EXHIBIT 1.1
CORTELCO SYSTEMS, INC.
3,200,000 Shares of Common Stock
Underwriting Agreement
________________, 1999
X.X. Xxxxxx Securities Inc.
Xxxxxxx & Company, Inc.
X.X. Xxxxxxx & Sons, Inc.
As Representatives of several
underwriters listed in Schedule I
hereto
c/o X.X. Xxxxxx Securities Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Cortelco Systems, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to the several Underwriters listed in Schedule I hereto (the
"Underwriters"), for whom you are acting as representatives (the
"Representatives"), an aggregate of ________ shares and, at the election of the
Underwriters, up to ________ additional shares of common stock, par value $.001
per share (the "Stock"), of the Company, and the stockholders of the Company
named in Schedule II hereto (the "Selling Stockholders") propose to sell to the
Underwriters an aggregate of ________ shares and, at the election of the
Underwriters, up to ________ additional shares of Stock. The aggregate of [# of
shrs not incl. option shrs] shares to be sold by the Company and the Selling
Stockholders is herein called the "Underwritten Shares" and the aggregate of [#
of option shrs] additional shares to be sold by the Company and the Selling
Stockholders is herein called the "Optional Shares". The Underwritten Shares and
the Optional Shares are herein referred to as the "Shares"
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement, including a prospectus, relating to the Shares. The registration
statement as amended at the time when it shall become effective, including
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act, is referred to
in this Agreement as the "Registration Statement", and the prospectus in the
form first used to confirm sales of Shares is referred to in this Agreement as
the "Prospectus". If the Company has filed an abbreviated registration statement
pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration
Statement"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement.
The Company and each of the Selling Stockholders hereby agree with the
Underwriters as follows:
1. The Company and each of the Selling Stockholders agree, severally
and not jointly, to sell the Underwritten Shares to the several Underwriters as
hereinafter provided, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase, severally and not jointly, from the
Company and each of the Selling Stockholders at a purchase price per share of
$[public offering price - gross spread] (the "Purchase Price") the number of
Underwritten Shares (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying the aggregate number of Underwritten Shares to be sold
by the Company and each of the Selling Stockholders as set forth opposite their
respective names in Schedule II hereto by a fraction, the numerator of which is
the aggregate number of Underwritten Shares to be purchased by such Underwriter
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Underwritten Shares to be
purchased by all the Underwriters from the Company and all the Selling
Stockholders hereunder.
In addition, the Company and each of the Selling Stockholders, as and to
the extent indicated in Schedule II hereto, agree, severally and not jointly, to
sell the Optional Shares to the several Underwriters, and the Underwriters shall
have the option to purchase at their election up to [# of option shrs] Optional
Shares for the sole purpose of covering over-allotments in the sale of the
Underwritten Shares. Each Underwriter, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
shall have the option to purchase, severally and not jointly, from the Company
and each of the Selling Stockholders at the Purchase Price that portion of the
number of Optional Shares as to which such election shall have been exercised
(to be adjusted by you so as to eliminate fractional shares) determined by
multiplying the aggregate number of Optional Shares to be sold by the Company or
such Selling Stockholder to all Underwriters by a fraction the numerator of
which is the aggregate number of Underwritten Shares to be purchased by such
Underwriter as
2
set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Underwritten Shares to be
purchased by all the Underwriters from the Company and all the Selling
Stockholders hereunder. The Optional Shares to be sold shall be allocated among
the Company and the Selling Stockholders [in proportion to the maximum number of
Optional Shares to be sold by the Company and each Selling Stockholder as set
forth in Schedule II hereto][initially to the Company and then among the Selling
Stockholders in proportion to the maximum number of Optional Shares to be sold
by each Selling Stockholder as set forth in Schedule II hereto].
