EXHIBIT 1.1
[ ] Shares of Common Stock
Digital Island, Inc.
UNDERWRITING AGREEMENT
----------------------
[ ], 1999
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇▇▇ BROTHERS INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LLC
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Digital Island, Inc., a corporation organized and existing under the
laws of Delaware (the "Company"), proposes, subject to the terms and conditions
stated herein, to issue and sell to the underwriters named in Schedule I hereto
(the "Underwriters"), acting severally and not jointly, an aggregate of [ ]
shares (the "Firm Shares") of its common stock, par value $0.001 per share (the
"Common Stock"), and, for the sole purpose of covering over-allotments in
connection with the sale of the Firm Shares, at the option of the Underwriters,
up to an additional [ ] shares (the "Additional Shares") of the Common
Stock. The Firm Shares and any Additional Shares purchased by the Underwriters
are referred to herein as the "Shares." The Shares are more fully described in
the Registration Statement referred to below.
1. Representations and Warranties of the Company. The Company hereby
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represents and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a
registration statement, and may have filed an amendment or amendments thereto,
on Form S-1 (No. 333-77039), for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"). Such registration statement,
including the prospectus, financial statements and schedules, exhibits and all
other documents filed as a part thereof, as amended at the time of effectiveness
of the registration statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A
or Rule 434 of the Rules and Regulations of the Commission under the Act (the
"Regulations"), is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the Regulations is herein called the
"462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The prospectus,
in the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) or Rule 434 filing is required, is herein called
the "Prospectus." The term "preliminary prospectus" as used herein means a
preliminary prospectus as described in Rule 430 of the Regulations. For purposes
of this Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment, supplement or term sheet with
respect to any of the foregoing shall be deemed to include the copy of such
documents filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("▇▇▇▇▇"). Neither the Commission nor the Blue Sky
or securities authority of any state or other jurisdiction has issued a stop
order suspending the effectiveness of the Registration Statement, preventing or
suspending the use of any preliminary prospectus, the Prospectus, the
Registration Statement or any amendment or supplement or term sheet thereto,
refusing to permit the effectiveness of the Registration Statement or suspending
the registration or qualification of the Shares, nor has any of such authorities
instituted or threatened to institute nor, to the Company's knowledge,
contemplated instituting, any proceedings with respect to a stop order.
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(b) At the respective time of the effectiveness of the
Registration Statement or any 462(b) Registration Statement or the effectiveness
of any post-effective amendment to the Registration Statement, when the
Prospectus is first filed with the Commission pursuant to Rule 424(b) or Rule
434 of the Regulations, when any supplement to or amendment of the Prospectus is
filed with the Commission and at the Closing Date and the Additional Closing
Date, if any (as hereinafter respectively defined), the Registration Statement
and the Prospectus and any amendments and supplements thereto complied or will
comply in all material respects with the applicable provisions of the Act and
the Regulations and do not or will not contain an untrue statement of a material
fact and do not or will not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein (i) in the
case of the Registration Statement, not misleading and (ii) in the case of the
Prospectus, in light of the circumstances under which they were made, not
misleading. When any related preliminary prospectus was first filed with the
Commission (whether filed as part of the registration statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
of the Regulations) and when any amendment or supplement thereto was first filed
with the Commission, such preliminary prospectus and any amendments and
supplements thereto complied in all material respects with the applicable
provisions of the Act and the Regulations and did not contain an untrue
statement of a material fact and did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not mislead-
ing. In addition, each preliminary prospectus and the Prospectus delivered to
the Underwriters for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
▇▇▇▇▇, except to the extent permitted by Regulation S-T. No representation and
warranty is made in this subsection (b), however, with respect to any
information contained in or omitted from the Registration Statement or the
Prospectus or any related preliminary prospectus or any amendment or supplement
thereto in reliance upon and in conformity with information furnished in writing
to the Company by
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or on behalf of any Underwriter through you as herein stated expressly for use
in connection with the preparation thereof. If Rule 434 is used, the Company
will comply with the requirements of Rule 434 and the Prospectus shall not be
"materially different," as such term is used in Rule 434, from the Prospectus
included in the Registration Statement at the time it became effective.
(c) PricewaterhouseCoopers LLP, who have certified the financial
statements and supporting schedules included in the Registration Statement, are
independent public accountants as required by the Act and the Regulations.
(d) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as set forth
in the Registration Statement and the Prospectus, (A) there has been no material
adverse change or any development involving a prospective material adverse
change in the business, prospects, properties, operations, condition (financial
or other) or results of operations of the Company and its subsidiaries taken as
a whole (a "Material Adverse Effect"), including but not limited to
relationships with customers and suppliers of the Company; (B) there have been
no transactions entered into by the Company or any of its subsidiaries, other
than those in the ordinary course of business, which are material with respect
to the Company and its subsidiaries taken as a whole; (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; and (D) since the date of the latest balance
sheet presented in the Registration Statement and the Prospectus, neither the
Company nor any of its subsidiaries has incurred or undertaken any liabilities
or obligations, direct or contingent, which are material to the Company and its
subsidiaries taken as a whole, except for liabilities or obligations which are
reflected in the Registration Statement and the Prospectus.
(e) This Agreement and the transactions contemplated herein have
been duly and validly authorized by all necessary corporate action, and this
Agreement has been duly and validly executed and
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delivered by the Company. Assuming due authorization, execution and delivery by
the Representatives, this Agreement constitutes a valid and binding obligation
of the Company, enforceable in accordance with its terms.
(f) The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby do not and will not
(i) conflict with or result in a breach of any of the terms and provisions of,
or constitute a default (or an event which with notice or lapse of time, or
both, would constitute a default) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, any debenture, note, contract, indenture,
mortgage, deed of trust, lease, joint venture or other agreement, instrument,
franchise, license or permit to which the Company or any of its subsidiaries is
a party or by which any of their respective properties or assets may be bound,
other than any breach, default, lien, change or encumbrance which would not have
a Material Adverse Effect, or (ii) violate or conflict with any provision of the
certificate of incorporation or by-laws of the Company, or any of its
subsidiaries, or any judgment, writ, decree, order, law, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of its subsidiaries or any of their
respective properties, assets or operations, other than any violation or
conflict which would not have a Material Adverse Effect. No consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of its subsidiaries or any of their
respective properties or assets is necessary or required for the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, including the issuance, sale and delivery of
the Shares to be issued, sold and delivered by the Company hereunder, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses and
permits as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters.
