CyberShop International, Inc.
2,300,000 Shares */
Common Stock
($.001 par value)
Underwriting Agreement
New York, New York
, 1998
X.X Xxxxxxxxx, Towbin
Xxxxxxxxxx & Co. Inc.
c/o X.X. Xxxxxxxxx, Towbin
Swiss Bank Tower
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
CyberShop International, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, 2,300,000 shares of Common Stock, $.001 par value ("Common
Stock") of the Company, (the "Underwritten Securities"). The Company also
proposes to grant to the Underwriters an option to purchase up to 345,000
additional shares of Common Stock (the "Option Securities"; the Option
Securities, together with the Underwritten Securities, being hereinafter called
the "Securities"). In addition, the Company proposes to issue to the
Representatives 230,000 warrants (the "Warrants") which will initially entitle
the Representatives to purchase 230,000 shares of Common Stock of the Company
pursuant to the terms of a Warrant Agreement dated as of [ ], 1998 between the
Company and the Representatives (the "Warrant Agreement"). To the extent there
are no additional Underwriters listed on Schedule I other than you, the term
Representatives as used herein shall mean you, as Underwriters, and the terms
Representatives and Underwriters shall mean either the singular or plural as the
context requires.
--------
*/ Plus an option to purchase from CyberShop International, Inc. up to
345,000 additional shares to cover overallotments.
2
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Business Day" shall mean any day other than a
Saturday, a Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York City.
The term "Effective Date" shall mean each date and time that the Registration
Statement, any post-effective amendment or amendments thereto and any Rule
462(b) Registration Statement became or become effective. "Execution Time" shall
mean the date and time that this Agreement is executed and delivered by the
parties hereto. "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(a) and any preliminary prospectus included in the
Registration Statement at the Effective Date that omits Rule 430A Information.
"Prospectus" shall mean the prospectus relating to the Securities that is first
filed pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant
to Rule 424(b) is required, shall mean the form of final prospectus relating to
the Securities included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to in
paragraph 1(a), including exhibits and financial statements, as amended at the
Execution Time (or, if not effective at the Execution Time, in the form in which
it shall become effective) and, in the event any post-effective amendment
thereto or any Rule 462(b) Registration Statement becomes effective prior to the
Closing Date (as hereinafter defined), shall also mean such registration
statement as so amended or any Rule 462(b) Registration Statement, as the case
may be. Such term shall include any Rule 430A Information deemed to be included
therein at the Effective Date as provided by Rule 430A. "Rule 424", "Rule 430A"
and "Rule 462(b)" refer to such rules under the Act. "Rule 430A Information"
means information with respect to the Securities and the offering thereof
permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A. "Rule 462(b) Registration Statement" shall mean
a registration statement and any amendments thereto filed pursuant to Rule
462(b) relating to the offering covered by the initial registration statement.
1. Representations and Warranties. The Company represents and warrants
to, and agrees with, each Underwriter that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (file number
333-42707) on Form S-1, including a related preliminary prospectus, for
the registration under the Securities Act of 1933 (the
3
"Act") of the offering and sale of the Securities. The Company may have
filed one or more amendments thereto, including a related preliminary
prospectus, each of which has previously been furnished to you. The
Company will next file with the Commission either (i) prior to the
Effective Date of such registration statement, a further amendment to
such registration statement (including the form of final prospectus) or
(ii) after the Effective Date of such registration statement, a final
prospectus in accordance with Rules 430A and 424(b)(1) or (4). In the
case of clause (ii), the Company has included in such registration
statement, as amended at the Effective Date, all information (other
than Rule 430A Information) required by the Act and the rules
thereunder to be included in such registration statement and the
Prospectus. As filed, such amendment and form of final prospectus, or
such final prospectus, shall contain all Rule 430A Information,
together with all other such required information, and, except to the
extent the Representatives shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to you prior
to the Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and other
changes (beyond that contained in the latest Preliminary Prospectus) as
the Company has advised you, prior to the Execution Time, will be
included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date and on any date on which shares
sold in respect of the Underwriters' over-allotment option are
purchased, if such date is not the Closing Date (a "settlement date"),
the Prospectus (and any supplements thereto) will, comply in all
material respects with the applicable requirements of the Act and the
rules thereunder; on the Effective Date and at the Execution Time, the
Registration Statement did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), will not, and on the date of any filing
pursuant to Rule 424(b) and on the Closing Date and any settlement
date, the Prospectus (together with any supplement thereto) will not,
include any untrue statement of a material fact or omit to state a
4
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or
warranties as to the information contained in or omitted from the
Registration Statement, or the Prospectus (or any supplement thereto)
in reliance upon and in conformity with information furnished herein or
in writing to the Company by or on behalf of any Underwriter through
the Representatives specifically for inclusion in the Registration
Statement or the Prospectus (or any supplement thereto).