The Underwriters may exercise the option to purchase the Optional Shares at
any time (but not more than once) on or before the thirtieth day following the
date of this Agreement, by written notice from the Representatives to the
Company and the Attorney-in-Fact (as defined below). Such notice shall set
forth the aggregate number of Optional Shares as to which the option is being
exercised and the date and time when the Optional Shares are to be delivered and
paid for, which may be the same date and time as the Closing Date (as
hereinafter defined) but shall not be earlier than the Closing Date nor later
than the tenth full Business Day (as hereinafter defined) after the date of such
notice (unless such time and date are postponed in accordance with the
provisions of Section 9 hereof). Any such notice shall be given at least two
Business Days prior to the date and time of delivery specified therein.
2. The Company and the Selling Stockholders understand that the
Underwriters intend (i) to make a public offering of the Shares as soon after
(A) the Registration Statement has become effective and (B) the parties hereto
have executed and delivered this Agreement, as in the judgment of the
Representatives is advisable and (ii) initially to offer the Shares upon the
terms set forth in the Prospectus.
3. Payment for the Shares shall be made by wire transfer in immediately
available funds to the account specified to the Representatives by the Company
with regard to payment to the Company and by the Attorneys-in-Fact (as defined
below), or any of them, with regard to payment to the Selling Stockholders in
the case of the Underwritten Shares, on August __, 1999, or at such other time
on the same or such other date, not later than the fifth Business Day
thereafter, as the Representatives and the Company and Attorneys-in-Fact may
agree upon in writing or, in the case of the Optional Shares, on the date and
time specified by the Representatives in the written notice of the Underwriters'
election to purchase such Optional Shares. The time and date of such payment
for the Underwritten Shares is referred to herein as the "Closing Date" and the
time and date for such payment for the Optional Shares, if other than the
Closing Date,
3
is herein referred to as the "Additional Closing Date". As used herein, the term
"Business Day" means any day other than a day on which banks are permitted or
required to be closed in New York City.
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company or the Selling
Stockholders, as the case may be. The certificates for the Shares will be made
available for inspection and packaging by the Representatives at the office of
X.X. Xxxxxx Securities Inc. set forth above not later than 1:00 P.M., New York
City time, on the Business Day prior to the Closing Date or the Additional
Closing Date, as the case may be.
4. (a) The Company represents and warrants to each Underwriter and the
Selling Stockholders that:
(i) no order preventing or suspending the use of any
preliminary prospectus has been issued by the Commission, and each
preliminary prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Securities Act, complied when so filed in all material
respects with the Securities Act, and did 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, in light of the
circumstances under which they were made, not misleading; provided that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information relating
to any Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use therein;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose
has been instituted or, to the knowledge of the Company, threatened by the
Commission; and the Registration Statement and Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) comply, or will comply, as the case may be, in all
material respects with the Securities Act and do not and will not, as of
the applicable effective date as to the Registration Statement and any
4
amendment thereto and as of the date of the Prospectus and any amendment or
supplement thereto, contain any 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 not misleading, and the Prospectus, as amended
or supplemented, if applicable, at the Closing Date or Additional Closing
Date, as the case may be, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; except that the foregoing representations and
warranties shall not apply to statements or omissions in the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through the Representatives expressly for use therein;
(iii) (a) the financial statements of the Company, and the
related notes thereto, included in the Registration Statement and the
Prospectus present fairly the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates indicated and the
results of their operations and changes in their consolidated cash flows
for the periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis, and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein; and
the pro forma financial information, and the related notes thereto,
included in the Registration Statement and the Prospectus has been prepared
in accordance with the applicable requirements of the Securities Act and is
based upon good faith estimates and assumptions believed by the Company to
be reasonable; and
(b) the financial statements of BCS Technologies, Inc.
