================================================================================
NETFLIX, INC.
(a Delaware corporation)
[5,500,000] Shares of Common Stock
PURCHASE AGREEMENT
------------------
Dated: May [ ], 2002
================================================================================
TABLE OF CONTENTS
Page
----
SECTION 1. Representations and Warranties ................................................. 3
(a) Representations and Warranties by the Company ............................ 3
(i) Compliance with Registration Requirements ...................... 3
(ii) Independent Accountants ........................................ 4
(iii) Financial Statements ........................................... 4
(iv) No Material Adverse Change in Business ......................... 5
(v) Good Standing of the Company ................................... 5
(vi) Subsidiaries ................................................... 5
(vii) Capitalization ................................................. 5
(viii) Authorization of Agreement ..................................... 6
(ix) Authorization and Description of Securities .................... 6
(x) Absence of Defaults and Conflicts .............................. 6
(xi) Absence of Labor Dispute ....................................... 7
(xii) Absence of Proceedings ......................................... 7
(xiii) Accuracy of Exhibits ........................................... 7
(xiv) Possession of Intellectual Property ............................ 8
(xv) Absence of Further Requirements ................................ 8
(xvi) [Compliance of Virtual Roadshows] .............................. 8
(xvii) Possession of Licenses and Permits ............................. 8
(xviii) Title to Property .............................................. 9
(xix) Investment Company Act ......................................... 9
(xx) Environmental Laws ............................................. 9
(xxi) Registration Rights ............................................ 10
(xxii) Statistical and Market-Related Data ............................ 10
(xxiii) Reserved Securities ............................................ 10
(xxiv) Insurance ...................................................... 10
(xxv) No Stabilization or Manipulation ............................... 11
(xxvi) Certain Transactions ........................................... 11
(xxvii) Accounting and Other Controls .................................. 11
(b) Officer's Certificates ................................................... 11
SECTION 2. Sale and Delivery to Underwriters; Closing ..................................... 11
(a) Initial Securities ....................................................... 11
(b) Option Securities ........................................................ 11
(c) Payment .................................................................. 12
(d) Denominations; Registration .............................................. 13
-i-
Page
----
SECTION 3. Covenants of the Company ....................................................... 13
(a) Compliance with Securities Regulations and Commission Requests ........... 13
(b) Filing of Amendments ..................................................... 13
(c) Delivery of Registration Statements ...................................... 14
(d) Delivery of Prospectus ................................................... 14
(e) Continued Compliance with Securities Laws ................................ 14
(f) Blue Sky Qualifications .................................................. 15
(g) Rule 158 ................................................................. 15
(h) Use of Proceeds .......................................................... 15
(i) Listing .................................................................. 15
(j) Restriction on Sale of Securities ........................................ 16
(k) Reporting Requirements ................................................... 16
(l) Compliance with NASD Rules ............................................... 16
(m) Compliance with Rule 463 ................................................. 16
SECTION 4. Payment of Expenses ............................................................ 17
(a) Expenses ................................................................. 17
(b) Termination of Agreement ................................................. 17
SECTION 5. Conditions to Underwriters' Obligations ........................................ 17
(i) Conditions to Purchase of Initial Securities ............................. 17
(a) Effectiveness of Registration Statement ............................. 18
(b) Opinion of Counsel for Company ...................................... 18
(c) Opinion of Counsel for Underwriters ................................. 18
(d) Officers' Certificate ............................................... 19
(e) Accountant's Comfort Letter ......................................... 19
(f) Bring-down Comfort Letter ........................................... 19
(g) Approval of Quotation ............................................... 19
(h) No Objection ........................................................ 19
(i) Lock-up Agreements .................................................. 19
(j) Conversion .......................................................... 20
(ii) Conditions to Purchase of Option Securities .............................. 20
(a) Officers' Certificate ............................................... 20
(b) Opinion of Counsel for Company ...................................... 20
(c) Opinion of Counsel for Underwriters ................................. 20
(d) Bring-down Comfort Letter ........................................... 20
(iii) Additional ............................................................... 20
(iv) Termination of Agreement ................................................. 21
SECTION 6. Indemnification ................................................................ 21
(a) Indemnification of Underwriters .......................................... 21
(b) Indemnification of Company, Directors and Officers ....................... 22
-ii-
Page
----
(c) Actions Against Parties; Notification .................................... 23
(d) Settlement Without Consent if Failure to Reimburse ....................... 24
(e) Indemnification for Reserved Securities .................................. 24
SECTION 7. Contribution ................................................................... 24
SECTION 8. Representations, Warranties and Agreements to Survive Delivery ................. 26
SECTION 9. Termination of Agreement ....................................................... 26
(a) Termination; General ..................................................... 26
(b) Liabilities .............................................................. 26
SECTION 10. Default by One or More of the Underwriters ..................................... 26
SECTION 11. Notices ........................................................................ 27
SECTION 12. Parties ........................................................................ 28
SECTION 13. GOVERNING LAW AND TIME ......................................................... 28
SECTION 14. Effect of Headings ............................................................. 28
SCHEDULES
Schedule A - List of Underwriters .................................................. Sch A-1
Schedule B - Pricing Information ................................................... Sch B-1
Schedule C - List of Persons subject to Lock-up .................................... Sch C-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel .................................. A-1
Exhibit B - Form of Lock-up Letter ................................................ B-1
-iii-
NETFLIX, INC.