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware; CyberShop L.L.C., a New Jersey limited liability company (the
"Subsidiary"), has been duly organized and is validly existing as a
limited liability company in good standing under the laws of the State
of New Jersey; each of the Company and the Subsidiary has the power and
authority to own its properties and conduct its business as described
in the Prospectus, and is duly qualified to do business as a foreign
corporation or limited liability company, as applicable, and is in good
standing, under the laws of each jurisdiction which requires such
qualification except where failure to so qualify would not have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the
Subsidiary, taken as a whole.
(d) The Company's authorized equity capitalization is as set forth
in the Prospectus; the capital stock of the Company conforms in all
material respects to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock have been duly and
validly authorized and issued and are fully paid and nonassessable; the
Securities being sold hereunder have been duly and validly authorized,
and, when issued and delivered to and paid for by the Underwriters
pursuant to this Agreement, will be fully paid and nonassessable; the
Securities have been duly authorized for listing, subject to official
notice of issuance on the Nasdaq SmallCap Market; the certificates for
the Securities and the Warrants are in valid and sufficient form; the
holders of outstanding shares of capital stock of the Company and the
membership interests of the Subsidiary are not entitled to preemptive
or other rights to subscribe for the Securities and, except as set
forth in the Prospectus,
5
no options, warrants or other rights to purchase, agreements or other
obligations to issue, or rights to convert any obligations into or
exchange any securities for, shares of capital stock of or ownership
interests in the Company or the Subsidiary are outstanding.
(e) There is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit thereto, which is not
described or filed as required.
(f) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms.
(g) Neither the Company nor the Subsidiary is and, after giving
effect to the offering and sale of the Securities and the Warrants and
the application of the proceeds thereof as described in the Prospectus,
neither will be an "investment company" as defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act").
(h) No consent, approval, authorization, filing with or order of
any court or governmental agency or body is required in connection with
the transactions contemplated herein, except such as have been obtained
under the Act and such as may be required under the blue sky laws of
any jurisdiction in connection with the purchase and distribution of
the Securities by the Underwriters in the manner contemplated herein
and in the Prospectus.
(i) Neither the issue and sale of the Securities or the Warrants
nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will conflict
with, or result in a breach or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or the
Subsidiary pursuant to, (i) the charter or by-laws of the Company, (ii)
the charter or operating agreement of the Subsidiary, (iii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which the Company or the Subsidiary is a
party or bound or to which its property is subject, or (iv) any
statute, law, rule, regulation, judgment, order or decree applicable to
the Company or the Subsidiary of any court, regulatory body,
6
administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or the Subsidiary or any of its or
their properties.
(j) No holder of securities of the Company or the Subsidiary has
any right to the registration of such securities under the Registration
Statement.
(k) The consolidated financial statements and schedules of the
Company and the Subsidiary included in the Prospectus and the
Registration Statement present fairly in all material respects the
financial condition, results of operations and cash flows of the
Company and the Subsidiary as of the dates and for the periods
indicated, comply as to form with the applicable accounting
requirements of the Act and the rules and regulations thereunder and
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved (except as otherwise noted therein). The selected financial
data set forth under the caption "Selected Financial Data" in the
Prospectus and Registration Statement fairly present, on the basis
stated in the Prospectus and the Registration Statement, the
information included therein.
(l) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or the Subsidiary or its or their property is pending or, to
their knowledge, threatened that (i) could reasonably be expected to
have a material adverse effect on the performance of this Agreement or
the consummation of any of the transactions contemplated hereby or (ii)
could reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and the Subsidiary, taken as a whole, whether
or not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus (exclusive of
any supplement thereto) (except, in the case of this clause (ii), for
those that have been disclosed in the Prospectus); and no labor
disturbance by or dispute with the employees of the Company or the
Subsidiary exists or, to their knowledge, is threatened or is imminent
that could reasonably be expected to have a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business
or properties of the Company and the Subsidiary, taken as a whole,
whether or not arising from transactions in the
7
ordinary course of business, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto).
(m) Each of the Company and the Subsidiary owns or leases all such
properties as are necessary to the conduct of its operations as
presently conducted; neither the Company nor the Subsidiary is in
violation of any law, rule or regulation of any Federal, state or local
governmental or regulatory authority applicable to it or is in
non-compliance with any term or condition of, or has failed to obtain
and maintain in effect, any license, certificate, permit or other
governmental authorization required for the ownership or lease of its
property or the conduct of its business, which violation,
non-compliance or failure would individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the
Subsidiary, taken as a whole, whether or not arising from transactions
in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto);
and neither the Company nor the Subsidiary has received notice of any
proceedings relating to the revocation or material modification of any
such license, certificate, permit or other authorization.