("BCS") and the related notes thereto, included in the Registration
Statement and the Prospectus present fairly the consolidated financial
position of BCS as of the dates indicated and the results of the operations
of BCS and changes in the consolidated cash flows of BCS for the periods
specified; said xxxxx cial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis, and
the supporting schedules included in the Registration Statement present
fairly the information required to be stated therein; and the pro forma
financial information, and the related notes thereto, included in the
Registration Statement and the Prospectus has been prepared in accordance
with the applicable requirements of the Securities Act and is
5
based upon good faith estimates and assumptions believed by the Company to
be reasonable;
(iv) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries, or any material adverse change, or any development involving
a prospective material adverse change, in or affecting the general affairs,
business, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the Prospectus; and except
as set forth or contemplated in the Prospectus neither the Company nor any
of its subsidiaries has entered into any transaction or agreement (whether
or not in the ordinary course of business) material to the Company and its
subsidiaries taken as a whole;
(v) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, other than where the failure
to be so qualified or in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(vi) each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, other than where the failure
to be so qualified or in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole; and all the
outstanding shares of capital stock of each subsidiary of the Company have
been duly authorized and validly issued, are fully-paid and non-assessable,
and (except, in the case of foreign subsidiaries, for directors' qualifying
shares, and except as described in the Prospectus) are owned by the
Company, directly or indirectly, free and clear of all liens, encumbrances,
security interests and claims;
6
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the Company has an authorized capitalization as set forth
in the Prospectus and such authorized capital stock conforms as to legal
matters to the description thereof set forth in the Prospectus, and all of
the outstanding shares of capital stock of the Company (including the
Shares to be sold by the Selling Stockholders) have been duly authorized
and validly issued, are fully-paid and non-assessable and are not subject
to any pre-emptive or similar rights; and, except as described in or
expressly contemplated by the Prospectus, there are no outstanding rights
(including, without limitation, pre-emptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
capital stock or other equity interest in the Company or any of its
subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of
the Company or any such subsidiary, any such convertible or exchangeable
securities or any such rights, warrants or options;
(ix) the Shares to be issued and sold by the Company hereunder
have been duly authorized and, when issued and delivered to and paid for by
the Underwriters in accordance with the terms of this Agreement, will be
duly issued and will be fully paid and non-assessable and will conform to
the descriptions thereof in the Prospectus; and the issuance of the Shares
is not subject to any preemptive or similar rights;
(x) neither the Company nor any of its subsidiaries is, or with
the giving of notice or lapse of time or both would be, in violation of or
in default under, its Certificate of Incorporation or By-Laws or any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them or any of their respective properties is bound,
except for violations and defaults which individually and in the aggregate
are not material to the Company and its subsidiaries taken as a whole; the
issue and sale of the Shares to be sold by the Company hereunder and the
performance by the Company of its obligations under this Agreement and the
consummation of the transactions contemplated herein will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any
7
of its subsidiaries is subject, nor will any such action result in any
violation of the provisions of the Certificate of Incorporation or the By-
Laws of the Company or any applicable law or statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company, its subsidiaries or any of their respective properties;
and no consent, approval, authorization, order, license, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares to be sold by the Company
hereunder or the consummation by the Company of the transactions
contemplated by this Agreement, except such consents, approvals,
authorizations, orders, licenses, registrations or qualifications as have
been obtained under the Securities Act and as may be required under state
securities or Blue Sky Laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(xi) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental investigations, actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries or any of their
respective properties or to which the Company or any of its subsidiaries is
or may be a party or to which any property of the Company or any of its
subsidiaries is or may be the subject which, if determined adversely to the
Company or any of its subsidiaries, could individually or in the aggregate
have, or reasonably be expected to have, a material adverse effect on the
general affairs, business, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries, taken
as a whole, and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others; and there are no statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required;
(xii) the Company and its subsidiaries have good and marketable
title in fee simple to all items of real property and good and marketable
title to all personal property owned by them, in each case free and clear
of all liens, encumbrances and defects except such as are described or
referred to in the Prospectus or such as do not materially affect the value
of such property and do not interfere with the use made or proposed to be
made of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its subsidiaries
are held by them under valid, existing and enforceable leases with such
exceptions as are not material and do not interfere with the use
8
made or proposed to be made of such property and buildings by the Company
or its subsidiaries;
(xiii) no relationship, direct or indirect, exists between or among