(a Delaware corporation)
[5,500,000] Shares of Common Stock
(Par Value $.001 Per Share)
PURCHASE AGREEMENT
------------------
May [ ], 2002
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxxx Xxxxxx Partners LLC
U.S. Bancorp Xxxxx Xxxxxxx Inc.
as Representatives of the several Underwriters
x/x Xxxxxxx Xxxxx & Xx.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Four World Financial Center
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Netflix, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated ("Xxxxxxx Xxxxx") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Xxxxxxx Xxxxx, Xxxxxx Xxxxxx Partners LLC and U.S. Bancorp
Xxxxx Xxxxxxx Inc. are acting as representatives (in such capacity, the
"Representatives"), with respect to the issue and sale by the Company and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of Common Stock, par value $.001 per share, of the
Company ("Common Stock") set forth in said Schedule A, and with respect to the
grant by the Company to the Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of
[ ] additional shares of Common Stock to cover over-allotments, if any. The
aforesaid [ ] shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the [ ] shares of
Common Stock subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities."
-2-
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.
The Company and the Underwriters agree that up to 15% of the Initial
Securities to be purchased by the Underwriters (the "Reserved Securities") shall
be reserved for sale by the Underwriters to certain eligible directors,
officers, employees and other persons having relationships with the Company
("Reserved Share Invitees"), as part of the distribution of the Securities by
the Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. (the "NASD") and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such Reserved Share Invitees by the end of the first business day
after the date of this Agreement, such Reserved Securities may be offered to the
public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-83878) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in any such prospectus that was omitted from such
registration statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective (a) pursuant
to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b)
pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information."
Each Prospectus used before such registration statement became effective, and
any prospectus that omitted, as applicable, the Rule 430A Information or the
Rule 434 Information that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus in
the form first furnished to the Underwriters for use in connection with the
offering of the Securities is herein called the "Prospectus." If Rule 434 is
relied on, the term "Prospectus" shall refer to the preliminary prospectus dated
May 6, 2002 together with the applicable
-3-
Term Sheet and all references in this Agreement to the date of such Prospectus
shall mean the date of the applicable Term Sheet. For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("XXXXX").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus, any preliminary prospectuses and any
supplement thereto or prospectus wrapper prepared in connection therewith,
at their respective times of issuance and at the Closing Time, complied and
will comply in all material respects with any applicable laws or
regulations of such foreign jurisdictions identified on Attachment A hereto
in which the Prospectus and such preliminary prospectuses, as amended or
supplemented, if applicable, are contemplated to be distributed in
connection with the offer and sale of Reserved Securities. None of the
Prospectus or any amendments or supplements thereto (including any
prospectus wrapper), at the time the Prospectus or any amendments or
supplements thereto were issued and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances
-4-
under which they were made, not misleading. If Rule 434 is used, the
Company will comply with the requirements of Rule 434 and the Prospectus
shall not be "materially different," as such term is used in Rule 434, from
the prospectuses included in the Registration Statement at the time it
became effective. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement, the Prospectus or any amendments or supplements to the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through the Representatives expressly for use in the
Registration Statement or the Prospectus.
Each preliminary prospectus printed for distribution to potential
investors or filed pursuant to Rule 424 under the 1933 Act complied when so
filed in all material respects with the 1933 Act Regulations. Each
Prospectus delivered to the Underwriters for distribution to potential
investors in connection with this offering was identical in all material
respects to the electronically transmitted copy thereof filed with the
Commission pursuant to XXXXX, except to the extent permitted by Regulation
S-T.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position and
stockholders' deficit of the Company at the dates indicated and the
statement of operations and cash flows of the Company for the periods
specified; said financial statements have been prepared in conformity with
United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved. The supporting
schedules included in the Registration Statement present fairly in
accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included in
the Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement. The pro forma and pro
forma as adjusted financial data included in the Registration Statement and
the Prospectus present fairly the information shown therein, have been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma information and have been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to therein. No
financial statements
-5-
are required to be included in the Registration Statement that have not
been so included
(iv) No Material Adverse Change in Business. Since March 31, 2002,
except as otherwise stated in the Registration Statement and the
Prospectus, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business prospects or assets of
the Company, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions entered
into by the Company, other than those in the ordinary course of business,
that are material with respect to the Company and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Delaware and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under this
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not be reasonably likely to
result in a Material Adverse Effect.
(vi) Subsidiaries. The Company has no subsidiaries.
(vii) Capitalization. As of March 31, 2002, the authorized, issued and
outstanding capital stock of the Company was as designated "(actual)" as
set forth in the Prospectus under the caption "Capitalization" and, after
giving effect to the offering (assuming that [5,500,000] shares of Company
Common Stock are sold in the offering) and the automatic conversion of all
of the shares of the Company's issued and outstanding preferred stock, will
be as designated "Pro Forma As Adjusted" under the caption "Capitalization"
(except, in each case, for subsequent issuances, if any, pursuant to this
Agreement, pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectus or pursuant to the exercise of convertible
securities or options referred to in the Prospectus). The shares of issued
and outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable; none of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the
Company. The shares of issued and outstanding capital stock of the Company
have been issued in compliance, in all material respects, with all federal
and state securities
-6-
laws. Except as disclosed in the Prospectus, as of the date of the
Prospectus, there are no outstanding options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or
sell, shares of the Company's capital stock. The descriptions of the
Company's stock option and purchase plans and the options or other rights
granted and exercised thereunder set forth in the Prospectus accurately and
fairly describe, in all material respects, the information required to be
shown with respect to such plans, arrangements, options and rights.