(n) Neither the Company nor the Subsidiary is in violation or
default of (i) any provision of its charter, by-laws or operating
agreement, as applicable, (ii) the terms of any material indenture,
contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is
subject, or (iii) any statute, law, rule, regulation, judgment, order
or decree of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction
over the Company or the Subsidiary or any of its or their properties,
except where such violation or default would not have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the Subsidiary,
taken as a whole.
(o) Xxxxxx Xxxxxxxx LLP, who have certified certain financial
statements of the Company and the Subsidiary and delivered their report
with respect to the audited consolidated financial statements and
8
schedules included in the Prospectus, are independent public
accountants with respect to the Company and the Subsidiary within the
meaning of the Act and the applicable published rules and regulations
thereunder.
(p) There are no transfer taxes or other similar fees or charges
under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the Warrant Agreement or
the issuance by the Company or sale by the Company of the Securities
and the Warrants.
(q) The Company and the Subsidiary have 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 on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and the Subsidiary, taken as a whole, whether
or not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus (exclusive of
any supplement thereto)) 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 as would not have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and the Subsidiary, taken as a
whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(r) No labor dispute with the employees of the Company or the
Subsidiary exists or is threatened or imminent that could result in a
material adverse change in the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the
Subsidiary, taken as a whole, whether or not arising from transactions
in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto).
(s) The Company and the Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as are
9
prudent and customary in the businesses in which they are engaged;
neither the Company nor the Subsidiary has been refused any insurance
coverage sought or applied for; and neither the Company nor the
Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and the Subsidiary, taken as a
whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(t) Each of the Company and the Subsidiary possesses all
certificates, authorizations and permits issued by the appropriate
Federal, state or foreign regulatory authorities necessary to conduct
its business, and neither the Company nor the Subsidiary has received
any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a material adverse change in the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and the Subsidiary, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).
(u) Neither the Company nor the Subsidiary is in violation of any
Federal or state law or regulation relating to occupational safety and
health or to the storage, handling or transportation of hazardous or
toxic materials; each of the Company and the Subsidiary has received
all permits, licenses or other approvals required of them under
applicable Federal and state occupational safety and health and
environmental laws and regulations to conduct their respective
businesses, and the Company and the Subsidiary are in compliance with
all terms and conditions of any such permit, license or approval,
except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals which
would not, singly or in the aggregate, result in a material adverse
change in the condition (financial or otherwise), prospects, earnings,
business
10
or properties of the Company and the Subsidiary, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(v) The Company and the Subsidiary maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(w) The Company and the Subsidiary own or have obtained licenses
for the patents, patent applications, trade and service marks, trade
secrets and other intellectual properties referenced or described in
the Prospectus as being owned by or licensed to them (collectively, the
"Intellectual Property"). Except as set forth in the Prospectus under
the caption "Business--Technology," (a) there are no rights of third
parties to any such Intellectual Property; (b) there is no material
infringement by third parties of any such Intellectual Property; (c)
there is no pending or threatened action, suit, proceeding or claim by
others challenging the Company's or the Subsidiary's rights in or to
any such Intellectual Property, and each of the Company and the
Subsidiary is unaware of any facts which would form a reasonable basis
for any such claim; (d) there is no pending or threatened action, suit,
proceeding or claim by others challenging the validity or scope of any
such Intellectual Property, and each of the Company and the Subsidiary
is unaware of any facts which would form a reasonable basis for any
such claim; (e) there is no pending or threatened action, suit,
proceeding or claim by others that the Company or the Subsidiary
infringes or otherwise violates any patent, trademark, copyright, trade
secret or other proprietary rights of others, and each of the Company
and the Subsidiary is unaware of any other fact which would form a
reasonable basis for any such claim; (f) there is no U.S. patent or
published U.S. patent application which contains claims
11
that dominate or may dominate any Intellectual Property described in
the Prospectus as being owned by or licensed to the Company or the
Subsidiary or that interferes with the issued or pending claims of any
such Intellectual Property; and (g) there is no prior art of which the
Company or the Subsidiary is aware that may render any U.S. patent held
by the Company or the Subsidiary invalid or any U.S. patent application
held by the Company or the Subsidiary unpatentable which has not been
disclosed to the U.S. Patent and Trademark Office. Each of the Company
and the Subsidiary owns the Intellectual Property or has the rights to
the Intellectual Property that is necessary to conduct its business as
described in the Prospectus.