the Company or any or its subsidiaries on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any of its
subsidiaries on the other hand, which is required by the Securities Act to
be described in the Registration Statement and the Prospectus which is not
so described;
(xiv) no person has the right to require the Company to register
any securities for offering and sale under the Securities Act by reason of
the filing of the Registration Statement with the Commission or the issue
and sale of the Shares to be sold by the Company hereunder or, to the best
knowledge of the Company, the sale of the Shares to be sold by the Selling
Stockholders hereunder;
(xv) the Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(xvi) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and its subsidiaries, PricewaterhouseCoopers LLP,
who have certified certain financial statements of Cortelco Systems Puerto
Rico and Xxxxx and Company, CPA's, P.C., who have certified certain
financial statements of BCS, are each independent public accountants as
required by the Securities Act;
(xvii) the Company and its subsidiaries have filed all federal,
state, local and foreign tax returns which have been required to be filed
and have paid all taxes shown thereon and all assessments received by them
or any of them to the extent that such taxes have become due and are not
being contested in good faith; and, except as disclosed in the Registration
Statement and the Prospectus, there is no tax deficiency which has been or
might reasonably be expected to be asserted or threatened against the
Company or any subsidiary;
(xviii) the Company has not taken nor will it 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
Stock;
9
(xix) each of the Company and its subsidiaries owns, possesses or
has obtained all licenses, permits, certificates, consents, orders,
approvals and other authorizations from, and has made all declarations and
filings with, all federal, state, local and other governmental authorities
(including foreign regulatory agencies), all self-regulatory organizations
and all courts and other tribunals, domestic or foreign, necessary to own
or lease, as the case may be, and to operate its properties and to carry on
its business as conducted as of the date hereof, except where the failure
to do so would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, and neither the Company nor any such
subsidiary has received any actual notice of any proceeding relating to
revocation or modification of any such license, permit, certificate,
consent, order, approval or other authorization, except as described in the
Registration Statement and the Prospectus; and each of the Company and its
subsidiaries is in compliance with all laws and regulations relating to the
conduct of its business as conducted as of the date hereof;
(xx) there are no existing or, to the best knowledge of the
Company, threatened labor disputes with the employees of the Company or any
of its subsidiaries which are likely to have a material adverse effect on
the Company and its subsidiaries taken as a whole;
(xxi) the Company and its subsidiaries (A) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (B) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (C) are in compliance with
all terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(xxii) each employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended,
("ERISA") that is maintained, administered or contributed to by the Company
or any of its affiliates for employees or former employees of the Company
and its affiliates has been maintained in compliance with its terms and the
requirements of any applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Internal Revenue
10
Code of 1986, as amended, ("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 which 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) exceeded the present value of all benefits accrued under
such plan determined using reasonable actuarial assumptions;
(xxiii) other than as set forth or contemplated in the Prospectus,
the Company owns or possesses adequate licenses or other rights to use all
patents, copyrights, trademarks, trade dress, service marks, trade names,
technology, trade secrets and know-how (the "Intellectual Property")
necessary to conduct its business in the manner described in the Prospectus
and the Company has not received any notice of infringement or conflict
with (and the Company is not aware of any infringement or conflict with)
asserted rights of others with respect to any patents, copyrights,
trademarks, trade dress, service marks, trade names, technology, trade
secrets or know-how which could result in any material adverse effect upon
the Company; and the discoveries, inventions, products or processes of the
Company necessary to conduct its business in the manner described in the
Prospectus do not, to the best knowledge of the Company, infringe or
conflict with any right or patent of any third party, or any discovery,
invention, product or process which is the subject of a patent application
filed by any third party, known to the Company which could have a material
adverse effect on the Company;
(xxiv) the Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (A) transactions
are executed in accordance with management's general or specific
authorizations; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (C) access to
assets is permitted only in accordance with management's general or
specific authorization; and (D) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences;
11
(xxv) as of the date the Registration Statement becomes effective,
the Stock will be authorized for listing on the Nasdaq National Market (as
herein defined) upon official notice of issuance; and
(xxvi) the Company has reviewed its operations and any third
parties with which the Company has a material relationship to evaluate the
extent to which the business or operations of the Company will be affected
by the Year 2000 Problem. As a result of such review, the Company has no
reason to believe, and does not believe, that the Year 2000 Problem will
have a material adverse effect on the general affairs, business,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole or result
in any material loss or interference with the Company's business or
operations. The "Year 2000 Problem" as used herein means any significant
risk that computer hardware or software used in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data or in the operation of mechanical or electrical systems
of any kind will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of dates
or time periods occurring prior to January 1, 2000.