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(g) All of the outstanding shares of capital stock of the
Company are duly and validly authorized and issued, fully paid and
nonassessable, and none of such shares was issued in violation of or is now
subject to any preemptive rights, co-sale rights, registration rights, rights of
first refusal or similar rights granted by the Company which have not otherwise
been waived in writing. All of the outstanding shares of capital stock and all
other outstanding securities of the Company have been issued in compliance in
all material respects with applicable Federal and state laws. The Shares have
been duly authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued, delivered and sold in accordance with this
Agreement, will be duly and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances or claims, will not
have been issued in violation of or be subject to any preemptive rights, co-sale
rights, registration rights, rights of first refusal or similar rights and no
holder of Shares will be subject to personal liability by reason of being such a
holder. The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus in the column entitled "Actual" under the caption
"Capitalization", and, after giving effect to the offering will be as set forth
in the column entitled "As Adjusted," and the number of authorized, issued and
outstanding options is set forth in the Prospectus under the caption
Capitalization." Since that date, none of the Company or its subsidiaries have
issued any securities other than (i) Common Stock of the Company pursuant to the
exercise of previously outstanding and privately granted options pursuant to the
Digital Island, Inc. 1998 Stock Option/Stock Incentive Plan (the "Plan"), and
(ii) options granted in the ordinary course of business pursuant to the Plan.
The authorized capital stock of the Company, including the Common Stock, the
Firm Shares and the Additional Shares, conforms in all material respects to the
descriptions thereof contained in the Registration Statement and the Prospectus
and such descriptions conform in all material respects to the rights set forth
in the instruments defining the same. Except as disclosed in the Registration
Statement and the Prospectus, there are no outstanding shares of capital
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stock, options, warrants or other securities or other rights calling for the
issuance of, and no commitments, obligations, plans or arrangements to issue,
any securities of the Company or any of its subsidiaries. The outstanding stock
options relating to the Common Stock have been duly authorized and validly
issued and each of the Plan and stock options granted by the Company conform in
all material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(h) Each of the Company and each of its subsidiaries has been
duly organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation. Each of the Company and its
subsidiaries is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business makes such
qualification necessary, except for those failures to be so qualified or in good
standing which could not in the aggregate have a Material Adverse Effect. All of
the outstanding capital stock of each of the Company's subsidiaries has been
duly authorized and validly issued, is fully paid and nonassessable and is owned
by the Company or a wholly-owned subsidiary of the Company free and clear of any
liens, mortgages, pledges, charges, security interests, claims, encumbrances or
other defects in title whatsoever and none of the outstanding shares of capital
stock of any of the Company's subsidiaries was issued in violation of the
preemptive rights, co-sale rights, registration rights, rights of first refusal
or similar rights, in each case granted by the Company and which have not
otherwise been waived in writing, of any security holder of any such subsidiary
or other party. Except as described in the Prospectus, the Company has no
agreements, commitments, or understandings with respect to acquiring or selling
the business, stock or material assets, except those assets acquired in the
ordinary course of business, of the Company, its subsidiaries or any other
person or entity. The only subsidiaries of the Company are the subsidiaries
listed on Exhibit 21.1 to the Registration Statement. None of the Company nor
any of its subsidiaries owns any capital stock or any other interest in any
other corporation or entity (other than such subsidiaries).
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(i) Each of the Company and its subsidiaries has all requisite
corporate power and corporate authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits
(collectively, "Governmental Licenses") of and from all appropriate Federal,
state, local or foreign public, regulatory or governmental agencies and bodies,
to own, lease and operate its properties and conduct its business as now being
conducted, or as presently proposed to be conducted, and as described in the
Registration Statement and the Prospectus, except for such Governmental
Licenses, the absence of which would not have a Material Adverse Effect. Each
such Governmental License is valid and in full force and effect, the Company and
its subsidiaries are in material compliance with the terms and conditions of all
such Governmental Licenses, and no such Governmental License contains a
materially burdensome restriction not disclosed in the Registration Statement
and the Prospectus, and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such Governmental Licenses.
(j) Neither the Company nor any of its subsidiaries is in
violation of any provision of its charter or by-laws, as the case may be, or in
breach of any of the terms or provisions of or in default (or would be in
default with notice or lapse of time, or both) under any debenture, note,
contract, indenture, mortgage, deed of trust, lease, joint venture or other
agreement, instrument, franchise, license or permit to which the Company or any
of its subsidiaries is a party or by which any of their respective properties,
assets or operations may be bound, which breach, violation, default or defaults
could have, individually or in the aggregate, a Material Adverse Effect, or in
violation of any judgment, writ, decree, order, law, statute, rule or regulation
of any court or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
respective properties, assets or operations, the violation of which could have,
individually or in the aggregate, a Material Adverse Effect.
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(k) Except as described in the Registration Statement and the
Prospectus, there is no litigation, action, suit, proceeding, inquiry or
governmental proceeding or investigation to which the Company or any of its
subsidiaries is a party or to which any property of the Company or any of its
subsidiaries is subject that would otherwise be required to be described therein
or which is pending or, to the best knowledge of the Company, threatened or
contemplated against the Company or any of its subsidiaries.
(l) The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and the Prospectus
present fairly the consolidated financial position of the Company and its
subsidiaries as of the dates indicated and the results of their operations,
stockholders' equity and cash flows for the periods specified; said financial
statements have been prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis through the periods involved;
the supporting schedules included in the Registration Statement present fairly
the information required to be stated therein; and the selected consolidated
financial data, the summary consolidated financial information, pro forma
financial information, and the capitalization information included in the
Registration Statement and the Prospectus present fairly in accordance with GAAP
and the Regulations the information shown therein and have been compiled on a
basis consistent with that of the financial statements included in the
Registration Statement and the Prospectus. No financial statements are required
to be included in the Registration Statement that have not been so included.