(viii) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Securities to be
purchased by the Underwriters from the Company have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement, and,
when issued and delivered by the Company pursuant to this Agreement against
payment of the consideration set forth herein, will be validly issued,
fully paid and nonassessable; the Common Stock conforms to all statements
relating thereto contained in the Prospectus and such description conforms
to the rights set forth in the instruments defining the same; no holder of
the Securities will be subject to personal liability for obligations of the
Company solely by reason of being such a holder; and the issuance of the
Securities is not subject to the preemptive or other similar rights of any
securityholder of the Company, other than pursuant to the letter agreement
dated June 22, 1999 by and among the Company and certain stockholders of
the Company, a copy of which has been provided to the Underwriters, which
have not been waived or substantially complied with.
(x) Absence of Defaults and Conflicts. The Company is not (A) in
violation of its charter or by-laws, (B) in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company is a
party or by which it may be bound, or to which any of the property or
assets of the Company is subject (collectively, "Agreements and
Instruments") or (C) in violation of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its assets, properties or operations ("Applicable Laws"),
except in the case of clauses (B) or (C) for such defaults that would not
be reasonably likely to result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the consummation
of the transactions described in this Agreement and in the Registration
Statement (including the issuance and sale of the Securities and the use of
the proceeds from the sale of the Securities in the manner described in the
Prospectus under the caption
-7-
"Use of Proceeds") and compliance by the Company with its obligations under
this Agreement have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) (except for the Company's
obligations to repay amounts outstanding under its subordinated promissory
notes as disclosed in the Prospectus) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action result
in any violation of the provisions of the charter or by-laws of the
Company, as such shall be in effect at the applicable time, or any
Applicable Laws. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company.
(xi) Absence of Labor Dispute. No labor dispute with the employees of
the Company exists or, to the knowledge of the Company, is imminent, and
the Company is not aware of any existing or imminent labor disturbance by
the employees of any of its principal suppliers, manufacturers, customers
or contractors, which, in either case, would be reasonably likely to result
in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against the Company, that is required to be
disclosed in the Registration Statement (other than as disclosed therein),
or that would be reasonably likely to result in a Material Adverse Effect,
or that would be reasonably likely to materially and adversely affect the
consummation of the transactions described in this Agreement or the
performance by the Company of its obligations hereunder; the aggregate of
all pending legal or governmental proceedings to which the Company is a
party or of which any of its properties or assets is the subject that are
not described in the Registration Statement, including ordinary routine
litigation incidental to the business, would not be reasonably likely to
result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents that
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
-8-
(xiv) Possession of Intellectual Property. The Company owns or
possesses, or can acquire on market terms, adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks, trade
names, domain names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now operated by
it, or to be operated by it as described in the Prospectus, and the Company
has not received any notice and is not otherwise aware of any infringement
by it of the Intellectual Property rights of any third party, which
infringement would be reasonably likely to have a Material Adverse Effect,
or of any facts or circumstances that would be reasonably likely to render
any material Intellectual Property invalid or inadequate to protect the
interest of the Company therein, and the Company is not aware of any
infringement by any third party of the Company's Intellectual Property
rights, which infringement would be reasonably likely to result in a
Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities under this Agreement or the consummation of the transactions
contemplated by this Agreement except (A) such as have been already
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations thereunder, and foreign or state
securities or blue sky laws and (B) such as have been obtained under the
laws and regulations of jurisdictions outside the United States in which
the Reserved Securities are offered.
(xvi) [Compliance of Virtual Roadshows. The Company has complied with
the rules, regulations and interpretations of the Commission relating to
the conducting of virtual roadshows, and assuming the compliance of the
Company's customers with their respective agreements with the Company, the
virtual roadshows involving the Company have been conducted in compliance
with such rules, regulations and interpretations. The Company has not
received notice from any applicable regulatory authority, including the
Commission, regarding non-compliance with such rules, regulations and
interpretations in connection with the virtual roadshows involving the
Company. To the Company's knowledge, its customers have complied with such
agreements and with such rules, regulations and interpretations in
connection with the virtual roadshows involving the Company.]
(xvii) Possession of Licenses and Permits. The Company possesses such
permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental
-9-
Licenses") issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by it; the Company is in compliance with the terms and conditions
of all such Governmental Licenses, except where the failure so to comply
would not, singly or in the aggregate, have a Material Adverse Effect; all
of the Governmental Licenses are valid and in full force and effect, except
when the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses that, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xviii) Title to Property. The Company does not own any all real
property. The Company has good title to all other properties owned by it,
in each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except (A) such
as are described in the Prospectus, (B) licenses to Intellectual Property
granted in the ordinary course of business or (C) such as do not, singly or
in the aggregate, materially affect the value of such property in the
aggregate and do not interfere with the use made of such property by the
Company; and all of the leases and subleases material to the business of
the Company, and under which the Company holds properties described in the
Prospectus, are in full force and effect, and the Company does not have any
notice of any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company under any such leases or subleases.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
under the caption "Use of Proceeds" will not be, an "investment company"
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) the Company is not in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the
manufacture,
-10-
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, "Environmental Laws"), (B)
the Company has all permits, authorizations and approvals required under
any applicable Environmental Laws and is in compliance with their
requirements, (C) there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company and (D) there are no
events or circumstances that would be reasonably likely to form the basis
of an order for clean-up or remediation, or an action, suit or proceeding
by any private party or governmental body or agency, against or affecting
the Company relating to Hazardous Materials or any Environmental Laws.
(xxi) Registration Rights. Except as disclosed in the Prospectus,
there are no persons with registration rights or other similar rights to
have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the 1933 Act.
(xxii) Statistical and Market-Related Data. The Company has no reason
to believe that the statistical and market-related data included in the
Prospectus are not based on or derived from reliable sources and are not
accurate in all material respects.
(xxiii) Reserved Securities. Neither the Company nor any of its
affiliates has offered, or caused the Underwriters to offer, any Reserved
Securities with the intent to unlawfully influence such purchaser of
Reserved Securities.