(b) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(i) all consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement and the Power of Attorney (the "Power of Attorney") and the
Custody Agreement (the "Custody Agreement") hereinafter referred to, and
for the sale and delivery of the Shares to be sold by such Selling
Stockholder hereunder, have been obtained; such Selling Stockholder has
full right, power and authority to enter into this Agreement, the Power of
Attorney and the Custody Agreement and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder; and
this Agreement, the Power of Attorney and the Custody Agreement have each
been duly authorized, executed and delivered by such Selling Stockholder;
(ii) the sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling Stockholder with
all of the provisions of this Agreement, the Power of Attorney and the
Custody Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, any indenture, mortgage, deed of trust, loan agreement
or other agreement or
12
instrument to which such Selling Stockholder is a party or by which such
Selling Stockholder is bound or to which any of the property or assets of
such Selling Stockholder is subject, nor will such action result in any
violation of the provisions of the Certificate of Incorporation or By-laws
of such Selling Stockholder if such Selling Stockholder is a corporation,
the Partnership Agreement of such Selling Stockholder if such Selling
Stockholder is a partnership, or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over such Selling Stockholder or the property of such Selling Stockholder;
(iii) such Selling Stockholder has good and valid title to the
Shares to be sold at the Closing Date or Additional Closing Date, as the
case may be, by such Selling Stockholder hereunder, free and clear of all
liens, encumbrances, equities or adverse claims; such Selling Stockholder
will have, immediately prior to the Closing Date or Additional Closing
Date, as the case may be, good and valid title to the Shares to be sold at
the Closing Date or Additional Closing Date, as the case may be, by such
Selling Stockholder, free and clear of all liens, encumbrances, equities or
adverse claims; and, upon delivery of the certificates representing such
Shares and payment therefor pursuant hereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or adverse
claims, will pass to the several Underwriters assuming the Underwriters
purchase the Shares in good faith and without notice of adverse claim
within the meaning of the Uniform Commercial Code;
(iv) such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares; and
(v) all information furnished by the Selling Stockholder for use
in the Registration Statement and Prospectus is, and will be, as of the
Closing Date or Additional Closing Date, as the case may be, true, correct
and complete, and does not, and on the Closing Date or Additional Closing
Date, as the case may be, will not, contain any untrue statements or
material fact or omit to state any material fact necessary to make such
information not misleading
Each of the Selling Stockholders represents and warrants that certificates
in negotiable form representing all of the Shares to be sold by such Selling
Stockholder hereunder have been placed in custody under a Custody Agreement
relating to such Shares, in the form heretofore furnished to you, duly executed
and
13
delivered by such Selling Stockholder to American Securities Transfer and Trust,
as custodian (the "Custodian"), and that such Selling Stockholder has duly
executed and delivered Powers of Attorney, in the form heretofore furnished to
you, appointing the person or persons indicated in the Custody Agreement, and
each of them, as such Selling Stockholder's Attorneys-in-fact (the
"Attorneys-in-Fact" or any one of them the "Attorney-in Fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder, to
determine the purchase price to be paid by the Underwriters to the Selling
Stockholders as provided herein, to authorize the delivery of the Shares to be
sold by such Selling Stockholder hereunder and otherwise to act on behalf of
such Selling Stockholder in connection with the transactions contemplated by
this Agreement and the Custody Agreement.