(m) All material Federal, state and local tax returns required
to be filed by the Company and its subsidiaries have been filed and all such
returns are true, complete, and correct in all material respects. All material
taxes that are due or claimed to be due from the Company and its subsidiaries
have been paid other than those (i) currently payable without penalty or
interest or (ii) being contested in good faith and by appropriate proceedings
and for which adequate reserves have been established in accordance
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with GAAP. Except as disclosed in the Registration Statement and the Prospectus,
there is no material tax deficiency that has been, or may reasonably be expected
to be, asserted against the Company or any of its subsidiaries.
(n) Either the Company or its subsidiaries maintains insurance
with insurers of recognized financial responsibility of the types and in the
amounts purchased by similarly situated companies and generally deemed adequate
for its respective businesses, including, without limitation, insurance coverage
for real and personal property owned or leased by them against theft, damage,
destruction, acts of vandalism, and all other material risks customarily insured
against, all of which insurance is in full force and effect. Neither the Company
nor any of its subsidiaries has any reason to believe that it will not be able
to renew existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its respective business. 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 are prudent and customary for officers and directors
liability insurance of a public company and as would cover claims which could be
made in connection with the issuance of the Shares; 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 cover its
officers and directors.
(o) Either the Company or its subsidiaries has good and
marketable title to all personal property and assets owned by it, free and clear
of all mortgages, pledges, security interests, claims, restrictions, liens,
encumbrances and defects except as do not, individually or in the aggregate, do
not interfere in any material respect with the use made or proposed to be made
of such property by the Company or its subsidiaries, as the case may be. Any
real property and buildings held under lease by the Company or any of its
subsidiaries are held under valid, existing and enforceable leases in full force
and effect with such exceptions as are not material and which do not interfere
in
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any material respect with the use made or proposed to be made of such property
and buildings by the Company or its subsidiaries, as the case may be, and
neither the Company or any of its subsidiaries has any notice of any claims of
any sort that has been asserted by anyone adverse to the rights of the Company
or any subsidiary under any such leases.
(p) Except as described in the Registration Statement and the
Prospectus, either the Company or its subsidiaries owns or possesses legal and
valid rights to use all patents, inventions, copyrights, software, databases,
know-how, Internet domain names, trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures,
trademarks, service marks, trade names, rights of publicity pertaining to the
name, likeness, voice, signatures, and/or biographical information of real
persons and other intellectual property (collectively, "Intellectual Property")
necessary to carry on the business of the Company and its subsidiaries as
currently conducted, and as presently proposed to be conducted and described in
the Prospectus, free and clear of all liens, claims and encumbrances, subject to
such exceptions as would not have a Material Adverse Effect. Except as described
in the Registration Statement and the Prospectus, neither the Company nor any of
its subsidiaries has received any notice or is otherwise aware of (i) any claim,
action or demand of any person in the United States or elsewhere or any
proceeding in the United States or elsewhere, pending or threatened, that (A)
challenges the ownership of the Company or any of its subsidiaries in or its
right to use any Intellectual Property or (B) alleges that any product or
service of the Company or any of its subsidiaries infringes or misappropriates
the Intellectual Property rights of others or constitutes unfair competition or
(ii) any facts or circumstances that would render any Intellectual Property
owned or used by the Company or any Intellectual Property license agreement to
which the Company or any of its subsidiaries is a party, invalid or inadequate
to protect the interest of the Company or any of its subsidiaries therein or
thereunder, subject to such exceptions as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has taken reasonable
steps to protect, maintain and
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safeguard its rights in all material Intellectual Property owned or used by the
Company or its subsidiaries and to maintain the secrecy of all such Intellectual
Property as to which improper or unauthorized disclosure would impair its value
or validity, including the execution of appropriate nondisclosure and
confidentiality agreements.
(q) No relationship, direct or indirect, exists between or among the
Company or any of its affiliates, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of its subsidiaries,
on the other hand, that is required by the Act to be described in the
Registration Statement and the Prospectus that is not so described. Except as
disclosed in the Registration Statement and the Prospectus, there are no
outstanding loans, advances, or guarantees or 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 that would be required to be
described in the Registration Statement and the Prospectus.
(r) The Shares have been duly authorized for listing on the
Nasdaq National Market, subject to official notice of issuance.
(s) Except for rights that have been specifically waived in
writing, no holder of securities of the Company has any rights to the
registration of securities of the Company because of the filing of the
Registration Statement or otherwise in connection with the sale of the Shares
contemplated hereby.
(t) The Company is not, and upon consummation of the
transactions contemplated hereby and the application of the net proceeds of the
offering of the Shares as described in the Prospectus will not be, subject to
registration as an "investment company" or an entity "controlled" by an
"investment company" under the Investment Company Act of 1940, as amended.
(u) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent, and the
Company is not aware of any existing or imminent labor
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disturbance by the employees of any of its or any subsidiary's principal
suppliers, manufacturers, customers or contractors that are likely, individually
or in the aggregate, to have a Material Adverse Effect.
(v) There are no contracts or documents which 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. The
descriptions of contracts in the Registration Statement and the Prospectus are
accurate and complete in all material respects; except as described therein, all
contracts described in the Registration Statement and the Prospectus are valid,
binding and enforceable and are in full force and effect, and neither the
Company nor any of its subsidiaries or, to the Company's knowledge, any other
party is in breach of or default under any provisions of such contracts, except,
in the case of the Company, for any such breach or default which would not have
a Material Adverse Effect. Neither the Company nor its subsidiaries has
experienced a material adverse change in its business relationships with its
material suppliers.