(x) All of the membership interests of the Subsidiary have been
duly and validly authorized and issued and are fully paid and
nonassessable, and all outstanding membership interests of the
Subsidiary are owned directly by the Company free and clear of any
perfected security interest and, to the knowledge of the Company,
after due inquiry, any other security interests, claims, liens or
encumbrances.
(y) The Subsidiary is not currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any
other distribution on such Subsidiary's membership interests, from
repaying to the Company any loans or advances to such Subsidiary from
the Company or from transferring any of such Subsidiary's property or
assets to the Company except as described in or contemplated by the
Prospectus.
(z) The Subsidiary is the only significant subsidiary of the
Company as defined by Rule 1-02 of Regulation S-X.
(aa) The Warrant Agreement has been duly authorized by the Company
and, when duly executed and delivered by the Company in accordance with
its terms, will constitute a valid and legally binding obligation of
the Company in accordance with its terms; the Warrants will conform in
all material respects to the description of the Warrants in the
Prospectus and in the Warrant Agreement; the Warrants to be issued and
sold by the Company to the Representatives pursuant to the Warrant
Agreement have been duly and validly authorized and, when duly
executed, issued and delivered as contemplated by the Warrant Agreement
against payment therefor will be duly and validly issued, fully paid
and will constitute the valid and
12
binding obligations of the Company, entitled to the benefits of the
Warrant Agreement and enforceable in accordance with their terms.
(bb) When the Securities are delivered and paid for pursuant to
this Agreement on the Closing Date, the Warrants will be exercisable
for shares of Common Stock of the Company ("Warrant Shares") in
accordance with their terms subsequent to [ ], 1999; the Warrant Shares
initially issuable upon the exercise of such Warrants have been duly
authorized and reserved for issuance upon such exercise in accordance
with the terms of the Warrants and, when issued upon such exercise,
will be validly issued, fully paid and nonassessable; and the
stockholders of the Company have no preemptive rights with respect to
the Warrant Shares.
Any certificate signed by any officer of the Company and delivered to
the Representatives or counsel for the Underwriters in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Underwriter.
2. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell (i) to each Underwriter, and each Underwriter agrees, severally
and not jointly, to purchase from the Company, at a purchase price of $[ ] per
share, the amount of the Underwritten Securities set forth opposite such
Underwriter's name in Schedule I hereto and (ii)to each Representative, and each
Representative agrees to purchase from the Company, at a purchase price of $.01
per Warrant, the amount of Warrants set forth opposite such Representative's
name in schedule I hereof.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
300,000 shares of Option Securities at the same purchase price per share as the
Underwriters shall pay for the Underwritten Securities. Said option may be
exercised only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole or in part
at any time (but not more than once) on or before the 30th day after the date of
the Prospectus upon written or telefax notice by the Representatives to the
Company setting forth the number of shares of the Option Securities as to which
the several
13
Underwriters are exercising the option and the settlement date. Delivery of
certificates for the shares of Option Securities, and payment therefor, shall be
made as provided in Section 3 hereof. The number of shares of the Option
Securities to be purchased by each Underwriter shall be the same percentage of
the total number of shares of the Option Securities to be purchased by the
several Underwriters as such Underwriter is purchasing of the Underwritten
Securities, subject to such adjustments as you in your absolute discretion shall
make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the Underwritten
Securities, the Warrants and the Option Securities (if the option provided for
in Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
[ ], 1998, or such time on such later date not more than three Business Days
after the foregoing date as the Representatives shall designate, which date and
time may be postponed by agreement between the Representatives and the Company
or as provided in Section 9 hereof (such date and time of delivery and payment
for the Securities being herein called the "Closing Date"). Delivery of the
Securities shall be made to the Representatives for the respective accounts of
the several Underwriters against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same day funds to an account specified by
the Company. Delivery of the Underwritten Securities and the Option Securities
shall be made through the facilities of the Depository Trust Company unless the
Representatives shall otherwise instruct. Delivery of the Warrants shall be made
to the Representatives for the Representatives' own account against payment by
the Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same day funds to an account specified by
the Company.
If the option provided for in Section 2(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Company will deliver the
Option Securities (at the expense of the Company) to the Representatives on the
date specified by the Representatives (which shall be within three Business Days
after exercise of said option), against payment by the several Underwriters
through the Representatives thereof to or upon the order of the Company by wire
transfer payable in same day funds to an account specified by the Company.
Delivery of the Option Securities shall be made through facilities of the
Depository Trust
14
Company unless the Representatives shall otherwise instruct.
If settlement for the Option Securities occurs after the Closing Date,
the Company will deliver to the Representatives on the settlement date for the
Option Securities, and the obligation of the Underwriters to purchase the Option
Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of
the Registration Statement or supplement to the Prospectus or any Rule
462(b) Registration Statement unless the Company has furnished you a
copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object.