Each of the Selling Stockholders specifically agrees that the Shares
represented by the certificates held in custody for such Selling Stockholder
under the Custody Agreement are subject to the interests of the Underwriters
hereunder, and that the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of the Attorneys-in-
Fact by the Power of Attorney, are to that extent irrevocable. Each of the
Selling Stockholders specifically agrees that the obligations of such Selling
Stockholder hereunder shall not be terminated by operation of law, whether by
the death or incapacity of any individual Selling Stockholder, or, in the case
of an estate or trust, by the death or incapacity of any executor or trustee or
the termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or by the
occurrence of any other event. If any individual Selling Stockholder or any such
executor or trustee should die or become incapacitated, or if any such estate or
trust should be terminated, or if any such partnership or corporation should be
dissolved, or if any other such event should occur, before the delivery of the
Shares hereunder, certificates representing such Shares shall be delivered by or
on behalf of such Selling Stockholder in accordance with the terms and
conditions of this Agreement and the Custody Agreement, and actions taken by the
Selling Stockholder pursuant to the Custody Agreement and by the Attorneys-in-
Fact pursuant to the Powers of Attorney shall be as valid as if such death,
incapacity, termination, dissolution or other event had not occurred, regardless
of whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall
have received notice of such death, incapacity, termination, dissolution or
other event.
5. (a) The Company covenants and agrees with each of the several
Underwriters as follows:
(i) to use its best efforts to cause the Registration Statement
to become effective at the earliest possible time and, if required, to
file the
14
final Prospectus with the Commission within the time periods specified by
Rule 424(b) and Rule 430A under the Securities Act and to furnish copies of
the Prospectus to the Underwriters in New York City prior to 10:00 a.m.,
New York City time, on the Business Day next succeeding the date of this
Agreement in such quantities as the Representatives may reasonably request;
(ii) to deliver, at the expense of the Company, to the
Representatives four signed copies of the Registration Statement (as
originally filed) and each amendment thereto, in each case including
exhibits, and to each other Underwriter a conformed copy of the
Registration Statement (as originally filed) and each amendment thereto, in
each case without exhibits, and, during the period mentioned in Section
5(a)(v) below, to each of the Underwriters as many copies of the Prospectus
(including all amendments and supplements thereto) as the Representatives
may reasonably request;
(iii) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the
Registration Statement becomes effective, to furnish to the Representatives
a copy of the proposed amendment or supplement for review and not to file
any such proposed amendment or supplement to which the Representatives
reasonably object;
(iv) to advise the Representatives promptly, and to confirm such
advice in writing (A) when the Registration Statement has become effective,
(B) when any amendment to the Registration Statement has been filed or
becomes effective, (C) when any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with copies
thereof, (D) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for any additional information, (E) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus or the initiation or threatening of any
proceeding for that purpose, (F) of the occurrence of any event, within the
period referenced in Section 5(a)(v) below, as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, and (G) of
the receipt by the Company of any notification with respect to any
suspension of the qualification of the
15
Shares for offer and sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and to use its best efforts
to prevent the issuance of any such stop order, or of any order preventing
or suspending the use of any preliminary prospectus or the Prospectus, or
of any order suspending any such qualification of the shares, or
notification of any such order thereof and, if issued, to obtain as soon as
possible the withdrawal thereof;
(v) if, during such period of time after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to be
delivered in connection with sales by the Underwriters or any dealer, any
event shall occur as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein, in light
of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus to
comply with law, forthwith to prepare and furnish, at the expense of the
Company, to the Underwriters and to the dealers (whose names and addresses
the Representatives will furnish to the Company) to which Shares may have
been sold by the Representatives on behalf of the Underwriters and to any
other dealers upon request, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law;
(vi) to endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the
Representatives shall reasonably request and to continue such qualification
in effect so long as reasonably required for distribution of the Shares;
provided that the Company shall not be required to file a general consent
to service of process in any jurisdiction;
(vii) to make generally available to its security holders and to
the Representatives as soon as practicable an earnings statement covering a
period of at least twelve months beginning with the first fiscal quarter of
the Company occurring after the effective date of the Registration
Statement, which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 of the Commission promulgated thereunder;
(viii) for a period of five years after the date of this Agreement,
to furnish to the Representatives copies of all reports or other
communications (financial or other) furnished to holders of the Shares,
16
and copies of any reports and financial statements furnished to or filed
with the Commission or any national securities exchange;
(ix) for a period of 180 days after the date of the initial public
offering of the Shares not to (A) offer, pledge, announce the intention to
sell, 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, directly or indirectly,
any shares of Stock or any securities convertible into or exercisable or
exchangeable for Stock or (B) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of
ownership of the Stock, whether any such transaction described in clause
(A) or (B) above is to be settled by delivery of Stock or such other
securities, in cash or otherwise without the prior written consent of X.X.