(w) Each employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Securities Act of 1974, as amended
("ERISA"), that is maintained, administered or contributed to by the Company or
any of its subsidiaries for employees or former employees of the Company or any
of its subsidiaries has been maintained in compliance in all material respects
with its respective terms and the requirements of any applicable statutes,
order, rules and regulations, including but not limited to ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"). No prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, has occurred with respect to any such plan, excluding transactions
effected pursuant to a statutory or administrative exemption. For each such plan
that is subject to the funding rules of Section 412 of the Code or Section 302
of ERISA, no "accumulated funding deficiency", as defined in Section 412 of the
Code, has been incurred, whether or not waived, and the fair market value of the
assets of each such plan (excluding for these purposes accrued but unpaid
contributions)
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exceeded the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions. The description of the Company's Plan
and the options or other rights granted and exercised thereunder set forth in
the Registration Statement and the Prospectus accurately and fairly describe, in
all material respects, the information required to be shown with respect to such
Plan, options and rights.
(x) Either the Company or its subsidiaries maintains a system of
internal accounting controls that are sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) The statistical and market-related data included in the
Registration Statement and the Prospectus are derived from sources which the
Company reasonably and in good faith believes to be accurate, reasonable and
reliable, and such data agrees in all material respects with the sources from
which they were derived.
(z) The Company has not at any time during the last five (5) years in
any jurisdiction (i) made any unlawful contribution to any candidate for office,
or failed to disclose fully any contribution in violation of law, or (ii) made
any payment to any governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States.
Any certificate signed by any director or officer of the Company or
any of its subsidiaries delivered to the Representative or to the Underwriters'
Counsel (as herein defined) shall be deemed a
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representation and warranty by the Company to each Underwriter as the matters
covered thereby.
2. Purchase, Sale and Delivery of the Shares.
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(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriters and the Underwriters,
severally and not jointly, agree to purchase from the Company, at a purchase
price per share of $[ ], the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any additional
number of Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP ("Company Counsel"), Two Embarcadero Place, ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as shall be agreed
upon by you and the Company, at 7:00 A.M. on the third or fourth Business Day
(as permitted under Rule 15c6-1 under the Exchange Act) (unless postponed in
accordance with the provisions of Section 9 hereof) following the date of the
effectiveness of the Registration Statement (or, if the Company has elected to
rely upon Rule 430A of the Regulations, the third or fourth business day (as
permitted under Rule 15c6-1 under the Exchange Act) after the determination of
the initial public offering price of the Shares), or such other time not later
than ten Business Days (as hereinafter defined) after such date as shall be
agreed upon by you and the Company (such time and date of payment and delivery
being herein called the "Closing Date"). It is understood that each Underwriter
has authorized you for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the Firm Shares and the Additional Shares, if
any, which it has agreed to purchase. As used herein, the term "Business Day"
means any day other than a Saturday, Sunday or other day on which commercial
banks are authorized or required to be closed in California. Payment shall be
made to the Company by wire transfer in same day funds, against delivery to you
for the respective accounts of the Underwriters of certificates for the Firm
Shares to be purchased by
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them. Certificates for the Firm Shares shall be registered in such name or names
and in such authorized denominations as you may request in writing at least two
full Business Days prior to the Closing Date. The Company will permit you to
examine and package such certificates for delivery at least one full Business
Day prior to the Closing Date.
(c) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants to the Underwriters
the option to purchase, severally and not jointly, up to [ ] Additional Shares
at the same purchase price per share to be paid by the Underwriters to the
Company for the Firm Shares as set forth in this Section 2, for the purpose of
covering over-allotments, if any, in the sale of Firm Shares by the
Underwriters. This option may be exercised at any time, or from time to time, in
whole or in part, on or before the thirtieth day following the date of the
Prospectus, by written notice by you to the Company. Such notice shall set forth
the aggregate number of Additional Shares as to which the option is being
exercised and the date and time, as reasonably determined by you, when the
Additional Shares are to be delivered (such date and time being herein sometimes
referred to as the "Additional Closing Date"); provided, however, that the
-------- -------
Additional Closing Date shall not be earlier than the Closing Date or earlier
than the second full Business Day after the date on which the option shall have
been exercised nor later than the eighth full Business Day after the date on
which the option shall have been exercised (unless such time and date are
postponed in accordance with the provisions of Section 9 hereof). Certificates
for the Additional Shares shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
Business Days prior to the Additional Closing Date. The Company will permit you
to examine and package such certificates for delivery at least one full Business
Day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter shall
be the number which bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth
16
opposite the name of such Underwriter in Schedule I hereto (or such number
increased as set forth in Section 9 hereof) bears to the total number of Firm
Shares subject, however, to such adjustments to eliminate any fractional shares
as you in your sole discretion shall make.
Payment of the purchase price for the Additional Shares shall be made
to the Company by wire transfer in same day funds to such account as specified
by the Company to the Representatives in writing at least two full Business Days
prior to the Additional Closing Date against delivery to you of the certificates
for the Additional Shares to you for the respective accounts of the
Underwriters.
3. Offering. Upon your delivery of the Firm Shares, the Underwriters
--------
propose to offer the Shares for sale to the public upon the terms set forth in
the Prospectus.
4. Covenants of the Company. The Company covenants and agrees with
------------------------
the Underwriters that:
(a) If the Registration Statement has not yet been declared
effective, the Company will use its reasonable best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as possible, and if Rule 430A is used or the filing of the Prospectus
is otherwise required under Rule 424(b) or Rule 434, the Company will file the
Prospectus (properly completed if Rule 430A has been used) pursuant to and in
compliance with Rule 424(b) or Rule 434 within the prescribed time period and
will provide evidence satisfactory to you of such timely filing. If, with your
consent, the Company elects to rely on Rule 434, the Company will prepare and
file a term sheet that complies with the requirements of Rule 434.