Subject to the foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Company will
cause the Prospectus, properly completed, and any supplement thereto to
be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. Upon your
request, the Company will cause the Rule 462(b) Registration Statement,
properly completed, to be filed with the Commission pursuant to Rule
462(b) and will provide evidence satisfactory to the Representatives of
such filing. The Company will promptly advise the Representatives (i)
when the Registration Statement, if not effective at the Execution
Time, shall have become effective, (ii) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration
Statement shall have been filed with the
15
Commission, (iii) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have been
filed or become effective, (iv) of any request by the Commission or its
staff for any amendment of the Registration Statement, or any Rule
462(b) Registration Statement, or for any supplement to the Prospectus
or of any additional information, (v) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that
purpose and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order or the suspension of any
such qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event occurs as a result
of which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Act or the rules thereunder, the Company
promptly will (i) prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section 5, an amendment or
supplement which will correct such statement or omission or effect such
compliance and (ii) supply any supplemented Prospectus to you in such
quantities as you may reasonably request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Representatives and counsel
for the Underwriters, without charge, signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a
copy of the Registration Statement (without exhibits thereto) and, so
long as delivery of a prospectus by an Underwriter or dealer may be
16
required by the Act, as many copies of each Preliminary Prospectus and
the Prospectus and any supplement thereto as the Representatives may
reasonably request. The Company will pay the expenses of printing or
other production of all documents relating to the offering.
(e) The Company will arrange, if necessary, for the qualification
of the Securities for sale under the laws of such jurisdictions as the
Representatives may designate, will maintain such qualifications in
effect so long as required for the distribution of the Securities and
will pay the fee of the National Association of Securities Dealers,
Inc., in connection with its review of the offering.
(f) The Company will not, for a period of one year following the
Execution Time, without the prior written consent of X.X. Xxxxxxxxx,
Towbin, offer, sell or contract to sell, or otherwise dispose of (or
enter into any transaction which is designed to, or could be expected
to, result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or otherwise) by
the Company or any affiliate of the Company or any person in privity
with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other shares of Common
Stock or any securities convertible into, or exchangeable for, shares
of Common Stock; provided, however, that the Company may issue and sell
Common Stock pursuant to any employee stock option plan, stock
ownership plan or dividend reinvestment plan of the Company in effect
at the Execution Time and the Company may issue Common Stock issuable
upon the conversion of securities or the exercise of warrants
outstanding at the Execution Time.
6. Conditions to the Obligations of the Underwriters. The obligations
of the Underwriters to purchase the Underwritten Securities and the Option
Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any settlement date pursuant to Section
3 hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to the
Execution Time, unless the Representatives agree in writing to a later time, the
17
Registration Statement will become effective not later than (i) 6:00 PM New York
City time on the date of determination of the public offering price, if such
determination occurred at or prior to 3:00 PM New York City time on such date or
(ii) 9:30 AM on the Business Day following the day on which the public offering
price was determined, if such determination occurred after 3:00 PM New York City
time on such date; if filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b), the Prospectus, and any such supplement, will
be filed in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or threatened.
(b) The Company shall have furnished to the Representatives the opinion
of Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx, counsel for the Company, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus, and is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification, except where the failure to so qualify would not have a
material adverse effect on the condition (financial or otherwise),
prospects earnings, business or properties of the Company and the
Subsidiary, taken as a whole;
(ii) the Subsidiary has been duly organized and is validly
existing as a limited liability company in good standing under the laws
of the State of New Jersey, with limited liability company power and
authority to own its properties and conduct its business as described
in the Prospectus, and is duly qualified to do business as a foreign
limited liability company and is in good standing under the laws of
each jurisdiction which requires such qualification, except where the
failure to so qualify would not have a material adverse effect on the
condition (financial or otherwise), prospects earnings, business or
properties of the Company and the Subsidiary, taken as a whole;
(iii) the Company's authorized equity capitalization and the
membership interests of the Subsidiary are as set forth in the
Prospectus; the
18
capital stock of the Company and the membership interests of the
Subsidiary conform in all material respects to the descriptions thereof
contained in the Prospectus; the outstanding shares of Common Stock
have been duly and validly authorized and issued and are fully paid and
nonassessable; all of the membership interests of the Subsidiary are
owned directly by the Company free and clear of any perfected security
interest and, to the knowledge of such counsel, after due inquiry, any
other security interests, claims, liens or encumbrances; the Securities