(xxiv) Insurance. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as the Company believes are prudent and customary in the businesses in
which they are engaged; and the Company does not have any reason to believe
that any of them 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 except where
the failure to renew or maintain such coverage would not reasonably be
expected to result in a Material Adverse Effect. The officers and directors
of the Company are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as the
Company believes are prudent and customary for officers and directors
liability insurance of a public company; and the Company has no reason to
believe that it will not be able to renew its existing directors and
officers liability insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
provide its officers and directors with such liability insurance.
-11-
(xxv) No Stabilization or Manipulation. Neither the Company nor, to
the knowledge of the Company, any of its directors, officers or affiliates
has taken nor will take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities in violation of Regulation M
under the 1934 Act.
(xxvi) Certain Transactions. Except as disclosed in the Prospectus,
there are no outstanding loans, advances, or guarantees of indebtedness by
the Company to or for the benefit of any of the executive officers or
directors of the Company or any of the members of the families of any of
them, other than those not required to be disclosed in the Prospectus.
(xxvii) Accounting and Other Controls. The Company has established a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions were executed in accordance with
management's general or specific authorization; (ii) transactions were
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets was permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets was compared with existing assets at
reasonable intervals and appropriate action was taken with respect to any
differences.
(b) Officer's Certificates. Any certificate signed by any officer of
the Company delivered to the Representatives or to counsel for the Underwriters
shall be deemed a representation and warranty by the Company to each Underwriter
as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities that such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase in the aggregate for all
Underwriters, up to an additional 825,000 shares of Common Stock at the price
per share set forth in Schedule B, less an amount per share equal to any
dividends or distributions
-12-
declared by the Company and payable on the Initial Securities but not payable on
the Option Securities. The option hereby granted will expire 30 days after the
date hereof and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments that may be made in connection with the
offering and distribution of the Initial Securities upon notice by the
Representatives to the Company setting forth the number of Option Securities as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for such Option Securities. Any such time and
date of delivery for the Option Securities (a "Date of Delivery") shall be
determined by the Representatives, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the Option Securities, each of the Underwriters, acting severally
and not jointly, will purchase that proportion of the total number of Option
Securities then being purchased which the number of Initial Securities set forth
in Schedule A opposite the name of such Underwriter bears to the total number of
Initial Securities, subject in each case to such adjustments as the
Representatives in its discretion shall make to eliminate any sales or purchases
of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Xxxxxx
Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other
place as shall be agreed upon by Xxxxxxx Xxxxx and the Company, at 9:00 A.M.
(Eastern time) on May [ ], 2002 (unless postponed in accordance with the
provisions of Section 10), or such other time not later than five 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
Time").
In the event that any or all of the Option Securities are purchased by
the Underwriters, payment of the purchase price for, and delivery of
certificates for, such Option Securities shall be made at the offices of Xxxxxx
Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, or at such other
place as shall be agreed upon by the Representatives and the Company, on each
Date of Delivery, or as soon as reasonably practicable thereafter, as specified
in the notice from the Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, that it has agreed to
purchase. Xxxxxxx Xxxxx, individually and not as a Representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the
-13-
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify Xxxxxxx Xxxxx
promptly, (i) when any post-effective amendment to the Registration
Statement shall become effective, or any supplement to the Prospectus or
any amended Prospectus shall have been filed, (ii) of the receipt of any
comments from the Commission regarding the Registration Statement or
otherwise regarding the proposed offering of the Securities, (iii) of any
request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional
information and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
of the Commission preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening
of any proceedings for any of such purposes. The Company will promptly
effect the filings necessary pursuant to Rule 424(b) and will take such
steps as it deems necessary to ascertain whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file such
prospectus. The Company will make commercially reasonable efforts to
prevent the issuance of any stop order by the Commission with respect to
the Registration Statement and, if any stop order is issued, to obtain the
lifting thereof at the earliest practicable moment.
(b) Filing of Amendments. The Company will give Xxxxxxx Xxxxx notice
of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it
-14-
became effective or to the Prospectus, will furnish the Representatives
with copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any
such document to which the Representatives or counsel for the Underwriters
shall reasonably object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts filed as exhibits thereto, and will also deliver to
the Representatives, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the Representatives. The copies of the Registration
Statement and each amendment thereto furnished to the Representatives will
be identical in all material respects to the electronically transmitted
copies thereof filed with the Commission pursuant to XXXXX, except to the
extent permitted by Regulation S-T.
(d) Delivery of Prospectus. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus
as such Underwriter reasonably requested, and the Company hereby consents
to the use by the Underwriters of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the Prospectus (as
amended or supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical in all material respects to the
electronically transmitted copies thereof filed with the Commission
pursuant to XXXXX, except to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as described in this
Agreement and in the Prospectus. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or
for the Company, to amend the Registration Statement or amend or supplement
any Prospectus in order that the Prospectus will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time, or if it shall be necessary, as
mutually determined by the Company and the Representatives, at any such
time to amend the Registration Statement or amend or supplement any
Prospectus
-15-
in order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
appropriate to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and
the Company will furnish to the Underwriters such number of copies of such
amendment or supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use commercially
reasonable efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws of
such states and other jurisdictions (domestic or foreign) as Xxxxxxx Xxxxx
may designate and to maintain such qualifications in effect for a period of
not less than one year from the later of the effective date of the
Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In
each jurisdiction in which the Securities have been so qualified, the
Company will file such statements and reports as may be required by the
laws of such jurisdiction to continue such qualification in effect for a
period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement or such
short a time as may be applicable.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earning statement for the
purposes of, and to provide the benefits to the Company contemplated by,
the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in a manner not inconsistent with the
description in the Prospectus under "Use of Proceeds."