The Company will notify you immediately (and, if requested by
you, will confirm such notice in writing) (i) when the Registration Statement
and any amendments thereto become effective, (ii) of any request by the
Commission for any amendment of or supplement to the Registration Statement or
the Prospectus or for any additional information, (iii) of the mailing or the
17
delivery to the Commission for filing of any amendment of or supplement to the
Registration Statement or the Prospectus, (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
any post-effective amendment thereto or any order preventing or suspending the
use of any preliminary prospectus, or of the initiation, or the threatening, of
any proceedings with respect to any of the foregoing, (v) of the receipt of any
comments from the Commission, and (vi) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for that purpose. If the Commission shall propose or enter a stop order at any
time, the Company shall use its reasonable best efforts to prevent the issuance
of any such stop order and, if issued, to obtain the lifting of such order as
soon as possible. The Company will not file any amendment to the Registration
Statement, make any filing under Rule 462(b) of the Regulations, or file any
amendment of or supplement to the Prospectus (including the prospectus required
to be filed pursuant to Rule 424(b)or Rule 434 of the Regulations) before or
after the effective date of the Registration Statement to which you shall
reasonably object in writing after being timely furnished in advance a copy
thereof.
(b) The Company will comply in all material respects with the
Act and the Regulations so as to permit the completion of the distribution of
the Shares as contemplated in this Agreement and the Prospectus. If at any time
when a prospectus relating to the Shares is required to be delivered under the
Act any event shall have occurred or a condition shall exist as a result of
which the Prospectus as then amended or supplemented would, in the judgment of
the Underwriters or the Company, include an untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it shall be necessary at any time to amend or
supplement the Prospectus or Registration Statement to comply with the Act or
the Regulations, the Company will notify you promptly and prepare and file with
the Commission an appropriate amendment or supplement (in form and
18
substance reasonably satisfactory to you) which will correct such statement or
omission and will use its best efforts to have any amendment to the Registration
Statement declared effective as soon as possible and the Company will furnish to
the Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(c) The Company will promptly deliver to you four conformed copies of
the Registration Statement, including exhibits and all amendments thereto, and
conformed copies of all consents, and will maintain in the Company's files
signed copies of such documents for at least five years from the date of filing,
and the Company will promptly deliver to each of the Underwriters, without
charge, during the period when the Prospectus is required to be delivered under
the Act, such number of copies of any preliminary prospectus, the Prospectus,
the Registration Statement, and all amendments of and supplements to such
documents, if any, as you may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the Act. The
copies of the Registration Statement and Prospectus and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to ▇▇▇▇▇, except
to the extent permitted by Regulation S-T.
(d) The Company will endeavor in good faith, in cooperation with you,
at or prior to the time of effectiveness of the Registration Statement, to
qualify the Shares for offering and sale under the securities laws relating to
the offering or sale of the Shares of such jurisdictions, domestic or foreign,
as you may designate and to maintain such qualification in effect for so long as
required for the distribution thereof; except that in no event shall the Company
be obligated in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction where it is
not so qualified or subject.
(e) The Company will make generally available (within the meaning of
Section 11(a) of the Act) to its security holders and to you as soon as
practicable, but not later than 45 days after the end of
19
its fiscal quarter in which the first anniversary date of the effective date of
the Registration Statement occurs, an earnings statement (in form complying with
the provisions of Rule 158 of the Regulations) covering a period of at least
twelve consecutive months beginning after the effective date of the Registration
Statement.
(f) During the period of 180 days from the date of the Prospectus,
each of the Company and its subsidiaries will not directly or indirectly,
without the prior written consent of Bear, ▇▇▇▇▇▇▇ & Co. Inc., (which consent
may be withheld at the sole discretion of Bear, ▇▇▇▇▇▇▇ & Co. Inc.), directly or
indirectly (i) issue, offer to sell, 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 Company's Common Stock, or any securities convertible
into or exchangeable or exercisable for such Common Stock or any other
securities of the Company or its subsidiaries, whether now owned or hereafter
acquired by such person or with respect to which such person has or hereafter
acquires the power of disposition; 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 or
convertible into or exchangeable for Common Stock whether any such swap
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise (other than as contemplated by this Agreement with respect to
the Shares); provided, however, that, notwithstanding the foregoing, the Company
-------- -------
may issue shares of its Common Stock or options to purchase its Common Stock
upon exercise of options pursuant to any stock option plan, warrants, stock
bonus or other stock plan or arrangement described in the Prospectus, in each
case in the ordinary course of business; provided, that any such shares which
are issued or options which vest during the period of 180 days from the date of
the Prospectus shall be subject to the restrictions set forth above in this
Section 4(f), and, in connection therewith, the Company shall cause any holder
of such shares or vested options to execute an appropriate Lock-Up Agreement
containing such provisions.
20
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its stockholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission on a
non-confidential basis or any national securities exchange. The Company, during
the period when the Prospectuses are required to be delivered under the Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act (including any
extensions of time obtained thereunder) and the rules and regulations of the
Commission thereunder.
(h) The Company will apply the proceeds from the sale of the Shares
as set forth under "Use of Proceeds" in the Prospectus and file with the
Commission such reports and report such use of proceeds as may be required
pursuant to Rule 463 of the Regulations.
(i) The Company will use its reasonable best efforts to cause
the Shares to be listed on the Nasdaq National Market.
(j) The Company will use its reasonable best efforts to do and
perform all things required or necessary to be done and performed under this
Agreement by the Company prior to or after the Closing Date or any Additional
Closing Date, as the case may be, and to satisfy all conditions precedent to the
delivery of the Shares.
Bear ▇▇▇▇▇▇▇ & Co. Inc., on behalf of the several Underwriters, may,
in its sole discretion, waive in writing the performance by the Company of any
one or more of the foregoing covenants or extend the time for their performance;
provided, however, that any such waiver or extension shall be effective only in
-------- -------
the specific instance and for the specific purpose for which given, and shall
not affect in any manner future compliance with or timely performance of such
covenants by the Company.
