or its properties or assets may be
bound or (ii) violate or conflict with any provision of the articles
of incorporation or bylaws of the Company, or (iii) violate or
conflict with any judgment, decree, order, statute, rule or
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regulation of any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its
properties or assets except, as to clauses (i) and (iii) above, for
such conflicts, violations, breaches, defaults, liens, charges or
encumbrances which, singly or in the aggregate, would not have a
Material Adverse Effect. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
court or any public, governmental or regulatory agency or body having
jurisdiction over the Company or its properties or assets is required
for the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby by the Company,
including the issuance, sale and delivery of the Shares to be issued,
sold and delivered by the Company hereunder, except the registration
under the Act of the Shares and such consents, approvals,
authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters.
(g) All of the outstanding shares of Common Stock are duly
and validly authorized and issued, fully paid and nonassessable and
were not issued and are not now in violation of or subject to any
preemptive rights. The Shares, when issued, delivered and sold in
accordance with this Agreement, will be duly and validly issued and
outstanding, fully paid and nonassessable, and will not have been
issued in violation of or be subject to any preemptive rights. The
Company had, at March 31, 1999, an authorized and outstanding
capitalization as set forth in the Registration Statement and the
Prospectus. The Common Stock, the Firm Shares and the Additional
Shares conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. All offers
and sales of securities of the Company have been at all relevant times
duly registered under or exempt from the registration requirements of
the Act and were duly registered under or exempt from the registration
requirements of all applicable state securities or Blue Sky laws.
Except as set forth in the Prospectus and except for options issued
under the Company's stock option plan, the Company does not have
outstanding, and at the Closing Date and, if later, the Additional
Closing Date, will not have outstanding, any options to purchase, or
any rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue
or sell any shares of Common Stock or any such warrants, convertible
securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements, and the
options or other rights granted thereunder, set forth in the
Prospectus accurately and fairly presents the information required to
be shown with respect to such plans, arrangements, options and rights.
(h) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Georgia. The Company is
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duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its properties
(owned, leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures to be so
qualified or in good standing which will not, in the aggregate, have a
Material Adverse Effect. The Company has all requisite power and
authority, and all necessary consents, approvals, authorizations,
orders, registrations, qualifications, licenses and permits of and
from all public, regulatory or governmental agencies and bodies,
necessary to own, lease and operate its properties and conduct its
business as now being conducted and as described in the Registration
Statement and the Prospectus, except as would not result in a Material
Adverse Effect, and no such consent, approval, authorization, order,
registration, qualification, license or permit contains a material
restriction not adequately disclosed in the Registration Statement and
the Prospectus. The Company has not received any written notice of any
proceedings relating to the revocation or modification of any such
consent, approval, authorization, order, registration, qualification,
license or permit which, singly or in the aggregate, if the subject of
an unfavorable decision, would have a Material Adverse Effect.
(i) Except as described in the Prospectus, there is no
litigation or governmental proceeding to which the Company is a party
or to which any property of the Company is subject or which is pending
or, to the knowledge of the Company, threatened against the Company
which might have a Material Adverse Effect or which is required to be
disclosed in the Registration Statement and the Prospectus.
(j) The Company maintains a system of internal accounting
controls sufficient to assure that: (i) all material transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of the Company's consolidated financial statements in
conformity in all material respects with generally accepted accounting
principles consistently applied and to maintain accountability for
assets; and (iii) assets are properly accounted for and safeguarded
against errors or loss from unauthorized use. Neither the Company,
nor, to the knowledge of the Company, any employee or agent of the
Company, has made any payment of funds of the Company or received or
retained any funds in violation of any law, rule or regulation, the
receipt or payment of which could have a Material Adverse Effect.
(k) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any
of the officers or directors of the Company (who are listed on
Schedule III hereto) or any of the members of the families of any of
them, except as disclosed in the Registration Statement and the
Prospectus.
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(l) Neither the Company nor any of its officers or directors
(who are listed on Schedule III hereto) has taken, nor will the
Company or, to the Company's knowledge, any of its officers or
directors (who are listed on Schedule III hereto), take, directly or
indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common
Stock to facilitate the sale or resale of the Shares.
(m) The financial statements, including the notes thereto,
and supporting schedules included in the Registration Statement and
the Prospectus present fairly the financial position of the Company as
of the dates indicated and the results of its operations for the
periods specified; except as otherwise stated in the Registration
Statement, said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated
therein; and, except as disclosed therein, the pro forma financial
information included in the Registration Statement and the Prospectus
has been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, and the
assumptions used in the preparation thereof are, in the Company's
opinion, reasonable. The selected financial data for the Company set
forth in the Prospectus have been prepared on a basis consistent with
the financial statements of the Company. No other financial statements
of the Company or any other entity are required by the Act or the
Rules and Regulations to be included in the Registration Statement or
the Prospectus.
(n) The Company has good and marketable title to all
properties and assets described in the Registration Statement and
Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are described in the
Prospectus or are not material to the business of the Company. The
Company has valid, subsisting and enforceable leases for the
properties described in the Prospectus as leased by it (the "Leased
Properties") subject only to the rights of any mortgagee, lienholder,
or other person or entity which has an interest in the Leased
Properties that is or may become superior to the interest of the
Company or the landlord of such Leased Properties. The Company has no
notice or knowledge of any material claim of any sort which has been,
or may be, asserted by anyone adverse to the Company's rights as
lessee or sublessee under any lease or sublease described above, or
affecting or questioning the Company's rights to the continued
possession of the leased or subleased premises under any such lease or
sublease in conflict with the terms thereof. The Company owns or
leases all such properties as are necessary to its operations as now
conducted.
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(o) The Company maintains insurance with insurers of
recognized financial responsibility against such losses and risks and
in such amounts as management believes is appropriate to the business
of the Company and all such policies are in full force and effect. 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.
(p) Except as described in the Registration Statement and the
Prospectus, there is no factual basis for any action, suit or other
proceeding involving the Company or any of its material assets for any
failure of the Company to comply with any requirements of federal,
state or local regulation relating to air, water, solid waste
management, hazardous or toxic substances, or the protection of health
or the environment. To the best of the Company's knowledge, there has
not been a release of any "hazardous substances in a reportable
quantity," as those terms are defined in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601
et seq. ("CERCLA"), by the Company on or at properties leased by the
Company. The Company has not received notice or request of information
under Section 104 of CERCLA or comparable state laws regarding an
investigation evaluating whether any remedial action is needed to
respond to a release or threatened release of any hazardous substance
at properties leased by the Company.
(q) All documents or contracts required to be filed as
exhibits to the Registration Statement to which the Company is a party
have been filed as exhibits to the Registration Statement and have
been duly authorized, executed and delivered by the Company,
constitute valid and binding agreements of the Company and are
enforceable against the Company in accordance with the terms thereof,
except where the lack of authorization, execution, delivery or
enforceability of any such contract would not have a Material Adverse
Effect.
(r) Except as described in the Prospectus, no holder of
securities of the Company has any rights to the registration of
securities of the Company because of the filing of the Registration
Statement or otherwise in connection with the sale of the Shares
contemplated hereby.
(s) The Company is not, and upon consummation of the
transactions contemplated hereby will not be, subject to registration
as an "investment company" under the Investment Company Act of 1940,
as amended.
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(t) No labor dispute with the employees of the Company exists
or, to the Company's knowledge, is threatened or imminent that would
have a Material Adverse Effect.
(u) The Company owns or possesses, or can acquire on
reasonable terms, all material trademarks, service marks, trade names,
licenses, copyrights and proprietary or other confidential information
currently employed by it in connection with its business, and the
Company has not received any notice of infringement of any asserted
rights of any third party with respect to the foregoing which, singly
or in the aggregate, if the subject of an unfavorable decision, would
have a Material Adverse Effect.
(v) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a Material Adverse Effect) and has paid all taxes
required to be paid by it and any other assessment, fine or penalty
levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is
currently being contested in good faith or as described in or
contemplated by the Prospectus, and except in any case in which the
failure so to pay would not have a Material Adverse Effect.