(i) Listing. The Company will use commercially reasonable efforts to
effect and maintain the quotation of the Securities on the Nasdaq National
Market and will file with the Nasdaq National Market all documents and
notices required by the Nasdaq National Market of companies that have
securities that are traded in the over-the-counter market and quotations
for which are reported by the Nasdaq National Market.
-16-
(j) Restriction on Sale of Securities. During a period of 180 days
from the date hereof, the Company will not, without the prior written
consent of Xxxxxxx Xxxxx, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase
or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
or file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Common Stock, whether any such
swap or transaction is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise, in each case, except as
contemplated by the Prospectus. The foregoing sentence shall not apply to
(A) the Securities to be sold hereunder, (B) any shares of Common Stock
issued by the Company upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof and referred to in
the Prospectus, (C) any shares of Common Stock issued or options to
purchase Common Stock granted pursuant to existing employee benefit plans
or agreements of the Company referred to in the Prospectus or (D) any
securities of the Company issued in connection with an acquisition of
another business or technology.
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods and rules and regulations of the
Commission thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that it will
use all commercially reasonable efforts to ensure that the Reserved
Securities held by those persons on Attachment B hereto will be restricted
to the extent required by the NASD rules from sale, transfer, assignment,
pledge or hypothecation for a period of three months following the date of
this Agreement. At the request of the Underwriters, the Company will direct
the Company's transfer agent to place a stop transfer restriction upon such
securities held by those persons on Attachment B for such three-month
period. Should the Company release, or seek to release, from such
restrictions any of the Reserved Securities, the Company agrees to
reimburse the Underwriters for any reasonable expenses (including, without
limitation, legal expenses) they incur in connection with such release.
(m) Compliance with Rule 463. The Company will include such
information in its periodic reports filed with the Commission as may be
required pursuant to Rule 463 of the 1933 Act Regulations.
-17-
SECTION 4. Payment of Expenses.
(a) Expenses. Except as otherwise provided in this Agreement, the
Company will pay all expenses incident to the performance of its obligations
under this Agreement, including, without limiting the generality of the
foregoing, expenses arising from (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, issuance
and delivery of the certificates for the Securities to the Underwriters,
including any stock or other transfer taxes and any stamp or other duties
payable upon the sale, issuance or delivery of the Securities to the
Underwriters and the transfer of the Securities between the Underwriters, (iii)
the fees and disbursements of the Company's counsel, accountants and other
advisors, (iv) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the fees and reasonable disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (v) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectus and any amendments or supplements thereto, (vi) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (vii) the fees and expenses of any transfer agent or
registrar for the Securities, (viii) the filing fees incident to, and the fees
and reasonable disbursements of counsel to the Underwriters in connection with,
the review by the NASD of the terms of the sale of the Securities, (ix) expenses
incurred in connection with the inclusion of the Securities in the Nasdaq
National Market and (x) all costs and expenses of the Underwriters, including
the fees and disbursements of counsel for the Underwriters, in connection with
matters related to the Reserved Securities that are designated by the Company
for sale to Reserved Share Invitees.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. Conditions to Underwriters' Obligations.
(i) Conditions to Purchase of Initial Securities. The obligations of
the several Underwriters to purchase the Initial Securities is conditioned upon
the representations and warranties of the Company contained in Section 1 hereof
or in certificates of any officer of the Company delivered pursuant to the
provisions hereof, being true and correct in all material respects as of the
Closing Time, (except in all cases where such representations and warranties are
qualified by materiality on the date hereof, in which case such representations
and warranties shall be true and correct as qualified) to the performance by the
Company in all material
-18-
respects as of or prior to the Closing Time of its covenants and other
obligations hereunder to be performed at or prior to the Closing Time and to the
following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued by the Commission under
the 1933 Act or proceedings therefor initiated or, to the Company's
knowledge, threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has
elected to rely upon Rule 434, a Term Sheet shall have been filed with the
Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At the Closing Time, the
Representatives shall have received the opinion, dated as of the Closing
Time, of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel for the Company, in form
and substance satisfactory to counsel for the Underwriters to the effect
set forth on Exhibit A hereto, together with signed or reproduced copies of
such letter for each of the other Underwriters. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions
other than the law of the State of California, the federal law of the
United States and the General Corporation Law of the State of Delaware,
upon the opinions of counsel satisfactory to the Representatives. Such
counsel may also state that, insofar as such opinion involves factual
matters, they have relied to the extent they deem proper, upon certificates
of officers of the Company and of the Representatives and certificates of
public officials.
(c) Opinion of Counsel for Underwriters. At the Closing Time, the
Representatives shall have received the opinion, dated as of the Closing
Time, of Xxxxxx Xxxxxx & Xxxxxxx, counsel for the Underwriters, together
with signed or reproduced copies of such letter for each of the other
Underwriters in form and substance satisfactory to the Representatives. In
giving such opinion such counsel may rely, as to all matters governed by
the laws of jurisdictions other than the law of the State of New York, the
federal law of the United States and the General Corporation Law of the
State of Delaware, upon the opinions of counsel satisfactory to the
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and certificates of public
officials.