5. Payment of Expenses. Whether or not the transactions contemplated
-------------------
in this Agreement are consummated or this Agreement is terminated, the Company
21
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement, as originally filed and all amendments thereof (including all
financial statements and exhibits thereto), any preliminary prospectus, the
Prospectus and any amendments or supplements thereto (including, without
limitation, fees and expenses of the Company's accountants and counsel and
advisors), the underwriting documents (including this Agreement and the
Agreement Among Underwriters) all other documents related to the public offering
of the Shares (including those supplied to the Underwriters in quantities as
hereinabove stated), (ii) the issuance, transfer and delivery of the Shares to
the Underwriters, including any transfer or other taxes or duties payable in
connection with the transfer and delivery of the Shares to the Underwriters,
(iii) the qualification of the Shares under state or foreign securities or Blue
Sky laws, including, if applicable, the costs of printing and mailing a
preliminary and final "Blue Sky Survey" and any supplements thereto and the
filing fees and reasonable fees of the Underwriters' Counsel, and such counsel's
reasonable disbursements in relation thereto, (iv) listing the Shares on the
Nasdaq National Market, (v) filing fees of the Commission and the National
Association of Securities Dealers, Inc. and the reasonable fees and
disbursements of the Underwriters' Counsel in connection with the review by the
NASD of the terms of the sale of the Shares, (vi) the transportation and other
expenses incurred by the Company in connection with presentations to prospective
purchasers of the Shares, (vii) the cost of preparing, printing, and delivering
certificates representing the Shares and (viii) the fees and expenses of any
transfer agent or registrar.
6. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to (i) the accuracy in all material
respects of the representations and warranties of the Company herein contained,
as of the date hereof and as of the Closing Date (for purposes of this Section 6
"Closing Date" shall refer to the Closing Date for the Firm Shares and any
Additional Closing Date,
22
if different, for the Additional Shares), (ii) the absence from any
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 of any material misstatement or
material omission, (iii) the material performance by the Company of its
covenants and other obligations hereunder, and (iv) the following additional
conditions:
(a) The Registration Statement, including any Rule 462(b)
Registration Statement, shall have become effective and all necessary approvals
of the Nasdaq National Market shall have been received not later than 5:30 P.M.,
New York time, on the date of this Agreement, or at such later time and date as
shall have been consented to in writing by you; if the Company shall have
elected to rely upon Rule 430A or Rule 434 of the Regulations, the Prospectus
shall have been filed with the Commission in a timely fashion in accordance with
Section 4(a) hereof; and at or prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement or any post-effective
amendment thereof shall have been issued and no proceedings therefor shall have
been initiated or threatened by the Commission or any state securities authority
and any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of the Underwriters.
(b) At the Closing Date, you shall have received an opinion of
Company Counsel, dated the Closing Date, addressed to the Underwriters and in
form and substance reasonably satisfactory to Underwriters' Counsel,
substantially in the form of Exhibit A hereto.
(c) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be reasonably
satisfactory in form and substance to you and to Underwriters' Counsel, and the
Underwriters shall have received from said Underwriters' Counsel a favorable
opinion, dated as of the Closing Date in customary form and covering such
matters as you may reasonably request, and the Company shall have furnished to
Underwriters' Counsel such documents as they reasonably request for the purpose
of enabling them to pass upon such matters. In giving such opinion
Underwriters' Counsel may rely, as to
23
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 Representative. Underwriters' 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 its
subsidiaries and certificates of public officials.
(d) At the Closing Date you shall have received a certificate of each
of the Chairman of the Board of Directors, the Chief Executive Officer and Chief
Financial Officer of the Company, dated the Closing Date to the effect that (i)
the conditions set forth in subsection (a) of this Section 6 have been
satisfied, (ii) as of the date hereof and as of the Closing Date, the
representations and warranties of the Company set forth in Section 1 hereof are
accurate in all material respects, (iii) as of the Closing Date, the obligations
of the Company to be performed hereunder on or prior thereto have been duly
performed in all material respects, and (iv) subsequent to the respective dates
as of which information is given in the Registration Statement and the
Prospectus, the Company and its subsidiaries have not sustained any material
loss or interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental proceeding,
and there has not been any material adverse change, or any development involving
a material adverse change, in the business prospects, properties, operations,
condition (financial or otherwise), or results of operations of the Company and
its subsidiaries taken as a whole, except in each case as described in or
contemplated by the Prospectus.
(e) At the time this Agreement is executed and at the Closing Date,
you shall have received a letter from PricewaterhouseCoopers LLP, independent
public accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Underwriters and in form
and substance reasonably satisfactory to you, stating that,
24
among other things: (i) they are independent certified public accountants with
respect to the Company within the meaning of the Act and the Regulations and
stating that the information provided in response to Item 10 of the Registration
Statement is correct insofar as it relates to them; (ii) in their opinion, the
financial statements and schedules of the Company included in the Registration
Statement and the Prospectus and covered by their opinion therein comply as to
form in all material respects with the applicable accounting requirements of the
Act and the applicable published rules and regulations of the Commission
thereunder; (iii) on the basis of procedures consisting of a reading of the
latest available unaudited interim consolidated financial statements of the
Company and its subsidiaries, a reading of the minutes of meetings and consents
of the stockholders and boards of directors of the Company and its subsidiaries
and the committees of such boards subsequent to September 30, 1998, inquiries of
officers and other employees of the Company and its subsidiaries who have
responsibility for financial and accounting matters of the Company and its
subsidiaries with respect to transactions and events subsequent to September 30,
1998, a review of interim financial information in accordance with the standards
established by the American Institute of Certified Public Accountants in
Statement of Auditing Standards No. 71, Interim Financial Information with
respect to the six-month period ended March 31, 1999 and other specified
procedures and inquiries to a date not more than five days prior to the date of
such letter, nothing has come to their attention that would cause them to
believe that: (A) the unaudited consolidated financial statements and schedules
of the Company presented in the Registration Statement and the Prospectus,
including the quarterly information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations," do
not comply as to form in all material respects with the applicable accounting
requirements of the Act and, if applicable, the Exchange Act and the applicable
published rules and regulations of the Commission thereunder or that such
unaudited consolidated financial statements are not fairly presented in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited consolidated financial
statements included in the Registration Statement and the Prospectus; (B) with
respect to the
25
period subsequent to March 31, 1999, there were, as of the date of the most
recently available monthly consolidated financial statements of the Company and
its subsidiaries, if any, and as of a specified date not more than five days
prior to the date of such letter, any changes in the capital stock or long-term
indebtedness of the Company or any decrease in the net current assets or
stockholders' equity of the Company, in each case as compared with the amounts
shown in the most recent balance sheet presented in the Registration Statement
and the Prospectus, except for changes or decreases which the Registration
Statement and the Prospectus disclose have occurred or may occur or which are
set forth in such letter or (C) that during the period from April 1, 1999 to the
date of the most recent available monthly consolidated financial statements of
the Company and its subsidiaries, if any, and to a specified date not more than
five days prior to the date of such letter, there was any decrease, as compared
with the corresponding period in the prior fiscal year, in total revenues, or
total or per share net income, except for decreases which the Registration
Statement and the Prospectus disclose have occurred or may occur or which are
set forth in such letter; and (iv) they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, and other financial
information pertaining to the Company and its subsidiaries set forth in the
Registration Statement and the Prospectus, which have been specified by you
prior to the date of this Agreement, to the extent that such amounts, numbers,
percentages, and information may be derived from the general accounting and
financial records of the Company and its subsidiaries or from schedules
furnished by the Company, and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries, and other appropriate procedures specified by
you set forth in such letter, and found them to be in agreement.