Xxxxxx Securities Inc., other than the Shares to be sold by the Company
hereunder and any shares of Stock of the Company issued upon the exercise
of options granted under existing employee stock option plans;
(x) to use the net proceeds received by the Company from the sale
of the Shares by the Company pursuant to this Agreement in the manner
specified in the Prospectus under caption "Use of Proceeds";
(xi) to use its best efforts to list for quotation the Shares on
the National Association of Securities Dealers Automated Quotations
National Market (the "Nasdaq National Market");
(xii) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all costs and expenses incident to the performance of its obligations
hereunder, including without limiting the generality of the foregoing, all
costs and expenses (A) incident to the preparation, reregistration,
transfer, execution and delivery of the Shares, (B) incident to the
preparation, printing and filing under the Securities Act of the
Registration Statement, the Prospectus and any preliminary prospectus
(including in each case all exhibits, amendments and supplements thereto),
(C) incurred in connection with the registration or qualification of the
Shares under the laws of such jurisdictions as the Representatives may
designate (including fees of counsel for the Underwriters and its
disbursements), (D) in connection with the listing of the Shares on the
Nasdaq National Market, (E) related to the filing with, and clearance of
the offering by, the National Association of Securities Dealers, Inc., (F)
in connection with the printing (including word processing and duplication
costs) and delivery of this Agreement, the Preliminary and Supplemental
17
Blue Sky Memoranda and the furnishing to the Underwriters and dealers of
copies of the Registration Statement and the Prospectus, including mailing
and shipping, as herein provided, (G) any expenses incurred by the Company
in connection with a "road show" presentation to potential investors, (H)
the cost of preparing stock certificates and (I) the cost and charges of
any transfer agent and any registrar.
(b) Each of the Selling Stockholders covenants and agrees with each of
the several Underwriters as follows:
(i) for a period of 180 days after the date of the initial public
offering of the Shares not to (A) offer, pledge, announce the intention to
sell, 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, directly or indirectly,
any shares of Stock or any securities convertible into or exercisable or
exchangeable for Stock or (B) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of
ownership of the Stock, whether any such transaction described in clause
(A) or (B) above is to be settled by delivery of Stock or such other
securities, in cash or otherwise or (C) make any demand for or exercise any
right with respect to the registration of any shares of Stock or any
security convertible into or exercisable or exchangeable for Stock without
the prior written consent of X.X. Xxxxxx Securities, Inc., in each case
other than the Shares to be sold by such Selling Stockholder hereunder; and
(ii) to deliver to the Representatives prior to or at the Closing
Date a properly completed and executed United States Treasury Department
Form W-9 (or other applicable form or statement specified by the Treasury
Department regulations in lieu thereof) in order to facilitate the
Underwriters' documentation of their compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated.