have been duly and validly authorized, and, when issued and delivered
to and paid for by the Underwriters pursuant to this Agreement, will be
fully paid and nonassessable; the Company has been notified by the
Nasdaq SmallCap Market that the Securities are duly authorized for
listing, subject to official notice of issuance on the Nasdaq SmallCap
Market; the certificates for the Securities are in valid and sufficient
form; and the holders of outstanding shares of capital stock of the
Company and the membership interests of the Subsidiary are not entitled
to preemptive or other rights to subscribe for the Securities; and
except as set forth in the Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or rights
to convert any obligations into or exchange any securities for, shares
of capital stock of or membership or ownership interests in the Company
or the Subsidiary are outstanding;
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or the Subsidiary of a character required to be disclosed in
the Registration Statement which is not adequately disclosed in the
Prospectus, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit thereto, which is not
described or filed as required;
(v) based solely upon the advice of the Commission, the
Registration Statement has become effective under the Act; any required
filing of the Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period required
by Rule 424(b); to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued, no proceedings for that purpose have been instituted or
threatened and
19
the Registration Statement and the Prospectus (other than the financial
statements and other financial and statistical information contained
therein as to which such counsel need express no opinion) comply as to
form in all material respects with the applicable requirements of the
Act and the rules thereunder; and solely on the basis of such counsel's
work in connection with this matter, including such counsel's
participation in conferences at which the Registration was discussed,
prepared and reviewed and examination of the documents referred to
therein, such counsel has no reason to believe that on the Effective
Date or at the Execution Time the Registration Statement contains or
contained any untrue statement of a material fact omits 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 and on the Closing Date includes any untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading (in each case, other than the
financial statements and other financial information contained therein,
as to which such counsel need not express an opinion);
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the Company is not and, after giving effect to the offering
and sale of the Securities and the Warrants and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act;
(viii) no consent, approval, authorization filing with or order of
any court or governmental agency or body is required in connection with
the transactions contemplated herein, except such as have been obtained
under the Act and such as may be required under the blue sky laws of
any jurisdiction in connection with the purchase and distribution of
the Securities by the Underwriters in the manner contemplated in this
Agreement and in the Prospectus;
(ix) to such counsel's knowledge, neither the issue and sale of
the Securities and the Warrants, nor the consummation of any other of
the transactions herein contemplated nor the fulfillment of the terms
hereof will conflict with, result in a breach or violation, or
20
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or the Subsidiary pursuant to, (i) the charter or
by-laws of the Company, (ii) the charter or operating agreement of the
Subsidiary, (iii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition or covenant or instrument to which the
Company or the Subsidiary is a party or bound or to which its property
is subject, or (iv) any statute, law, rule, regulation, judgment, order
or decree applicable to the Company or the Subsidiary of any court,
regulatory body, administrative agency, governmental body, arbitrator
or other authority having jurisdiction over the Company or the
Subsidiary or any of its or their properties;
(x) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement; and
(xi) the Warrant Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding
obligation of the Company in accordance with its terms; the Warrant
Agreement and the Warrants conform in all material respects to the
descriptions thereof contained in the Prospectus; the Warrants have
been duly and validly authorized, executed, issued and delivered and
constitute the valid and binding obligations of the Company, entitled
to the benefits of the Warrant Agreement and enforceable in accordance
with their terms; the certificates for the Warrants are in valid and
sufficient form; the Warrants are exercisable for the Warrant Shares of
the Company in accordance with their terms; the Warrant Shares
initially issuable upon the exercise of the Warrants have been duly
authorized and reserved for issuance upon such exercise and, when
issued upon such exercise, will be validly issued, fully paid and
nonassessable; the stockholders of the Company have no preemptive
rights with respect to the Warrant Shares.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of Delaware, State
of New York or the Federal laws of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other counsel of good
standing whom they believe to be reliable and who are satisfactory to counsel
for the Underwriters and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of
21
the Company and public officials. References to the Prospectus in this paragraph
(b) include any supplements thereto at the Closing Date.
(c) The Representatives shall have received from Cravath, Swaine &
Xxxxx, counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the Registration
Statement, the Prospectus (together with any supplement thereto) and other
related matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have carefully
examined the Registration Statement, the Prospectus, any supplements to the
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied in all material respects with all the
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto), there
has been no material adverse change in the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and the Subsidiary, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectus (exclusive of any supplement
thereto).