-19-
(d) Officers' Certificate. At the Closing Time, there shall not have
been, since the date hereof or since March 31, 2002, any Material Adverse
Effect, and the Representatives shall have received a certificate of the
Chief Executive Officer and the Chief Financial Officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such
Material Adverse Effect, (ii) the representations and warranties in Section
1(a) hereof are true and correct with the same force and effect as though
expressly made at and as of Closing Time, except as would not have a
Material Adverse Effect (except in all cases where such representations and
warranties are qualified by materiality on the date hereof, in which case
such representations and warranties shall be true and correct as
qualified), (iii) the Company has complied in all material respects with
all covenants and conditions hereunder to be performed or satisfied by the
Company at or prior to the Closing Time and (iv) no stop order suspending
the effectiveness of the Registration Statement has been issued by the
Commission and no proceedings for that purpose have been instituted by or
are pending before or, to the knowledge of the Company, have been
threatened by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from KPMG LLP a letter
dated such date, in form and substance reasonably satisfactory to the
Representatives, together with signed or reproduced copies of such letter
for each of the other Underwriters containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At the Closing Time, the
Representatives shall have received from KPMG LLP a letter, dated as of the
Closing Time, to the effect that it reaffirms the statements made in the
letter furnished pursuant to subsection (e) of this Section, except that
the specified date referred to shall be a date not more than three business
days prior to the Closing Time.
(g) Approval of Quotation. At the Closing Time, the Securities shall
have been approved for quotation on The Nasdaq Stock Market's National
Market, subject only to official notice of issuance.
(h) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
(i) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form
of Exhibit B hereto signed by the persons listed on Schedule D hereto.
-20-
(j) Conversion. At Closing Time, each share of issued and outstanding
Preferred Stock of the Company shall have been converted into shares of
Common Stock of the Company in accordance with the Company's Certificate of
Incorporation.
(ii) Conditions to Purchase of Option Securities. In the event that
the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company contained herein and the statements in any
certificates furnished by the Company hereunder shall be true and correct except
as would not have a Material Adverse Effect (except in all cases where such
representations and warranties are qualified by materiality on the date hereof,
in which case such representations and warranties shall be true and correct as
qualified) as of each Date of Delivery and, at the relevant Date of Delivery,
the Representatives shall have received:
(a) Officers' Certificate. A certificate, dated such Date of Delivery,
of the Chief Executive Officer and the Chief Financial Officer of the
Company confirming that the certificate delivered at the Closing Time
pursuant to Section 5(i)(d) hereof remains true and correct, as of such
Date of Delivery.
(b) Opinion of Counsel for Company. The opinion of Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, counsel for the Company, in form and substance
reasonably satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(i)(b) hereof.
(c) Opinion of Counsel for Underwriters. The opinion of Xxxxxx Xxxxxx
& Xxxxxxx, counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Securities to be purchased on such Date of Delivery
and otherwise to the same effect as the opinion required by Section 5(i)(c)
hereof.
(d) Bring-down Comfort Letter. A letter from KPMG LLP, in form and
substance reasonably satisfactory to the Representatives and dated such
Date of Delivery, substantially in the same form and substance as the
letter furnished to the Representatives pursuant to Section 5(i)(f) hereof,
except that the "specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to such Date of
Delivery.
(iii) Additional. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated
-21-
shall be satisfactory in form and substance to the Representatives and counsel
for the Underwriters.
(iv) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Securities
on a Date of Delivery which is after the Closing Time, the obligations of the
several Underwriters to purchase the relevant Option Securities, may be
terminated by the Representatives by notice to the Company at any time at or
prior to Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party except as
provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any
such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. 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 1933 Act or Section 20 of
the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the material distributed in foreign jurisdictions
in connection with the reservation and sale of the Reserved Securities to
Reserved Share Invitees or the omission or alleged omission therefrom of a
material fact necessary to make the statements therein, when considered in
conjunction with the Prospectus or preliminary prospectuses, not
misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation,
-22-
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission or in the Registration Statement or Prospectus in connection with
any violation of the nature referred to in Section 6(a) (ii)(A) hereof;
provided that (subject to Section 6(d) below) any such settlement is
effected with the written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of one counsel chosen by Xxxxxxx Xxxxx),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission or in connection with any violation of the nature referred to in
Section 6(a) (ii)(A) hereof, to the extent that any such expense is not
paid under (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto); provided further, that this indemnity
agreement will not apply to any preliminary prospectus to the extent that any
loss, liability, claim, damage or expense resulted from the fact that such
Underwriter, in contravention of a requirement of this Agreement or applicable
law, sold Securities to a person to whom such Underwriter failed to send or
give, at or prior to the Closing Time, a copy of the Final Prospectus, as then
amended or supplemented if: (i) the Company has previously furnished copies
thereof, in accordance with Section 3(d) of this Agreement within a reasonable
period of time prior to the Closing Time, to the Underwriter and the loss,
liability, claim, damage or expense of such Underwriter resulted from an untrue
statement or omission of a material fact contained in or omitted from the
preliminary prospectus which was corrected in the Prospectus as, if applicable,
amended or supplemented prior to the Closing Time and such Prospectus was
required by law to be delivered at or prior to the written confirmation of sale
to such person and (ii) sending or giving such Prospectus by the Closing Time to
the party or parties asserting such loss, liability, claim, damage or expense
would have cured the defect giving rise to such loss, liability, claim, damage
or expense.
(b) Indemnification of Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained
-23-
in subsection (a)(1) of this Section, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a)(1) above, counsel to the indemnified parties shall be selected by Xxxxxxx
Xxxxx, and, in the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances;
provided that, if indemnity is sought pursuant to Section 6(a)(2), then, in
addition to the fees and expenses of such counsel for the indemnified parties,
the indemnifying party shall be liable for the reasonable fees and expenses of
not more than one counsel (in addition to any local counsel) separate from its
own counsel and that of the other indemnified parties for the Independent
Underwriter in its capacity as a "qualified independent underwriter" and all
persons, if any, who control the Independent Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of 1934 Act in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances if, in the
reasonable judgment of the Independent Underwriter, there may exist a conflict
of interest between the Independent Underwriter and the other indemnified
parties. Any such separate counsel for the Independent Underwriter and such
control persons of the Independent Underwriter shall be designated in writing by
the Independent Underwriter. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 6 or Section 7
-24-
hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel pursuant to the terms hereof,
such indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by (1) Section 6(a) (iii) 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.