(w) The Company owns no shares of stock or any other equity
securities of any corporation and has no subsidiaries as defined by
Regulation S-X. The Company has no equity interest in any firm,
partnership, association or other entity, except as described in or
contemplated by the Prospectus.
(x) No event has occurred that will, with notice or the
passage of time or both, (i) conflict with or result in a breach of
any of the terms and provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would constitute a
default) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
pursuant to any agreement, instrument, franchise, license or permit to
which the Company is a party or by which the Company or its properties
may be bound, except for such conflicts, breaches or defaults which
would not have a Material Adverse Effect or (ii) conflict with any
provision of the articles of incorporation or bylaws of the Company or
(iii) conflict with or violate any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company or any
of its properties or assets, except for such conflicts or violations
which would not have a Material Adverse Effect.
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(y) The Shares have been approved for listing on the National
Association of Securities Dealers Automated Quotation National Market
System (the "Nasdaq National Market").
(z) The description of the Company's Year 2000 readiness set
forth under the heading "Year 2000 Compliance" in the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" section of the Prospectus is accurate and complete in all
material respects.
(aa) Each certificate signed by any officer of the Company
and delivered to the Representatives or counsel for the Underwriters
shall be deemed to be a representation and warranty by the Company,
and not by such officer in an individual capacity, to each Underwriter
as to the matters covered thereby.
1A. Representations and Warranties of the Selling Shareholders. Each
Selling Shareholder, severally and not jointly, represents and warrants to the
Underwriters that:
(a) At the date hereof, such Selling Shareholder has, and at
the time of delivery thereof hereunder, such Selling Shareholder will
have (i) sole legal and beneficial ownership of the Shares to be sold
by such Selling Shareholder hereunder, free and clear of any claims,
liens, encumbrances or security interests and (ii) full legal right,
power and authority to sell, transfer and deliver the Shares to be
sold by such Selling Shareholder to the Underwriters hereunder and to
make the representations, warranties and agreements made by such
Selling Shareholder herein. Upon delivery of and payment for the
Shares to be sold by the Selling Shareholder hereunder, such Selling
Shareholder will deliver sole legal and beneficial ownership thereof,
free and clear of any claims, liens, encumbrances or security
interests.
(b) On the Closing Date and on the Additional Closing Date,
if any, all stock transfer and other taxes (other than income taxes)
which are required to be paid in connection with the sale and transfer
of the Shares to be sold by such Selling Shareholder to the several
Underwriters hereunder will have been fully paid or provided for and
all laws imposing such taxes will have been complied with in all
material respects.
(c) The execution, delivery, and performance of this
Agreement and the Custody Agreement (as hereinafter defined) and the
consummation of the transactions contemplated hereby and thereby do
not and will not, with notice or the passage of time or both, (i)
conflict with or result in a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of
time, or both, would constitute a default) under, or result in the
creation or imposition
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of any lien, charge or encumbrance upon any property or assets of such
Selling Shareholder pursuant to, any agreement, instrument, franchise,
license or permit to which such Selling Shareholder is a party or by
which such Selling Shareholder's properties or assets may be bound or
(ii) violate or conflict with any provision of the articles of
incorporation or bylaws of such Selling Shareholder, as applicable, or
any judgment, decree, order, statute, rule or regulation of any court
or any public, governmental or regulatory agency or body having
jurisdiction over such Selling Shareholder or any of such properties
or assets. No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any
public, governmental or regulatory agency or body having jurisdiction
over such Selling Shareholder or any of such properties or assets is
required for the execution, delivery and performance of this Agreement
or the Custody Agreement by such Selling Shareholder or the
consummation of the transactions contemplated hereby and thereby,
including the sale and delivery of the Shares to be sold and delivered
by such Selling Shareholder hereunder, except the registration under
the Act of the Shares and such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses and permits
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters.
(d) The sale of the Shares proposed to be sold by the Selling
Shareholder is not prompted by such Selling Shareholder's knowledge of
any material nonpublic information regarding the Company.
(e) At the time of the effectiveness of the Registration
Statement or the effectiveness of any post-effective amendment to the
Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b) or Rule 434 of the Regulations,
when any supplement to or amendment of the Prospectus is filed with
the Commission and at the Closing Date and the Additional Closing
Date, if any, all information with respect to such Selling Shareholder
contained in the Registration Statement and the Prospectus and any
amendments thereof and supplements thereto in reliance upon and in
conformity with information relating to such Selling Shareholder
furnished to the Company by or on behalf of such Selling Shareholder
expressly for use therein complied or will comply in all material
respects with the applicable provisions of the Act and the
Regulations. The Registration Statement and the Prospectus and any
amendments thereof and supplements thereto contain and will contain
all statements with respect to such Selling Shareholder required to be
stated therein in accordance with the Act and the Regulations, and do
not or will not contain an untrue statement of a material fact and do
not or will not omit to state any material fact regarding such Selling
Shareholder required to be stated therein or necessary in order to
make the statements therein (i) in the case of the Registration
Statement, not misleading and (ii) in the case of
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the Prospectus, in light of the circumstances under which they were
made, not misleading. When any related preliminary prospectus was
first filed with the Commission (whether filed as part of the
registration statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) of the Regulations) and
when any amendment thereof or supplement thereto was first filed with
the Commission, all information with respect to such Selling
Shareholder contained in such preliminary prospectus and any
amendments thereof and supplements thereto complied in all material
respects with the applicable provisions of the Act and the Regulations
and did not contain an untrue statement of a material fact regarding
such Selling Shareholder and did not omit to state any material fact
regarding such Selling Shareholder required to be stated therein or
necessary in order to make the statements therein in light of the
circumstances under which they were made not misleading.
(f) Other than as permitted by the Act and the Regulations,
such Selling Shareholder has not distributed and will not distribute
any preliminary prospectus, the Prospectus or any other offering
material in connection with the offering or sale of the Shares. Such
Selling Shareholder has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common
Stock to facilitate the sale or resale of the Shares.
(g) Such Selling Shareholder has full right, power and
authority to enter into this Agreement and the Custody Agreement. All
authorizations and consents necessary for the execution and delivery
by such Selling Shareholder of this Agreement and the Custody
Agreement and the performance of the transactions contemplated hereby
and thereby have been obtained. Each of this Agreement and the Custody
Agreement has been duly authorized, executed and delivered by or on
behalf of such Selling Shareholder and constitutes a valid and binding
agreement of such Selling Shareholder and is enforceable against such
Selling Shareholder in accordance with its terms, except, in the case
of enforceability, as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws now or hereafter in effect
relating to the availability of remedies and by general principles of
equity and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy
underlying such laws.
(h) Each Selling Shareholder has duly executed and delivered
in the form heretofore furnished to the Representatives a custody
agreement ("Custody Agreement") with Reliance Trust Company, Atlanta,
Georgia as the custodian ("Custodian").
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(i) Each certificate signed by such Selling Shareholder and
delivered to the Representatives or counsel for the Underwriters shall
be deemed to be a representation and warranty by such Selling
Shareholder to each Underwriter as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company agrees to sell to the
Underwriters 2,100,000 Firm Shares, each Selling Shareholder agrees to
sell to the Underwriters the number of Firm Shares set forth opposite
such Selling Shareholder's name in Schedule II hereto, and the
Underwriters, severally and not jointly, agree to purchase from the
Company and each of the Selling Shareholders, at a purchase price per
share of $__________, the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any
additional number of Shares which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of
Xxxxxxxx Xxxxxxx LLP ("Underwriters' Counsel"), Atlanta, Georgia, or
at such other place as shall be agreed upon by the Representatives and
the Company, at 10:00 A.M. on the third or fourth business day (as
permitted under Rule 15c6-1 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (unless postponed in accordance with
the provisions of Section 9 hereof) following the date of the
effectiveness of the Registration Statement (or, if the Company has
elected to rely upon Rule 430A of the Regulations, the third or fourth
business day (as permitted under Rule 15c6-1 under the Exchange Act)
after the determination of the initial public offering price of the
Shares), or such other time not later than ten business days after
such date as shall be agreed upon by the Representatives and the
Company (such time and date of payment and delivery being herein
called the "Closing Date"). Payment shall be made to the Company and
each of the Selling Shareholders by wire transfer in same day funds,
against delivery to the Representatives for the respective accounts of
the Underwriters of certificates for the Firm Shares to be purchased
by them. Certificates for the Firm Shares shall be registered in such
name or names and in such authorized denominations as the
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Representatives may request in writing at least two full business days
prior to the Closing Date. The Company and each of the Selling
Shareholders will permit the Representatives to examine and package
such certificates for delivery at least one full business day prior to
the Closing Date.