(e) At the Execution Time and at the Closing Date, Xxxxxx Xxxxxxxx LLP
shall have furnished to the Representatives letters, dated respectively as of
the Execution Time and as of the Closing Date, in form and
22
substance satisfactory to the Representatives, confirming that they are
independent accountants within the meaning of the Act and the applicable
published rules and regulations thereunder and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included in the Registration Statement
and the Prospectus and reported on by them comply in form in all
material respects with the applicable accounting requirements of the
Act and the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company; carrying out certain
specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily
reveal matters of significance with respect to the comments set forth
in such letter; a reading of the minutes of the meetings of the
stockholders, directors and the executive, audit and compensation
committees of the Company and the Operating Agreement, as amended, of
the Subsidiary ; and inquiries of certain officials of the Company who
have responsibility for financial and accounting matters of the Company
and the Subsidiary as to transactions and events subsequent to December
31, 1997, nothing came to their attention which caused them to believe
that:
(1) with respect to the period subsequent to December 31,
1997, there were any changes, at a specified date not more than
five days prior to the date of the letter, in the long-term
liabilities of the Company or the Subsidiary or capital stock of
the Company or decreases in the stockholders' equity of the
Company and the Subsidiary or decreases in working capital of the
Company as compared with the amounts shown on the December 31,
1997, consolidated balance sheet included in the Registration
Statement and the Prospectus, or for the period from January 1,
1998 to such specified date there were any decreases, as compared
with the corresponding period in the preceding year in net
revenues or income before income taxes or in total or per share
amounts of net income of the Company and the Subsidiary, operating
income, net interest income, except in all instances for changes
or decreases set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Company as to
23
the significance thereof unless said explanation is not deemed
necessary by the Representatives; or
(2) the information included in the Registration Statement
and Prospectus in response to Regulation S-K, Item 301 (Selected
Financial Data), Item 302 (Supplementary Financial Information)
and Item 402 (Executive Compensation) is not in conformity with
the applicable disclosure requirements of Regulation S-K; and
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and the Subsidiary) set forth
in the Registration Statement and the Prospectus, including the
information set forth under the captions "Summary Financial
Information", "Dilution", "Capitalization", "Selected Financial Data",
"Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Business", "Management", "Certain
Transactions", "Principal Stockholders" and "Description of Capital
Stock" in the Prospectus, agrees with the accounting records of the
Company and the Subsidiary, excluding any questions of legal
interpretation.
References to the Prospectus in this paragraph (e) include any
supplement thereto at the date of the letter.
(f) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (e) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, business or properties of the Company and
the Subsidiary, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto) the effect of which, in any
case referred to in clause (i) or (ii) above, is, in the sole judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the
24
Registration Statement (exclusive of any amendment thereof) and the Prospectus
(exclusive of any supplement thereto).
(g) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto from each
officer, director stockholder and option holder of the Company addressed to the
Representatives.
(h) The Company shall have caused the Securities to be eligible for
trading on the Nasdaq SmallCap Market upon issuance.
(i) At the time of Closing, the Company shall have executed and
delivered the Warrant Agreement to the Representatives.
(j) Prior to the Closing Date, the Company shall have furnished to the
Representatives such further information, certificates and documents as the
Representatives may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of such
cancelation shall be given to the Company in writing or by telephone or
facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Cravath, Swaine & Xxxxx, counsel for the
Underwriters, at Worldwide Plaza, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, xx the
Closing Date.
7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally through X.X. Xxxxxxxxx, Towbin on
25
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Securities Exchange Act of 1934 (the
"Exchange Act") against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, 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, or arise out of or are based upon 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 Common Stock or the offering contemplated hereby, and
which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon matters covered above and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that (i) the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon 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 specifically for inclusion therein or in the section of the
Prospectus entitled "Underwriting" and (ii) such indemnity with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or any
director, officer, employee or agent of such Underwriter or any person
controlling such Underwriter) from whom the person asserting any such loss,
claim, damage or liability purchased the Securities that are the subject thereof
if such person did not receive a copy of the
26
Prospectus (or the Prospectus as supplemented) excluding documents incorporated
therein by reference at or prior to the confirmation of the sale of such
Securities to such person in any case where such delivery is required under the
Act and any untrue statement or omission of a material fact contained in any
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
supplemented). This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with
reference to written information furnished to the Company by or on behalf of
such Underwriter through the Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have. The
Company acknowledges that the statements set forth in the last paragraph of the
cover page regarding delivery of the Securities, the stabilization legend in
block capital letters on page 2 and under the heading "Underwriting" constitute
the only information furnished in writing by or on behalf of the several