(e) Indemnification for Reserved Securities. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request, in writing to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of Reserved Share Invitees to pay for and
accept delivery of Reserved Securities that, by the end of the first business
day following the date of this Agreement, were subject to a properly confirmed
agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions,
or in connection with any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof, which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds
-25-
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the total underwriting discount received
by the Underwriters, in each case as set forth on the cover of the Prospectus,
or, if Rule 434 is used, the corresponding location on the Term Sheet, bear to
the aggregate initial public offering price of the Securities as set forth on
such cover.
The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission or any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the
-26-
number of Initial Securities set forth opposite their respective names in
Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company submitted pursuant
hereto shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Company, and shall survive delivery of the Securities to
the Underwriters until the applicable statute of limitations.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since March
31, 2002, any material adverse change in the condition, financial or otherwise,
or in the earnings, business prospects or assets of the Company, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or in the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
reasonable judgment of the Representatives, impracticable or inadvisable to
market the Securities or to enforce contracts for the sale of the Securities for
the foreseeable future, or (iii) if trading in any securities of the Company has
been suspended or materially limited by the Commission or the Nasdaq National
Market, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or a material disruption has occurred
in commercial banking or securities settlement or clearance services in the
United States or (iv) if a banking moratorium has been declared by either
Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements
-27-
for one or more of the non-defaulting Underwriters, or any other underwriters
reasonably acceptable to the Company, to purchase all, but not less than all, of
the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of
the Underwriters to purchase and of the Company to sell the Option
Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default that does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representatives or the Company shall have the
right to postpone the Closing Time or the relevant Date of Delivery, as the case
may be, for a reasonable period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication; provided, however, that
notification by electronic mail shall not be deemed a standard from of
telecommunication for purposes hereof. Notices to the Underwriters shall be
directed to the Representatives c/o Merrill Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated at Four Financial Center, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, attention: Equity Capital Markets; and notices to the Company shall be
directed to it at 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, attention:
Chief Financial Officer.
-28-
SECTION 12. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal Representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal Representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Section headings herein and the
Table of Contents are for convenience only and shall not affect the construction
hereof.
-29-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
NETFLIX, INC.
By:
-----------------------------------------
Name:
Title:
-30-
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
XXXXXX XXXXXX PARTNERS LLC
U.S. BANCORP XXXXX XXXXXXX INC.
By: XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
By:
-------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
------------------- ----------
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx ............................
Incorporated
Xxxxxx Xxxxxx Partners LLC .......................................
U.S. Bancorp Xxxxx Xxxxxxx Inc. ..................................
Total ............................................................
Schedule A-1
SCHEDULE B
NETFLIX, INC.
[5,500,000] Shares of Common Stock
(Par Value $.001 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $[ ].
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $[ ], being an amount equal to the initial
public offering price set forth above less $[ ] per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.
Schedule B-1
SCHEDULE C
List of persons and entities
subject to lock-up
Schedule C-1
Exhibit A
FORM OF OPINION OF XXXXXX XXXXXXX XXXXXXXX & XXXXXX
TO BE DELIVERED PURSUANT TO SECTION 5(i)(b)
(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.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in California, Massachusetts, New York,
Georgia, Texas, Michigan, Colorado, Washington and Minnesota.
(iv) To our knowledge, the authorized, issued and outstanding capital stock
of the Company as of March 31, 2002 was as set forth in the Prospectus under the
caption "Capitalization" and, designated "(actual)". The shares of issued and
outstanding capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable; none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or other
similar rights of any securityholder of the Company set forth in the Company's
certificate of incorporation, bylaws or in contracts identified in Attachment A
hereto. The shares of issued and outstanding capital stock of the Company have
been issued in compliance, in all material respects, with all federal and state
securities laws. Except as disclosed in the Prospectus, to our knowledge, as of
[ ], 2002, there were no outstanding options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of the Company's capital stock.
(v) The Securities to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale to the Underwriters pursuant to
the Purchase Agreement, and, when issued and delivered by the Company pursuant
to the Purchase Agreement, against payment of the consideration set forth in the
Purchase Agreement, will be validly issued and fully paid and nonassessable.
(vi) To our knowledge, other than as set forth in the letter agreement
dated June 22, 1999, by and among the Company and certain stockholders of the
Company, the issuance of the Securities is not subject to the contractual,
written preemptive or other similar rights of any securityholder of the Company
which have not been waived or satisfied.
(vii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
A-1
(viii) The Registration Statement [, including any Rule 462(b) Registration
Statement,] has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to our knowledge, no stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no proceedings for
that purpose have been instituted by or are pending before or threatened by the
Commission.
(ix) The Registration Statement [, including any Rule 462(b) Registration
Statement], the Rule 430A Information, the Prospectus and each amendment or
supplement to the Registration Statement and the Prospectus as of their
respective effective or issue dates (other than the financial statements and
supporting schedules included therein or omitted therefrom, as to which we
express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(x) The form of certificate used to evidence the Common Stock complies in
all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company.
(xi) To our knowledge, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Company is a party, or to
which the property of the Company is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which is required to be
described in the Prospectus that is not fairly described, in all material
respects, therein as required under the 1933 Act and 1933 Act Regulations.