(c) In addition, the Company hereby grants to the
Underwriters the option to purchase up to 100,000 Additional Shares,
and each of the Selling Shareholders hereby grants to the Underwriters
the option to purchase up to the number of Additional Shares set forth
opposite such Selling Shareholder's name in Schedule II hereto, at the
same purchase price per share to be paid by the Underwriters to the
Company and the Selling Shareholders for the Firm Shares as set forth
in this Section 2, for the sole purpose of covering over-allotments in
the sale of Firm Shares by the Underwriters. This option may be
exercised at any time, in whole or in part, on or before the thirtieth
day following the date of the Prospectus, by written notice by the
Representatives to the Company. Such notice shall set forth the
aggregate number of Additional Shares as to which the option is being
exercised and the date and time, as reasonably determined by the
Representatives, when the Additional Shares are to be delivered (such
date and time being herein sometimes referred to as the "Additional
Closing Date"); provided, however, that the Additional Closing Date
shall not be earlier than the Closing Date or earlier than the second
full business day after the date on which the option shall have been
exercised nor later than the eighth full business day after the date
on which the option shall have been exercised (unless such time and
date are postponed in accordance with the provisions of Section 9
hereof). Certificates for the Additional Shares shall be registered in
such name or names and in such authorized denominations as the
Representatives may request in writing at least two full business days
prior to the Additional Closing Date. The Company and each of the
Selling Shareholders will permit the Representatives to examine and
package such certificates for delivery at least one full business day
prior to the Additional Closing Date.
The number of Additional Shares to be sold to each
Underwriter shall be the number which bears the same ratio to the
aggregate number of Additional Shares being purchased as the number of
Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto (or such number increased as set forth in Section 9
hereof) bears to 2,500,000, subject, however, to such adjustments to
eliminate any fractional shares as the Representatives in their sole
discretion shall make.
Payment for the Additional Shares shall be made by wire
transfer in same day funds, at the offices of Underwriters' Counsel,
or such other location as may be mutually acceptable, upon delivery of
the certificates for the Additional Shares to the Representatives for
the respective accounts of the Underwriters.
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3. Offering. Upon the authorization by the Representatives of the
release of the Firm Shares, the Underwriters propose to offer the Shares for
sale to the public upon the terms set forth in the Prospectus.
4. Covenants of the Company and the Selling Shareholders. The Company
and the Selling Shareholders, severally and not jointly, covenant and agree
with the Underwriters that:
(a) If the Registration Statement has not yet been declared
effective, the Company will use its best efforts to cause the
Registration Statement and any amendments thereto to become effective
as promptly as possible, and if Rule 430A is used or the filing of the
Prospectus is otherwise required under Rule 424(b) or Rule 434, the
Company will file the Prospectus (properly completed if Rule 430A has
been used) pursuant to Rule 424(b) or Rule 434 within the prescribed
time period and will provide evidence satisfactory to the
Representatives of such timely filing. If the Company elects to rely
on Rule 434, the Company will prepare and file a term sheet that
complies with the requirements of Rule 434.
The Company will notify the Representatives immediately (and,
if requested by the Representatives, will confirm such notice in
writing) (i) when the Registration Statement and any amendments
thereto become effective, (ii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the
Prospectus or for any additional information, (iii) of the mailing or
the delivery to the Commission for filing of any amendment of or
supplement to the Registration Statement or the Prospectus, (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective
amendment thereto or of the initiation, or the threatening, of any
proceedings therefor, (v) of the receipt of any comments from the
Commission, and (vi) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Shares for
sale in any jurisdiction or the initiation or threatening of any
proceeding for that purpose. If the Commission shall propose or enter
a stop order at any time, the Company will make every reasonable
effort to prevent the issuance of any such stop order and, if issued,
to obtain the lifting of such order as soon as possible. The Company
will not file any amendment to the Registration Statement or any
amendment of or supplement to the Prospectus (including the prospectus
required to be filed pursuant to Rule 424(b) or Rule 434) that differs
from the prospectus on file at the time of the effectiveness of the
Registration Statement before or after the effective date of the
Registration Statement to which the Representatives shall reasonably
object in writing after being timely furnished in advance a copy
thereof.
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(b) If at any time when a prospectus relating to the Shares
is required to be delivered under the Act any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would, in the judgment of the Underwriters or the
Company, include an 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, in the light of the circumstances under
which they were made, not misleading, or if it shall be necessary at
any time to amend or supplement the Prospectus or Registration
Statement to comply with the Act or the Regulations, the Company will
notify the Representatives promptly and prepare and file with the
Commission an appropriate amendment or supplement (in form and
substance satisfactory to the Representatives) which will correct such
statement or omission and will use its best efforts to have any
amendment to the Registration Statement declared effective as soon as
possible.
(c) The Company will promptly deliver to the Representatives
three signed copies of the Registration Statement, including exhibits,
and all amendments thereto, and the Company will promptly deliver to
each of the Underwriters such number of copies of any preliminary
prospectus, the Prospectus, the Registration Statement, and all
amendments of and supplements to such documents, if any, as the
Representatives may reasonably request.
(d) The Company will endeavor in good faith, in cooperation
with the Representatives, at or prior to the time of effectiveness of
the Registration Statement, to qualify the Shares for offering and
sale under the securities laws relating to the offering or sale of the
Shares of such jurisdictions as the Representatives may designate and
to maintain such qualification in effect for so long as required for
the distribution thereof; except that in no event shall the Company be
obligated in connection therewith to qualify as a foreign corporation
or to execute a general consent to service of process.
(e) The Company will make generally available (within the
meaning of Section 11(a) of the Act) to its security holders and to
the Representatives as soon as practicable, but not later than 45 days
after the end of its fiscal quarter in which the first anniversary
date of the effective date of the Registration Statement occurs, an
earning statement (in form complying with the provisions of Rule 158
of the Regulations) covering a period of at least twelve consecutive
months beginning after the effective date of the Registration
Statement.
(f) During the period of 90 days from the date of the
Prospectus, the Company and the Selling Shareholders will not, without
the prior written consent of Bear, Xxxxxxx & Co. Inc. issue, sell,
offer or agree to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any Common Stock (or any
securities
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convertible into, exercisable for or exchangeable for Common Stock),
and the Company will obtain the undertaking of each of its officers,
directors, and such shareholders as have been heretofore designated by
the Representatives and listed on Schedule III hereto not to engage in
any of the aforementioned transactions on their own behalf, other than
the Company's and the Selling Shareholders' sale of Shares hereunder,
and (i) the issuance of Common Stock by the Company upon the exercise
of options granted pursuant to the Company's Stock Option and
Incentive Award Plan (the "Plan") that are outstanding as of the date
of this Underwriting Agreement; (ii) the grant by the Company of stock
options pursuant to the Plan, consistent with past practices, so long
as such stock options do not vest and are not exercisable during the
aforementioned period of 90 days; and (iii) bona fide gifts made in
accordance with and subject to the further provisions of Section 6(h)
hereof.
(g) During a period of three years from the effective date of
the Registration Statement, the Company will furnish to the
Representatives copies of (i) all reports to its shareholders; and
(ii) all reports, financial statements and proxy or information
statements filed by the Company with the Commission or any national
securities exchange.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
(i) The Company will use its best efforts to cause the Shares
to be listed for inclusion in the Nasdaq National Market.
(j) Neither the Company, nor any of its officers or
directors, nor the Selling Shareholders, will take, directly or
indirectly, any action designed to cause or result in, or which
constitutes or might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common
Stock to facilitate the sale or resale of the Shares.