Underwriters for inclusion in any Preliminary Prospectus or the Prospectus.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below);
27
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and the Underwriters agree to contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and one or more of the Underwriters
may be subject in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and by the Underwriters on the
other from the offering of the Securities; provided, however, that in no case
shall any Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the Securities) be responsible for any
amount in excess of the underwriting discount or commission applicable to the
Securities purchased by such Underwriter hereunder. If the
28
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Underwriters shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in such Losses as
well as any other relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the total net proceeds from the offering
(before deducting expenses), and benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company on the
one hand or the Underwriters on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), 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. For purposes of
this Section 8, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the
29
aggregate amount of Securities set forth opposite the names of all the remaining
Underwriters) the Securities which the defaulting Underwriter or Underwriters
agreed but failed to purchase; provided, however, that in the event that the
aggregate amount of Securities which the defaulting Underwriter or Underwriters
agreed but failed to purchase shall exceed 10% of the aggregate amount of
Securities set forth in Schedule I hereto, the remaining Underwriters shall have
the right to purchase all, but shall not be under any obligation to purchase
any, of the Securities, and if such nondefaulting Underwriters do not purchase
all the Securities, this Agreement will terminate without liability to any
nondefaulting Underwriter or the Company. In the event of a default by any
Underwriter as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding five Business Days, as the Representatives shall
determine in order that the required changes in the Registration Statement and
the Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company and any nondefaulting Underwriter for
damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Company prior
to delivery of and payment for the Securities, if at any time prior to such time
(i) trading in the Company's Common Stock shall have been suspended by the
Commission or the Nasdaq SmallCap Market or trading in securities generally on
the New York Stock Exchange or the Nasdaq SmallCap Market shall have been
suspended or limited or minimum prices shall have been established on either of
such Exchange or SmallCap Market, (ii) a banking moratorium shall have been
declared either by Federal or New York State authorities or (iii) there shall
have occurred any outbreak or escalation of hostilities, declaration by the
United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the sole judgment
of the Representatives, impractical or inadvisable to proceed with the offering
or delivery of the Securities as contemplated by the Prospectus (exclusive of
any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf
30
of any Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancelation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed and confirmed to them, care of X.X. Xxxxxxxxx, Towbin,
Swiss Bank Tower, 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000;
or, if sent to the Company, will be mailed, delivered or telefaxed and confirmed
to it at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, attention of Xxxxxxx
Xxxxxx.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for convenience only
and shall not affect the construction hereof.
31
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
Very truly yours,
By: ..............................................
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
X.X. Xxxxxxxxx, Towbin
By: .................................................
For itself, Xxxxxxxxxx & Co. Inc. and the
other several Underwriters named in
Schedule I to the foregoing Agreement.
SCHEDULE I
NUMBER OF SHARES NUMBER OF WARRENTS
UNDERWRITERS TO BE PURCHASED TO BE PURCHASED
X.X. Xxxxxxxxx, Towbin . . . . . . . 1,380,000 138,000
Xxxxxxxxxx & Co. Inc. . . . . . . . 920,000 92,000
--------- -------
Total . . . . . . . . . 2,300,000 230,000
========= =======
EXHIBIT A
[Letterhead of officer, director, shareholder or option
holder of CyberShop International, Inc.]
CyberShop International, Inc.
Public Offering of Common Stock
, 1998
X.X. Xxxxxxxxx, Towbin
Xxxxxxxxxx & Co. Inc.
X/X X.X. Xxxxxxxxx, Xxxxxx
Xxxxx Xxxx Xxxxx
00 Xxxx 50th Street, 22nd Floor
New York, New York 10022
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between CyberShop
International, Inc., a Delaware corporation (the "Company"), and you as the
Underwriter named therein, relating to an underwritten public offering (the
"Offering") of Common Stock, $.001 par value (the "Common Stock"), of the
Company.
In order to induce you to enter into the Underwriting Agreement, the
undersigned will not, without the prior written consent of X.X. Xxxxxxxxx,
Towbin, offer, sell, contract to sell, pledge or otherwise dispose of, or file a
registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act with respect to,
any shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect any such transaction, for a period of one year after the
date of this Agreement, other than (i) shares of Common Stock obtained by any
purchases in the open market by the undersigned following consummation of the
Offering, (ii) any shares of Common Stock to be sold hereunder, (iii) any option
or warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus to which this Agreement relates, (iv) shares of
Common Stock disposed of as bona fide gifts, and (v) the transfer of shares of
Common Stock by the undersigned to
2
(a) any spouse, parents, siblings or lineal descendants of the undersigned, (b)
any trust for the benefit of the undersigned, (c) any distributee, legatee or
devisee of the undersigned who acquires its shares by will or operation of law
upon the death or dissolution of the undersigned or (d) any current holder of
Common Stock; provided that the transferee in each of the preceding clauses (iv)
and (v) agrees in writing to be bound by the terms of this Agreement to the same
extent as the undersigned.
If for any reason the Underwriting Agreement shall be terminated prior
to the Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above shall likewise be terminated.
Yours very truly,
[Signature of officer,
director, shareholder or
option holder]
[Name and address of officer,
director, shareholder or
option holder]