(xii) The information in the Prospectus under "Description of Capital Stock"
and "Certain Relationships and Related Transactions" and in the Registration
Statement under Item 14, to the extent that it constitutes matters of law, is
accurate in all material respects and to the extent that it constitutes
summaries of legal matters, the Company's certificate of incorporation and
bylaws, legal proceedings, or legal conclusions, has been reviewed by us and
fairly summarizes such in all material respects.
(xiii) To our knowledge, there are no statutes or regulations that are
required to be described in the Prospectus that are not described as required in
all material respects.
(xiv) All descriptions in the Prospectus of contracts and other documents to
which the Company is a party are accurate in all material respects; to our
knowledge, there are no franchises, contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments required to be described or
referred to in the Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed as exhibits thereto,
and the descriptions thereof or references thereto are correct in all material
respects.
A-2
(xv) To our knowledge, the Company is not in violation of its charter or
by-laws and no default by the Company exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described in the Registration Statement or
the Prospectus or filed as an exhibit to the Registration Statement.
(xvi) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any domestic court or governmental
authority or agency, (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance,
sale or delivery of the Securities.
(xvii) The execution, delivery and performance of the Purchase Agreement and
the consummation of the transactions described in the Purchase Agreement and in
the Registration Statement (including the issuance and sale of the Securities)
and compliance by the Company with its obligations under the Purchase Agreement
do not and will not, whether with or without the giving of notice or lapse of
time or both, conflict with or constitute a breach of, or default or Repayment
Event (as defined in Section 1(a)(xi) of the Purchase Agreement) 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 contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or any other agreement or
instrument, identified on Attachment A hereto, nor does such action result in
any violation of the provisions of the charter or by-laws of the Company, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of their respective
properties, assets or operations.
(xviii) The Company is not an "investment company" as defined in the 1940 Act.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information, (except for financial statements and schedules and other financial
data included therein or omitted therefrom, as to which we make no statement),
at the time such Registration Statement or any such amendment became effective
or at the date hereof, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the date of the
Prospectus, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
A-3
In rendering such opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A-4
Exhibit B
LOCK-UP AGREEMENT
[ ], 2002
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxxx Xxxxxx Partners LLC
U.S. Bancorp Xxxxx Xxxxxxx Inc.
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
x/x Xxxxxxx Xxxxx & Xx.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Four World Financial Center
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Proposed Public Offering by Netflix, Inc.
Dear Sirs:
The undersigned understands that Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated ("Xxxxxxx Xxxxx"), Xxxxxx Xxxxxx & Partners
and U.S. Bancorp Xxxxx Xxxxxxx propose to enter into a Purchase Agreement (the
"Purchase Agreement") with Xxxxxxx.xxx, Inc., a Delaware corporation (the
"Company") providing for the public offering of shares (the "Securities") of the
Company's common stock (the "Common Stock"). In recognition of the benefit that
such an offering will confer upon the undersigned and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
Purchase Agreement that, during a period commencing from the date of the
execution of this Lock-Up Agreement and ending 180 days after the date of the
final prospectus relating to the offering of the Common Stock, the undersigned
will not, without the prior written consent of Xxxxxxx Xxxxx, directly or
indirectly, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or transfer any shares
of the Common Stock or any securities convertible into, exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of
B-1
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Common
Stock, whether any such swap or transaction is to be settled by delivery of
Common Stock or other securities, in cash or otherwise, in each case, except as
expressly contemplated by the Prospectus (as defined in the Purchase Agreement);
provided however, that nothing herein shall prohibit the undersigned from (a)
acquiring any security convertible into, exchangeable or exercisable for Common
Stock directly from the Company (e.g. stock option, warrant, convertible debt
instrument or the like) or exercising any such derivative security; provided
however, that Common Stock received upon the exercise of such derivative
security shall be subject to the restrictions set forth herein, (b) surrendering
such Common Stock or securities convertible into, exchangeable or exercisable
for Common Stock pursuant to a merger or consolidation approved by the board of
directors of the Company, or (c) tendering such Common Stock or securities
convertible into, exchangeable or exercisable for Common Stock pursuant to a
tender offer made in compliance with Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder. Notwithstanding anything contained herein to the contrary, the
undersigned is expressly permitted to transfer any or all of the Common Stock
(1) as a bona fide gift or gifts, (2) on death by will or intestacy, (3) to the
undersigned's immediate family or to a trust, partnership or other entity, the
beneficiaries, partners or equity holders of which are exclusively the
undersigned and/or a member or members of the undersigned's immediate family, or
(4) pursuant to a court order or settlement agreement approved by a court of
competent jurisdiction; provided however, that in any such case, it shall be a
condition to the transfer that the transferee execute an agreement stating that
the transferee is receiving and holding the Securities transferred subject to
the provisions of this Lock-Up Agreement, and there shall be no further transfer
of such Securities except in accordance with this Lock-Up Agreement, and
provided further that any such transfer shall not involve a disposition for
value. The term "immediate family" as used herein shall mean the lineal
descendant, spouse, adopted child, father, mother, grandfather, grandmother,
brother or sister of the undersigned and the spouses, adopted children and
lineal descendants of any of the foregoing.
This Lock-Up Agreement shall terminate and be of no further force or
effect if at any time after the date hereof, Xxxxxxx Xxxxx shall indicate to the
Company that it no longer wishes to proceed with the public offering of the
Securities or if the Company informs Xxxxxxx Xxxxx in writing of its intention
not to proceed with the public offering of the Securities with Xxxxxxx Xxxxx
serving as a representative of the several underwriters.
B-2
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Lock-Up Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
Very truly yours,
----------------------------------
Signature:
----------------------------------
Print Name:
B-3