(k) The Company, during the period when the Prospectus is
required to be delivered under the Act or the Exchange Act, will file
all documents required to be filed with the Commission pursuant to
Sections 13, 14 or 15 of the Exchange Act within the time periods
required by the Exchange Act and the rules and regulations thereunder.
(l) As promptly as practicable after the Selling Shareholders
are advised thereof, the Selling Shareholders will advise the
Representatives and, if requested by the Representatives, confirm such
advice in writing, (i) of receipt by the Selling Shareholders, or by
any representative of the Selling Shareholders, of any communication
from the Commission relating to the Registration Statement, the
Prospectus or any
-16-
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preliminary prospectus, or any notice or order from the Commission
relating to the Company or the Selling Shareholders in connection with
the transactions contemplated hereby and (ii) of the happening of any
event, at any time prior to the date on which the distribution of the
Shares as contemplated herein and in the Prospectus has been
completed, that in the judgment of the Selling Shareholders makes any
statement made in the Registration Statement untrue or that requires
the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(m) The Selling Shareholders will deliver to the Underwriters
prior to or on the Closing Date properly completed and executed United
States Treasury Department Forms W-9 (or other applicable form or
statement specified by the Treasury Department regulations in lieu
thereof).
5. Payment of Expenses. Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company and the Selling Shareholders hereunder, including
those in connection with (i) preparing, printing, duplicating, filing and
distributing the Registration Statement, as originally filed and all amendments
thereof (including all exhibits thereto), any preliminary prospectus, the
Prospectus and any amendments or supplements thereto (including, without
limitation, fees and expenses of the Company's and the Selling Shareholders'
accountants and counsel), reasonable expenses associated with the underwriting
documents (including this Agreement, the Agreement Among Underwriters, and the
Selling Agreement and all other documents related to the public offering of the
Shares (including those supplied to the Underwriters in quantities as
hereinabove stated), (ii) the issuance, transfer and delivery of the Shares to
the Underwriters, including any transfer or other taxes payable thereon, (iii)
the qualification of the Shares under state or foreign securities or Blue Sky
laws, including the costs of printing and mailing a "Blue Sky Survey" and the
reasonable fees of counsel for the Underwriters and such counsel's
disbursements in relation thereto, (iv) listing of the Shares on the Nasdaq
Stock Market's National Market, (v) filing fees of the Commission and the
National Association of Securities Dealers, Inc., (vi) the cost of printing
certificates representing the Shares, and (vii) the cost and charges of any
transfer agent or registrar.
6. Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company and the Selling Shareholders herein contained, as of
the date hereof and as of the Closing Date (for purposes of this Section 6,
"Closing Date" shall refer to the Closing Date for the Firm Shares and any
Additional Closing Date, if different, for the Additional Shares), to the
absence from any
-17-
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certificates, opinions, written statements or letters furnished to the
Representatives or to Underwriters' Counsel pursuant to this Section 6 of any
misstatement or omission, to the performance by the Company and the Selling
Shareholders of their respective obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective
and all necessary foreign regulatory or stock exchange approval shall
have been received not later than 5:30 P.M., New York time, on the
date of this Agreement, or at such later time and date as shall have
been consented to in writing by the Representatives; if the Company
shall have elected to rely upon Rule 430A or Rule 434 of the
Regulations, the Prospectus shall have been filed with the Commission
in a timely fashion in accordance with Section 4(a) hereof; and, at or
prior to the Closing Date no stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereof
shall have been issued and no proceedings therefor shall have been
initiated or threatened by the Commission.
(b) At the Closing Date the Representatives shall have
received the opinion of Xxxxxxxxxx Xxxxxxxx LLP, counsel for the
Company and for Xxxxx X. Xxxxxxx (a Selling Shareholder listed on
Schedule II hereto), dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of Georgia. The Company is duly qualified and in good
standing as a foreign corporation in each jurisdiction in
which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures
to be so qualified or in good standing which will not in the
aggregate have a Material Adverse Effect on the Company. The
Company has all requisite corporate authority to own, lease
and license its respective properties and conduct its
business as now being conducted and as described in the
Registration Statement and the Prospectus.
(ii) The authorized capital stock of the Company is
as set forth in the Registration Statement and the Prospectus
under the caption "Capitalization." All of the outstanding
shares of Common Stock are duly and validly authorized and
validly issued, fully paid and nonassessable and were not
issued in violation of, or subject to, any preemptive rights
arising by operation of law or under the Company's articles
of incorporation or bylaws or, to such counsel's knowledge,
any other contractual or similar rights. The Shares to be
delivered on the Closing
-18-
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Date have been duly and validly authorized and, when issued
and delivered by the Company or the Selling Shareholders in
accordance with this Agreement, will be validly issued, fully
paid and nonassessable and will not have been issued in
violation of, or subject to, any preemptive rights arising by
operation of law or under the Company's articles of
incorporation or bylaws or, to such counsel's knowledge, any
other contractual or similar rights. The Common Stock, the
Firm Shares and the Additional Shares conform to the
description thereof contained in the Registration Statement
and the Prospectus.
(iii) The Common Stock currently outstanding is
listed, and the Shares to be sold under this Agreement to the
Underwriters are duly authorized for listing, on the Nasdaq
National Market.
(iv) Execution, delivery and performance by the
Company of this Agreement have been duly authorized by all
necessary corporate action on behalf of the Company, and such
counsel shall confirm to the Underwriters that the Agreement
has been duly executed and delivered on behalf of the
Company.
(v) There is no litigation or governmental or other
action, suit, proceeding or investigation before any court or
before or by any regulatory or governmental agency or body
pending or threatened against, or involving the properties or
business of, the Company which is required to be disclosed in
the Registration Statement and the Prospectus which is not so
disclosed therein (it being understood that such opinion is
limited to those matters handled on behalf of the Company by
such counsel and those matters identified and listed on an
officer's certificate provided to such counsel and furnished
with the opinion of such counsel).
(vi) The execution, delivery, and performance of
this Agreement and the consummation of the transactions
contemplated hereby by the Company (i) do not and will not,
with notice or the passage of time or both, conflict with or
result in the breach of any of the terms and provisions of,
constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result
in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
pursuant to any agreement, instrument, franchise, license or
permit (known to such counsel) to which the Company is a
party or by which it or any of its properties or assets may
be subject and (ii) do not and will not, with notice or the
passage of time or both, violate or conflict with (A) any
provision of the articles of incorporation or bylaws of the
Company, (B) any of the Company's existing obligations under
any judgment,
-19-
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decree or order of any court or any governmental or
regulatory agency or body having jurisdiction over the
Company or any of its properties or assets, or (C) any
statute, rule, regulation or other law which is known to such
counsel to be applicable to the Company where (as to clauses
(B) and (C)) such violation would reasonably be expected to
have a material adverse effect on the validity, performance
or enforceability of any of the terms of this Agreement
applicable to the Company. No consent, approval,
authorization, order, registration, filing, qualification,
license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction
over the Company or of any of its properties or assets is
required for the execution, delivery and performance of this
Agreement by the Company or the consummation of the
transactions contemplated hereby, except for (1) such as may
be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares
by the Underwriters (as to which such counsel need express no
opinion) and (2) such as may have been obtained under the Act
and the Regulations.
(vii) The Registration Statement and the Prospectus
and any amendments thereof or supplements thereto (other than
the financial statements and schedules and other financial
data included or incorporated by reference therein, as to
which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the
Regulations.
(viii) Based solely on telephone conversations
between such counsel and the Staff, the Registration
Statement has become effective under the Act, and, to the
best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any
post-effective amendment thereof has been issued under the
Act and no proceedings therefor have been initiated or
threatened by the Commission under the Act. All filings
required by Rule 424(b) of the Regulations have been made.
(ix) The statements made in the Registration
Statement and the Prospectus under the captions "Dividend
Policy," "Capitalization" and "Description of Capital Stock,"
to the extent that they constitute summaries of documents
referred to therein or matters of law or legal conclusions,
are accurate summaries in all material respects and fairly
present the information disclosed therein.