(f) Subject to the final paragraph contained in Section 1 of this
Agreement, prior to the Closing Date, the Company shall have furnished to you
such further information, certificates and documents as you or Underwriters'
Counsel may reasonably request (not involving any additional representations,
warranties or covenants).
26
(g) At the Closing Date, the Shares shall have been duly authorized
for listing on the Nasdaq National Market, subject to official notice of
issuance.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
cancelled by you at, or at any time prior to, the Closing Date, and the
obligations of the Underwriters to purchase the Additional Shares may be
canceled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, facsimile, telex or telegraph, confirmed in writing.
7 Indemnification.
---------------
(a) The Company hereby agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), against any and all losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim or inquiry whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they or any
of them may become subject under the Act, the Exchange Act, the common law,
state law or otherwise, insofar as such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) arise out of, relate to or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; or
(ii) any untrue statement or alleged untrue statement of a material fact
27
contained in any preliminary prospectus or the Prospectus or in any supplement
thereto or amendment thereof or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
--------
however, that the Company will not be liable in any such case to the extent but
-------
only to the extent that any such loss, liability, claim, damage or expense
arises out of, relates to or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission: (i) made in any preliminary
prospectus or the Prospectus or in any supplement thereto or amendment thereof
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter expressly for use therein, or (ii)
made in any preliminary prospectus (which untrue statement or alleged untrue
statement or omission or alleged omission was corrected in the Prospectus or in
any supplement thereto or amendment thereof), to the extent that (A) the Company
previously furnished copies of the Prospectus and any supplements thereto or
amendments thereof on a timely basis to the Underwriters, and (B) a prospectus
relating to such Shares was required to be delivered by the Underwriters to the
purchaser of such Shares under the Act, and any such loss, liability, claim,
damage or expense resulted from the fact that there was not sent or given to the
purchaser in question, at or prior to the written confirmation of the sale of
such Shares to such person, a copy of the Prospectus and any supplements thereto
or amendments thereof. This indemnity agreement will be in addition to any
liability which the Company may otherwise have under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to indemnify
and hold harmless the Company, each of the directors of the Company, each of the
officers of the Company who shall have signed the Registration Statement, and
each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of
28
any claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act, the common law, state law or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of, relate to or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus or in any supplement thereto or
amendment thereof or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of, relates to or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter expressly for use therein; provided,
--------
however, that in no case shall any Underwriter be liable or responsible for any
-------
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder. This indemnity will be in addition to any
liability which any Underwriter may otherwise have including under this
Agreement. The Company acknowledges that the statements set forth in the last
paragraph of the cover page and each of the paragraphs set forth under the
caption "Underwriting" in the Prospectus constitute the only information
furnished in writing by or on behalf of any Underwriter expressly for use in the
Registration Statement or in any amendment thereof, any related preliminary
prospectus or the Prospectus or in any amendment thereof or supplement thereto,
as the case may be.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such
29
subsection, notify each party against whom indemnification is to be sought in
writing of the commencement of such action (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 7). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses of counsel shall be borne by the indemnifying parties;
provided, that the indemnifying parties shall only be--------obligated to pay
the fees and expenses of one such counsel for the benefit of the indemnified
party or parties. The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent, or (ii) effected without its written consent if the
settlement is entered into more than twenty Business Days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the
30
indemnifying party shall have failed to comply with such reimbursement request.
No indemnifying party shall be liable to an indemnified party for any settlement
of any action or claim by the indemnified party without the written consent of
the indemnifying party, which consent shall not be unreasonably withheld or
delayed.
8 Contribution. In order to provide for contribution in
------------
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company, on
the one hand, and the Underwriters, on the other, shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
reasonable legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting in the case of losses, claims, damages, liabilities and
expenses suffered by the Company, any contribution received by the Company from
persons, other than the Underwriters, who may also be liable for contribution,
including persons who control the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, officers of the Company who signed
the Registration Statement and directors of the Company) as incurred to which
the Company and one or more of the Underwriters may be subject, in such
proportions as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Underwriters, on the other, from the offering
of the Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 7 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company, on the one hand, and the Underwriters, on the
other, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Underwriters, on the other, shall be deemed to be in
31
the same proportion as (x) the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and (y) the underwriting discounts and commissions received by
the Underwriters, respectively, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company, on the one
hand, and of the Underwriters, on the other, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8, (i) in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder, and (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 8 and the preceding sentence, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. For purposes of this
Section 8, each person, if any, who controls an Underwriter within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as such Underwriter, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution
32
as the Company, subject in each case to clauses (i) and (ii) of this Section 8.
Any party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.
-------- -------
9 Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if the
Firm Shares or Additional Shares with respect to which such default relates do
not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, as the case may be, the Firm Shares or Additional Shares
to which the default relates shall be purchased by the non-defaulting
Underwriters in proportion to the respective proportions which the numbers of
Firm Shares set forth opposite their respective names in Schedule I hereto bear
to the aggregate number of Firm Shares set forth opposite the names of the non-
defaulting Underwriters.