(x) The Company is not an "investment company" or a
company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
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(xi) Such counsel shall confirm to the Underwriters
that this Agreement and the Custody Agreement have been duly
executed and delivered by Xxxxx X. Xxxxxxx. Each constitutes a
valid and binding obligation of Xxxxx X. Xxxxxxx and, except
for the indemnification provisions thereof, as to which such
counsel need express no opinion, the Custody Agreement is
enforceable against Xxxxx X. Xxxxxxx in accordance with its
terms.
(xii) The execution, delivery, and performance of
this Agreement and the Custody Agreement by Xxxxx X. Xxxxxxx
(i) do not and will not, with notice or the passage of time or
both, result in a breach of any of the terms and provisions
of, constitute a default (or an event which, with notice or
the passage of time or both, would constitute a default)
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of Xxxxx X.
Xxxxxxx pursuant to any agreement, instrument, franchise,
license or permit to which Xxxxx X. Xxxxxxx is a party or by
which any of his properties or assets may be bound, where such
default or breach would reasonably be expected to have a
material adverse effect on the ability of Xxxxx X. Xxxxxxx to
perform his obligations under the Agreement or to impose any
liability upon any one or more of the Underwriters and (ii) do
not and will not, with notice or the passage of time or both,
violate (A) any of Xxxxx X. Xxxxxxx'x existing obligations
under any judgment, decree or order of any court or any
governmental or regulatory agency or body having jurisdiction
over Xxxxx X. Xxxxxxx or any of his properties or assets, or
(B) any statute, rule, regulation or other law which is known
to such counsel to be applicable to Xxxxx X. Xxxxxxx where
such violation would reasonably be expected to have a material
adverse effect on the validity, performance or enforceability
of any of the terms of this Agreement or the Custody
Agreement applicable to Xxxxx X. Xxxxxxx. No consent,
approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any
governmental or regulatory agency or body having jurisdiction
over Xxxxx X. Xxxxxxx or any of his properties or assets is
legally required for the execution, delivery and performance
of this Agreement or the Custody Agreement by Xxxxx X.
Xxxxxxx, except for (1) such as may be required under state
securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters (as to
which such counsel need express no opinion), and (2) such as
may be required under the Act and the Regulations.
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(xiii) Xxxxx X. Xxxxxxx has good and valid title to
all of the Shares to be sold by him pursuant to this Agreement
and owns such Shares free of all restrictions on transfer,
liens, encumbrances, security interests, equities and claims
whatsoever other than pursuant to the Custody Agreement and
the Underwriting Agreement and other than any such restriction
on transfer, lien, encumbrance, equity or claim created by an
Underwriter or resulting from any actions taken by an
Underwriter. Upon delivery of, and payment for, the Shares to
be sold by Xxxxx X. Xxxxxxx pursuant to this Agreement, Xxxxx
X. Xxxxxxx will deliver sole legal and beneficial ownership
thereof, free and clear of any claims, liens, encumbrances or
security interests. In rendering such opinion, such counsel
may assume that the Underwriters are purchasing such Shares in
good faith, for value and without notice of any defect in
title of any, or adverse claims against any, of the Shares
being purchased from Xxxxx X. Xxxxxxx.
In addition, such opinion shall also contain a statement that
such counsel has participated in conferences with officers and
representatives of the Company, representatives of the independent
public accountants for the Company and representatives of the
Underwriters at which the contents of the Registration Statement and
the Prospectus and related matters were discussed, and no facts have
come to the attention of such counsel that cause such counsel to
believe that either the Registration Statement at the time it became
effective (including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule
430A(b) or Rule 434, if applicable), or any amendment thereof made
prior to the Closing Date as of the date of such amendment, contained
an untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of its
date (or any amendment thereof or supplement thereto made prior to the
Closing Date as of the date of such amendment or supplement) and as of
the Closing Date contained or contains an untrue statement of a
material fact or omitted or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
(it being understood that in each case such counsel need express no
belief or opinion with respect to the financial statements, schedules
and other financial data included or incorporated by reference
therein).
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' Counsel) of other counsel
reasonably acceptable to Underwriters' Counsel, familiar with the
applicable laws; and (B) as to matters of fact, to
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the extent they deem proper, on certificates of responsible officers
of the Company and certificates or other written statements of
officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel. The opinion of such
counsel for the Company and for Xxxxx X. Xxxxxxx shall state that the
opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, you and they are justified in relying
thereon.
(c) At the Closing Date, the Representatives shall have
received the opinion of Xxxxxxxxx X. Xxxxxxxx, Esq., General Counsel
of ITC Service Company (a Selling Shareholder listed on Schedule II
hereto), dated the Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel, to the
effect that:
(i) ITC Service Company has been duly organized and
is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation. ITC Service
Company has the requisite corporate power and authority to
enter into this Agreement and the Custody Agreement and to
sell, assign, transfer, and deliver the Shares to be sold by
it thereunder in the manner provided therein.
(ii) Such counsel shall confirm to the Underwriters
that this Agreement and the Custody Agreement have been duly
authorized, executed and delivered by ITC Service Company.
Each constitutes a valid and binding obligation of ITC Service
Company and, except for the indemnification provisions
thereof, as to which such counsel need express no opinion, the
Custody Agreement is enforceable against ITC Service Company
in accordance with its terms.
(iii) The execution, delivery, and performance of
this Agreement and the Custody Agreement by ITC Service
Company (i) do not and will not, with notice or the passage of
time or both, result in a breach of any of the terms and
provisions of, constitute a default (or an event which, with
notice or the passage of time or both, would constitute a
default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of ITC
Service Company pursuant to any agreement, instrument,
franchise, license or permit to which ITC Service Company is a
party or by which any of its properties or assets may be
bound, where such default or breach would reasonably be
expected to have a material adverse effect on the ability of
ITC Service Company to perform its obligations under the
Agreement
-23-
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or to impose any liability upon any one or more of the
Underwriters and (ii) do not and will not, with notice or the
passage of time or both, violate (A) any provision of the
articles of incorporation or bylaws of ITC Service Company or
any of ITC Service Company's existing obligations under any
judgment, decree or order of any court or any governmental or
regulatory agency or body having jurisdiction over ITC Service
Company or any of its properties or assets, or (B) any
statute, rule, regulation or other law which is known to such
counsel to be applicable to ITC Service Company where such
violation would reasonably be expected to have a material
adverse effect on the validity, performance or enforceability
of any of the terms of this Agreement or the Custody Agreement
applicable to ITC Service Company. No consent, approval,
authorization, order, registration, filing, qualification,
license or permit of or with any court or any governmental or
regulatory agency or body having jurisdiction over ITC Service
Company or any of his or its properties or assets is legally
required for the execution, delivery and performance of this
Agreement or the Custody Agreement by ITC Service Company,
except for (1) such as may be required under state securities
or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters (as to which
such counsel need express no opinion), (2) such as may be
required under the Act and the Regulations, and (3) such as
may be required by the NASD.
(iv) ITC Service Company has good and valid title to
all of the Shares to be sold by ITC Service Company pursuant
to this Agreement and owns such Shares free of all
restrictions on transfer, liens, encumbrances, security
interests, equities and claims whatsoever other than pursuant
to the Custody Agreement and the Underwriting Agreement and
other than any such restriction on transfer, lien,
encumbrance, equity or claim created by an Underwriter or
resulting from any actions taken by an Underwriter. Upon
delivery of, and payment for, the Shares to be sold by ITC
Service Company pursuant to this Agreement, ITC Service
Company will deliver good and valid title thereto, free and
clear of any claims, liens, encumbrances or security
interests. In rendering such opinion, such counsel may assume
that the Underwriters are purchasing such Shares in good
faith, for value and without notice of any defect in title of
any, or adverse claims against any, of the Shares being
purchased from ITC Service Company.
In rendering such opinion, such counsel may also
rely (A) as to matters involving the application of laws
other than the laws of the United States and jurisdictions in
which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions
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(in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable
to Underwriters' Counsel, familiar with the applicable laws;
and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of ITC
Service Company and certificates or other written statements
of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or
good standing of ITC Service Company and its subsidiaries,
provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel. The opinion of
such counsel for ITC Service Company shall state that the
opinion of any such other counsel is in form satisfactory to
such counsel and, in their opinion, you and they are
justified in relying thereon.
(d) All proceedings taken in connection with the sale of the
Firm Shares and the Additional Shares as herein contemplated shall be
satisfactory in form and substance to the Representatives and to
Underwriters' Counsel, and the Underwriters shall have received from
said Underwriters' Counsel a favorable opinion, dated as of the
Closing Date with respect to the issuance and sale of the Shares, the
Registration Statement and the Prospectus and such other related
matters as the Representatives may reasonably require, and the Company
and the Selling Shareholders shall have furnished to Underwriters'
Counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
(e) (i) At the Closing Date, the Representatives shall have
received a certificate signed on behalf of the Company by the Chief
Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date to the effect that (A) the condition set forth in
subsection (a) of this Section 6 has been satisfied, (B) as of the
date hereof and as of the Closing Date the representations and
warranties of the Company set forth in Section 1 hereof are accurate,
(C) as of the Closing Date, the obligations of the Company to be
performed hereunder on or prior thereto have been duly performed, and
(D) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company
has not sustained any material loss or interference with its business
or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or any
legal or governmental proceeding, and there has not been any change,
or any development involving a change, which had or will have a
Material Adverse Effect, except in each case as described in or
contemplated by the Prospectus.
(ii) At the Closing Date, the Representatives shall
have received a certificate of the Selling Shareholders dated the
Closing Date to the effect that (i) as of the date hereof and as of
the Closing Date the representations and warranties of such
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Selling Shareholders set forth in Section 1A above are accurate and
(ii) as of the Closing Date, the obligations of such Selling
Shareholders to be performed hereunder on or prior thereto have been
duly performed.
(f) At the time this Agreement is executed and at the Closing
Date, the Representatives shall have received a letter from Xxxxxx
Xxxxxxxx LLP, independent public accountants for the Company, dated,
respectively, as of the date of this Agreement and as of the Closing
Date, addressed to the Underwriters and in form and substance
satisfactory to the Representatives, to the effect that:
(i) they are independent certified public
accountants with respect to the Company within the meaning of
the Act and the Regulations and stating that the answer to
Item 10 of the Registration Statement is correct insofar as
it relates to them;
(ii) stating that, in their opinion, the financial
statements and schedules of the Company included in the
Registration Statement and the Prospectus and covered by
their opinion therein comply as to form in all material
respects with the applicable accounting requirements of the
Act and the applicable published rules and regulations of the
Commission thereunder;
(iii) on the basis of procedures consisting of a
reading of the latest available unaudited interim
consolidated financial statements of the Company, a reading
of the minutes of meetings and consents of the shareholders
and board of directors of the Company and the committees of
such board subsequent to December 31, 1998, inquiries of
officers and other employees of the Company who have
responsibility for financial and accounting matters of the
Company with respect to transactions and events subsequent to
December 31, 1998 and other specified procedures and
inquiries to a date not more than five days prior to the date
of such letter, nothing has come to their attention that
would cause them to believe that: (A) the unaudited
consolidated financial statements and schedules of the
Company presented in the Registration Statement and the
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act, and,
if applicable, the Exchange Act and the applicable published
rules and regulations of the Commission thereunder or that
such unaudited consolidated financial statements are not
fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited consolidated financial
statements included in the Registration Statement and the
Prospectus; (B) with respect to the period subsequent to
March 31, 1999 there were, as of the date of the most recent
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available monthly consolidated financial statements of the
Company, if any, and as of a specified date not more than
five days prior to the date of such letter, any changes in
the capital stock or other debt or indebtedness of the
Company or any decrease in the total assets or shareholders'
equity of the Company, in each case as compared with the
amounts shown in the most recent balance sheet presented in
the Registration Statement and the Prospectus, except for
changes or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur or which are
set forth in such letter; or (C) that during the period from
April 1, 1999 to the date of the most recent available
monthly consolidated financial statements of the Company, if
any, and to a specified date not more than five days prior to
the date of such letter, there was any decrease, as compared
with the corresponding period in the prior fiscal year, in
total revenues, or total or per share net income, except for
decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur or which are set forth in
such letter;
(iv) nothing has come to their attention that would
cause them to believe that the pro forma financial
information included in the Registration Statement does not
comply in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or
that the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of such
financial information; and
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, and other financial information pertaining to the
Company set forth in the Registration Statement and the
Prospectus, which have been specified by the Representatives
prior to the date of this Agreement, to the extent that such
amounts, numbers, percentages, and information may be derived
from the general accounting and financial records of the
Company or from schedules furnished by the Company, and
excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of
specified readings, inquiries, and other appropriate
procedures specified by the Representatives set forth in such
letter, and found them to be in agreement.
(g) Prior to the Closing Date, the Company and the Selling
Shareholders shall have furnished to the Representatives such further
information, certificates and documents as the Representatives may
reasonably request.
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(h) The Representatives shall have received from the
Company's directors, officers and shareholders as have been heretofore
designated by the Representatives and listed on Schedule III hereto an
agreement to the effect that such person will not, directly or
indirectly, without the Representatives' prior written consent, offer,
sell, offer or agree to sell, grant any option to purchase or
otherwise dispose (or announce any offer, sale, grant of an option to
purchase or other disposition) of any shares of Common Stock (or any
securities convertible into, exercisable for or exchangeable or
exercisable for shares of Common Stock) for a period of 90 days after
the date of the Prospectus, other than the Company's and the Selling
Shareholders' sale of Shares hereunder and other than transfers of
securities by bona fide gift, provided that any such transferee shall
have agreed in writing to be bound by the restrictions set forth in
such agreement and shall have certified to Bear, Xxxxxxx & Co. Inc.
that such transferee has been in compliance with such restrictions
from the original date of this Agreement.
(i) At the Closing Date, the Shares shall have been approved
for listing on the Nasdaq National Market.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the
Representatives or to Underwriters' Counsel pursuant to this Section 6 shall
not be in all material respects reasonably satisfactory in form and substance
to the Representatives and to Underwriters' Counsel, all obligations of the
Underwriters hereunder may be canceled by the Representatives at, or at any
time prior to, the Closing Date and the obligations of the Underwriters to
purchase the Additional Shares may be canceled by the Representatives at, or at
any time prior to, the Additional Closing Date. Notice of such cancellation
shall be given to the Company and the Selling Shareholders in writing, or by
telephone, telex or telegraph, confirmed in writing.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, liabilities, claims, damages
and expenses whatsoever as incurred (including but not limited to
attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon:
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(i) any untrue statement or alleged untrue statement
of a material fact contained in the registration statement for
the registration of the Shares under the Act, as originally
filed or any amendment thereof, or any related preliminary
prospectus or the Prospectus, or in any supplement thereto or
amendment thereof, or
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
(iii) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or
referred to in any losses, liabilities, claims, damages or
expenses arising out of or based upon matters covered by
clause (i) and (ii) above (provided that the Company shall not
be liable under this clause (iii) to the extent it is finally
judicially determined in a court of competent jurisdiction
that such losses, liabilities, claims, damages or expenses
resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Underwriter through
its gross negligence or willful misconduct);
provided, however, that the Company will not be liable in any such case to the
extent but only to the extent that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, any preliminary prospectus or the Prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Representatives expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus; and
provided, further, that this indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, liabilities, claims, damages or expenses
purchased Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any such amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if such is required by law, at or
prior to the written confirmation of the sale of such Shares to such person and
if the Prospectus (as so amended or supplemented) would have corrected the
defect giving rise to such loss, liability, claim, damage or expense. This
indemnity agreement will be in addition to, and shall not in any way impair or
otherwise limit, any liability which the Company may otherwise have, including
but not limited to liabilities under this Agreement and under applicable
securities laws.