(b) In the event that such default relates to more than 10% of the
total number of Firm Shares or Additional Shares, as the case may be, you may in
your discretion arrange for yourself or for another party or parties (including
any non-defaulting Underwriter or Underwriters who so agree) to purchase such
Firm Shares or Additional Shares, as the case may be, to which such default
relates on the terms contained herein. In the event that within 5 calendar days
after such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as provided
in this Section 9, this Agreement or, in the case of a default with respect to
the Additional Shares, the obligations of the
33
Underwriters to purchase and of the Company to sell the Additional Shares shall
thereupon terminate, without liability on the part of the Company (except in
each case as provided in Section 5, 7(a) and 8 hereof) or the Underwriters, but
nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters
of its or their liability, if any, to the other Underwriters and the Company for
damages occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to which
such default relates are to be purchased by the non-defaulting Underwriters, or
are to be purchased by another party or parties as aforesaid, you or the Company
shall have the right to postpone the Closing Date or Additional Closing Date, as
the case may be, for a period not exceeding five Business Days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus which, in the opinion of Underwriters' Counsel, may
thereby be made necessary or advisable. The term "Underwriter" as used in this
Agreement shall include any party substituted under this Section 9 with like
effect as if it had originally been a party to this Agreement with respect to
such Firm Shares and Additional Shares, as the case may be.
10 Survival of Representations and Agreements. All representations
------------------------------------------
and warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including the agreements contained in Section 5
hereof, the indemnity agreements contained in Section 7 hereof and the
contribution agreements contained in Section 8 hereof, and in certificates of
directors or officers of the Company provided pursuant hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter or any controlling person thereof or by or on
behalf of the Company or any of its officers and directors or any controlling
person thereof and shall survive delivery of and payment for the Shares to and
by the Underwriters. The representations contained in Section 1 and the
agreements contained in Sections 5, 7, 8, 10 and 11(d)
34
hereof shall survive the termination of this Agreement, including termination
pursuant to Section 9 or 11 hereof.
11 Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective upon the later of: (i) such
time as you and the Company shall have received notification of the
effectiveness of the Registration Statement, and (ii) the execution of this
Agreement; provided, however, that if either the initial public offering or the
-------- -------
purchase price per Share has not been agreed upon prior to 5:00 P.M., New York
City time, on the fifth full business day after the Registration Statement shall
have been declared effective, this Agreement shall thereupon terminate without
liability to the Company or the Underwriters except as herein expressly
provided. Until this Agreement becomes effective as aforesaid, it may be
terminated by the Company by notifying you or by you notifying the Company.
Notwithstanding the foregoing, the provisions of this Section 11 and of Sections
1, 5, 7, 8 and 10 hereof shall at all times be in full force and effect.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the obligations of the Underwriters to purchase the
Additional Shares at any time prior to the Additional Closing Date, as the case
may be: (i) if any domestic or international event or act or occurrence has
materially disrupted, or in your opinion will in the immediate future materially
disrupt, the market for the Company's securities or securities in general; (ii)
if trading on the New York or American Stock Exchanges or the Nasdaq National
Market (collectively the "Exchanges") shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required, on any of the Exchanges by the
authorities of such Exchanges or by order of the Commission or any other
governmental authority having jurisdiction; or (iii) if a banking moratorium has
been declared by a state or federal authority or if any new restriction
materially adversely affecting the distribution of the Firm Shares or the
Additional Shares, as the case may be, shall have become effective; or (iv)(A)
if the United States becomes engaged in hostilities or there is an escalation of
35
hostilities involving the United States or there is a declaration of a national
emergency or war by the United States or (B) if there shall have been such
change in political, financial or economic conditions, if the effect of any such
event in (A) or (B) as in your judgment makes it impracticable or inadvisable to
proceed with the offering, sale and delivery of the Firm Shares or the
Additional Shares, as the case may be, on the terms contemplated by the
Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, facsimile, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied (other than the condition that the Underwriters receive a legal
opinion from the Underwriters' Counsel) or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply
with any provision hereof, the Company will, subject to demand by you, reimburse
the Underwriters for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of their counsel), incurred by the Underwriters in
connection herewith.
12 Notices. All communications hereunder, except as may be
-------
otherwise specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, sent by facsimile, telex or telegraph
and confirmed in writing by letter, to such Underwriter c/o either Bear, ▇▇▇▇▇▇▇
& Co. Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇ (with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.,
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇), ▇▇▇▇▇▇ Brothers Inc., 3 World
Financial Center, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇▇ Band, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, or ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC, ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇▇▇▇▇▇▇▇, fax no. (415)
36
364-2696; if sent to the Company, shall be mailed, delivered, or sent by
facsimile, telex or telegraph and confirmed in a letter to the Company, Digital
Island, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇.▇. ▇▇▇▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to ▇▇▇▇▇▇
▇. Mo, Esq., ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, Two Embarcadero Place, ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, fax no. (▇▇▇) ▇▇▇-▇▇▇▇.
13 Parties. This Agreement shall inure solely to the benefit of,
-------
and shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Sections 7 and
8, and their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision contained herein.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of any Shares from any of the Underwriters.
14 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
15 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
37
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
DIGITAL ISLAND, INC.
By:
Name:
---------------------------
Title:
Accepted as of the date first above written
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
By:
---------------------------
Name:
Title:
▇▇▇▇▇▇ BROTHERS INC.
By:
---------------------------
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇ PARTNERS LLC
By:
---------------------------
Name:
Title:
Each on behalf of itself and the other
Underwriters named in Schedule I hereto.
38
SCHEDULE I
Number of Firm
Name of Underwriter Shares to be Purchased
------------------- --------------------------------------------
Bear, ▇▇▇▇▇▇▇ & Co. Inc............
▇▇▇▇▇▇ Brothers Inc................
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC.........
Total. . . . . .