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30
(b) ITC Service Company, in its capacity as a Selling
Shareholder, agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any
and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any such
claim or litigation), joint or several, to which they or any of them
may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement
of a material fact contained in the registration statement for
the registration of the Shares under the Act, as originally
filed or any amendment thereof, or any related preliminary
prospectus or the Prospectus, or in any supplement thereto or
amendment thereof, or
(ii) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, or
(iii) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or
referred to in any losses, liabilities, claims, damages or
expenses arising out of or based upon matters covered by
clause (i) and (ii) above (provided that ITC Service Company
shall not be liable under this clause (iii) to the extent it
is finally judicially determined in a court of competent
jurisdiction that such losses, liabilities, claims, damages or
expenses resulted directly from any such acts or failures to
act undertaken or omitted to be taken by such Underwriter
through its gross negligence or willful misconduct);
provided, however, that ITC Service Company in each case will be liable
only to the extent that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein
in reliance upon and in conformity with written information furnished
to the Company by or on behalf of ITC Service Company expressly for use
in the Registration Statement, any preliminary prospectus or the
Prospectus; and provided
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further, however, that in no case shall ITC Service Company, in its
capacity as a Selling Shareholder, be liable or responsible for
indemnification pursuant to this Section 7(b) for any amount in excess
of an amount equal to the net proceeds received by ITC Service Company
from the sale of its Shares pursuant to this Agreement. This indemnity
agreement will be in addition to, and shall not in any way impair or
otherwise limit, any liability which ITC Service Company may otherwise
have, including but not limited to liabilities under this Agreement and
under applicable securities laws. The Underwriters acknowledge that the
statements set forth under the captions "Principal and Selling
Shareholders" and "Related Party Transactions" in the Prospectus
constitute the only information furnished in writing to the Company by
or on behalf of ITC Service Company, in its capacity as a Selling
Shareholder, expressly for use in the registration statement relating
to the Shares as originally filed or in any amendment thereof, any
related preliminary prospectus or the Prospectus or in any amendment
thereof or supplement thereto, as the case may be.
(c) Xxxxx X. Xxxxxxx, in his capacity as a Selling
Shareholder, agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any
and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any such
claim or litigation), joint or several, to which they or any of them
may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement
of a material fact contained in the registration statement for
the registration of the Shares under the Act, as originally
filed or any amendment thereof, or any related preliminary
prospectus or the Prospectus, or in any supplement thereto or
amendment thereof, or
(ii) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, or
(iii) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or
referred to
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32
in any losses, liabilities, claims, damages or expenses
arising out of or based upon matters covered by clause (i) and
(ii) above (provided that Xxxxx X. Xxxxxxx shall not be liable
under this clause (iii) to the extent it is finally judicially
determined in a court of competent jurisdiction that such
losses, liabilities, claims, damages or expenses resulted
directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross
negligence or willful misconduct);
provided, however, that Xxxxx X. Xxxxxxx, in his capacity as a Selling
Shareholder, in each case will be liable in such capacity only to the
extent that any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by
or on behalf of Xxxxx X. Xxxxxxx, in his capacity as a Selling
Shareholder, expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus; and provided further,
however, that in no case shall Xxxxx X. Xxxxxxx, in his capacity as a
Selling Shareholder, be liable or responsible for indemnification
pursuant to this Section 7(c) for any amount in excess of an amount
equal to the net proceeds received by Xxxxx X. Xxxxxxx from the sale of
his Shares pursuant to this Agreement. This indemnity agreement will be
in addition to, and shall not in any way impair or otherwise limit, any
liability which Xxxxx X. Xxxxxxx may otherwise have, including but not
limited to liabilities under this Agreement and under applicable
securities laws. The Underwriters acknowledge that the statements set
forth under the captions "Management," "Principal and Selling
Shareholders" and "Related Party Transactions" in the Prospectus
constitute the only information furnished in writing to the Company by
or on behalf of Xxxxx X. Xxxxxxx, regarding his capacity as a Selling
Shareholder, expressly for use in the registration statement relating
to the Shares as originally filed or in any amendment thereof, any
related preliminary prospectus or the Prospectus or in any amendment
thereof or supplement thereto, as the case may be.
(d) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the
Company, each of the officers of the Company who shall have signed the
Registration Statement, the Selling Shareholders and each other person,
if any, who controls the Company or the Selling Shareholders within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees
and any and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened,
or any claim whatsoever, and any and all amounts paid in settlement of
any such claim or litigation), joint or several, to which they or any
of them may become subject under the
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33
Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement for the registration of the Shares under the Act, as
originally filed or any amendment thereof, or any related preliminary
prospectus or the Prospectus, or in any amendment thereof or supplement
thereto, 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, in each
case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives expressly for use therein;
provided, however, that in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder. This
indemnity will be in addition to, and shall not in any way impair or
otherwise limit, any liability which any Underwriter may otherwise
have, including but not limited to liabilities under this Agreement and
under applicable securities laws. The Company and the Selling
Shareholders acknowledge that the statements set forth in the last
paragraph of the cover page, and in the seventh, eighth and ninth
paragraphs under the caption "Underwriting" in the Prospectus
constitute the only information furnished in writing to the Company by
or on behalf of any Underwriter through the Representatives expressly
for use in the registration statement relating to the Shares as
originally filed or in any amendment thereof, any related preliminary
prospectus or the Prospectus or in any amendment thereof or supplement
thereto, as the case may be.
(e) Promptly after receipt by an indemnified party under
subsection (a), (b), (c) or (d) above of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof
is to be made against the indemnifying party under such subsection,
notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may
have under this Section 7). 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 it may elect by written notice
delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense
thereof with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel
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shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to have charge of
the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties
shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to
one or all of the indemnifying parties (in which case the indemnifying
parties shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties.
Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim
or action effected without its written consent; provided, however, that
such consent was not unreasonably withheld. Notwithstanding any other
provision of this Section 7(e), if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, such indemnifying party agrees
that it shall be liable for any settlement effected without its written
consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered
into, and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written
consent of each indemnified party, settle or compromise or consent to
entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated by this Section 7
(whether or not any indemnifying party is a party thereto), unless such
settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising or that may arise out
of such claim, action or proceeding.
8. Contribution. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company and the Selling
Shareholders, on the one hand, and the Underwriters, on the other hand, shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any such action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company any contribution received by
the Company from persons, other than the Underwriters, who may also be liable
for contribution, including persons who control the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the
Company who signed the Registration Statement and directors of the Company) as
incurred to which the Company, one or more of the
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Selling Shareholders and one or more of the Underwriters may be subject, in such
proportions as is appropriate to reflect the relative benefits received by the
Company and the Selling Shareholders, on the one hand, and the Underwriters, on
the other hand, from the offering of the Shares or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 7
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Selling Shareholders, on the one hand, and the Underwriters, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Shareholders, on the one hand, and the Underwriters, on the other hand,
shall be deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and the Selling Shareholders and (y) the
underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and the Selling Shareholders, on
the one hand, and of 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, the Selling Shareholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Selling Shareholders and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8 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 which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter be liable or responsible
for any amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, and (ii) 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. Notwithstanding the provisions of this Section 8 and the
preceding sentence, 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. For purposes of this Section 8, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each person, if any, who controls the Company or any Selling Shareholder within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to
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contribution as the Company or the Selling Shareholders, as the case may be,
subject in each case to clauses (i) and (ii) of this Section 8. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties, notify each party
or parties from whom contribution may be sought, but the omission to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 8 or otherwise. No party shall be liable for contribution with respect
to any action or claim settled without its consent; provided, however, that such
consent was not unreasonably withheld. The liability of each Selling Shareholder
under this Section 8 shall be limited to an amount equal to the total net
proceeds received by the Selling Shareholder from the sale of its Shares
pursuant to this Agreement.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares
hereunder, and if the Firm Shares or Additional Shares with respect to
which such default relates do not (after giving effect to arrangements,
if any, made by the Representatives pursuant to subsection (b) below)
exceed in the aggregate 10% of the number of Firm Shares or Additional
Shares, the number of Firm Shares or Additional Shares to which the
default relates shall be purchased by the non-defaulting Underwriters
in proportion to the respective proportions which the numbers of Firm
Shares set forth opposite their respective names in Schedule I hereto
bear to the aggregate number of Firm Shares set forth opposite the
names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, the
Representatives may in their discretion arrange for themselves or for
another party or parties (including any non-defaulting Underwriter or
Underwriters who so agree) to purchase such Firm Shares or Additional
Shares, as the case may be, to which such default relates on the terms
contained herein. In the event that within five calendar days after
such a default the Representatives do not arrange for the purchase of
the Firm Shares or Additional Shares, as the case may be, to which such
default relates as provided in this Section 9(b), this Agreement or, in
the case of a default with respect to the Additional Shares, the
obligations of the Underwriters to purchase and of the Company and the
Selling Shareholders to sell the Additional Shares shall thereupon
terminate, without liability on the part of the Company or the Selling
Shareholders with respect thereto (except in each case as provided in
Section 5, 7(a), 7(b), 7(c) and 8 hereof) or the Underwriters, but
nothing in this Agreement shall relieve a defaulting Underwriter or
Underwriters of its or their liability, if any, to the other
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37
Underwriters, the Company and the Selling Shareholders for damages
occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as
aforesaid, the Representatives or the Company shall have the right to
postpone the Closing Date or Additional Closing Date, as the case may
be, for a period, not exceeding five business days, in order to effect
whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and arrangements,
and the Company agrees to file promptly any amendment or supplement to
the Registration Statement or the Prospectus which, in the opinion of
Underwriters' Counsel, may thereby be made necessary or advisable. The
term "Underwriter" as used in this Agreement shall include any party
substituted under this Section 9 with like effect as if it had
originally been a party to this Agreement with respect to such Firm
Shares and Additional Shares.
10. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Underwriters, the Selling
Shareholders and the Company contained in this Agreement, including the
agreements contained in Section 5, the indemnity agreements contained in Section
7 and the contribution agreements contained in Section 8, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter or any controlling person thereof, by or on behalf of
any Selling Shareholder, or by or on behalf of the Company, any of its officers
and directors or any controlling person thereof, and shall survive delivery of
and payment for the Shares to and by the Underwriters. The representations
contained in Sections 1 and 1A and the agreements contained in Sections 5, 7, 8
and 11(d) hereof shall survive the termination of this Agreement, including
termination pursuant to Section 9 or 00 xxxxxx.
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00
00. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the later to
occur of (i) receipt by the Representatives and the Company of
notification of the effectiveness of the Registration Statement or (ii)
the execution of this Agreement. If the purchase price per Share has
not been agreed upon prior to 5:00 P.M., New York time, on the fifth
full business day after the Registration Statement shall have become
effective, this Agreement shall thereupon terminate without liability
to the Company, the Selling Shareholders or the Underwriters except as
herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying the
Representatives or by the Representatives notifying the Company and the
Selling Shareholders. Notwithstanding the foregoing, the provisions of
this Section 11 and of Sections 1, 5, 7 and 8 hereof shall at all times
be in full force and effect.
(b) The Representatives shall have the right to terminate this
Agreement at any time prior to the Closing Date or the obligations of
the Underwriters to purchase the Additional Shares at any time prior to
the Additional Closing Date, as the case may be, if (A) any domestic or
international event or act or occurrence has materially disrupted, or
in the opinion of the Representatives will in the immediate future
materially disrupt, the market for the Company's securities or
securities in general; or (B) if trading in the Shares on the Nasdaq
National Market shall have been suspended or materially limited; or (C)
if trading on the New York or American Stock Exchanges or the Nasdaq
National Market shall have been suspended, or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required, on the New York or American Stock
Exchanges or the Nasdaq National Market by the New York or American
Stock Exchanges or the Nasdaq Stock Market or by order of the
Commission or any other governmental authority having jurisdiction; or
(D) if a banking moratorium has been declared by a state or federal
authority or if any new restriction materially adversely affecting the
distribution of the Firm Shares or the Additional Shares, as the case
may be, shall have become effective; or (E) (i) if the United States
becomes engaged in hostilities or there is an escalation of hostilities
involving the United States or there is a declaration of a national
emergency or war by the United States or (ii) if there shall have been
such change in political, financial or economic conditions, if the
effect of any such event in (i) or (ii) as in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with
the offering, sale and delivery of the Firm Shares or the Additional
Shares, as the case may be, on the terms contemplated by the
Prospectus.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone, telex, or telegraph, confirmed in writing by
letter.
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(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to (i) notification by
the Representatives as provided in Section 11(a) hereof or (ii) Section
9(b) or 11(b) hereof), or if the sale of the Shares provided for herein
is not consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any
refusal, inability or failure on the part of the Company or the Selling
Shareholders to perform any agreement herein or comply with any
provision hereof, the Company will, subject to demand by the
Representatives, reimburse the Underwriters for all out-of-pocket
expenses (including the fees and expenses of their counsel), incurred
by the Underwriters in connection herewith.
12. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed, telecopied or telegraphed
and confirmed in writing, to such Underwriter c/o Bear, Xxxxxxx & Co. Inc., 000
Xxxx Xxxxxx, Xxx Xxxx, X.X. 00000, Attention: Equity Syndicate; if sent to the
Company or Xxxxx X. Xxxxxxx, shall be mailed, delivered, or telegraphed or
telecopied and confirmed in writing to the Company, Innotrac Corporation, 0000
Xxxxxxxxx Xxxxxxx, Xxxxxx, Xxxxxxx 00000, Attention: Chief Executive Officer;
and if sent to ITC Service Company, shall be mailed, delivered or telegraphed or
telecopied and confirmed in writing to ITC Service Company, 0000 X.X. Xxxxxxx
Xxxxx, Xxxx Xxxxx, Xxxxxxx 00000, Attention: Xxxxxxxxx X. Xxxxxxxx Esq. These
addresses may be changed by notice to the other parties.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters, the Selling Shareholder and the Company
and the controlling persons, directors, officers, employees and agents referred
to in Sections 7 and 8, and their respective successors and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Shares from any of the Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
15. Miscellaneous. The Representatives represent and warrant that they
have been authorized by the several Underwriters to enter into this Agreement on
their behalf and to act for them in the manner provided in this Agreement.
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If the foregoing correctly sets forth the understanding among the
Representatives, the Selling Shareholders and the Company, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among the parties hereto.
Very truly yours,
INNOTRAC CORPORATION
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
ITC SERVICE COMPANY, a Selling Shareholder
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
XXXXX X. XXXXXXX, a Selling Shareholder
By:
---------------------------------
Xxxxx X. Xxxxxxx
Accepted as of the date first above written:
BEAR, XXXXXXX & CO. INC.
By: Bear, Xxxxxxx & Co. Inc.
By:
-----------------------------------------
Name:
------------------------------
Title:
-----------------------------
On behalf of themselves and the other Underwriters
named in Schedule 1 hereto
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SCHEDULE I
Number of Firm Shares
Name of Underwriter to be Purchased
------------------- ---------------
Bear, Xxxxxxx & Co. Inc.
The Xxxxxxxx-Xxxxxxxx Company, LLC
X.X. Xxxxxxxx & Co.
42
SCHEDULE II
Selling Shareholder Firm Shares Additional Shares
------------------- ----------- -----------------
Xxxxx X. Xxxxxxx 300,000 200,000
ITC Service Company 100,000 75,000
43
SCHEDULE III
(Persons subject to Lock-Up Agreements)
Name Position(s)
---- -----------
Xxxxx X. Xxxxxxx Selling Shareholder, officer, director
ITC Service Company Selling Shareholder
Xxxxx X. Xxxxx Officer, director
Xxxxx X. Xxxxxx Officer, director
Xxxx X. Xxxxxxx, III Officer
Xxx X. Xxxxxx, Xx. Officer
Xxxxxxx X. Xxxxxx Officer
Will Xxxxxxxx Officer
Xxxxx X. Xxxxxxx Director
Xxxxxx X. Xxxxx Director
Xxxxxxx X. Xxxxx, III Director