6. The several obligations of the Underwriters hereunder to purchase
the Shares on the Closing Date or the Additional Closing Date, as the case may
be, are subject to the performance by the Company and each of the Selling
Stockholders of their respective obligations hereunder and to the following
additional conditions:
(a) the Registration Statement shall have become effective (or if
a post-effective amendment is required to be filed under the Securities
Act, such post-effective amendment shall have become effective) not later
than
18
5:00 P.M., New York City time, on the date hereof; and no stop order
suspending the effectiveness of the Registration Statement or any post-
effective amendment shall be in effect, and no proceedings for such purpose
shall be pending before or threatened by the Commission; the Prospectus
shall have been filed with the Commission pursuant to Rule 424(b) within
the applicable time period prescribed for such filing by the rules and
regulations under the Securities Act and in accordance with Section 5(a)(i)
hereof; and all requests for additional information shall have been
complied with to the satisfaction of the Representatives;
(b) the respective representations and warranties of the Company
and the Selling Stockholders contained herein are true and correct on and
as of the Closing Date or the Additional Closing Date, as the case may be,
as if made on and as of the Closing Date or the Additional Closing Date, as
the case may be, and each of the Company and the Selling Stockholders shall
have complied with all agreements and all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date or the
Additional Closing Date, as the case may be;
(c) subsequent to the execution and delivery of this Agreement and
prior to the Closing Date or the Additional Closing Date, as the case may
be, there shall not have occurred any downgrading, nor shall any notice
have been given of (i) any downgrading, (ii) any intended or potential
downgrading or (iii) any review or possible change that does not indicate
an improvement, in the rating accorded any securities of or guaranteed by
the Company by any "nationally recognized statistical rating organization",
as such term is defined for purposes of Rule 436(g)(2) under the Securities
Act;
(d) since the respective dates as of which information is given in
the Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, business, prospects,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole, otherwise
than as set forth or contemplated in the Prospectus, the effect of which in
the judgment of the Representatives makes it impracticable or inadvisable
to proceed with the public offering or the delivery of the Shares on the
Closing Date or the Additional Closing Date, as the case may be, on the
terms and in the manner contemplated in the Prospectus; and neither the
Company nor any of its subsidiaries has sustained since the date of the
latest audited financial statements included in the Prospectus
19
any material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus;
(e) the Representatives shall have received on and as of the
Closing Date or the Additional Closing Date, as the case may be, (i) a
certificate of an executive officer of the Company, with specific knowledge
about the Company's financial matters, satisfactory to the Representatives
to the effect set forth in Sections 6(a), 6(b), 6(c) and 6(d) (with respect
to the respective representations, warranties, agreements and conditions of
the Company) and to the further effect that there has not occurred any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, business,
prospects, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries taken as a whole from
that set forth or contemplated in the Registration Statement and (ii) a
certificate of the Selling Stockholders, satisfactory to the
Representatives to the effect set forth in Section 6(b) (with respect to
the respective representations, warranties, agreements and conditions of
the Selling Stockholders);
(f) Baker, Donelson, Bearman & Xxxxxxxx, a professional
corporation, as counsel for the Company, shall have furnished to the
Representatives their written opinion, dated the Closing Date or the
Additional Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in
the Prospectus;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in
good standing would not have a material adverse effect on the Company
and its subsidiaries taken as a whole;
(iii) each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation under the laws
20
of its jurisdiction of incorporation with power and authority
(corporate and other) to own its properties and conduct its business
as described in the Prospectus and has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified and in
good standing would not have a material adverse effect on the Company
and its subsidiaries taken as a whole; and all of the outstanding
shares of capital stock of each subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, and (except,
in the case of foreign subsidiaries, for directors' qualifying shares,
and except as described in the Prospectus) are owned of record by the
Company;
(iv) other than as set forth or contemplated in the
Prospectus, the Company has not received any notice of legal or
governmental investigations, actions, suits or proceedings pending or,
to the best of such counsel's knowledge, there are no legal or
governmental investigations, actions, suits or proceedings threatened
against or affecting the Company or any of its subsidiaries or any of
their respective properties or to which the Company or any of its
subsidiaries is or may be a party or to which any property of the
Company or its subsidiaries is or may be the subject which, if
determined adversely to the Company or any of its subsidiaries, could
individually or in the aggregate have, or reasonably be expected to
have, a material adverse effect on the general affairs, business,
prospects, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries taken as a
whole, and such counsel does not know of any contracts or other
documents that are required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required;
(v) each of the Company and its subsidiaries owns,
possesses or has obtained all licenses, permits, certificates,
consents, orders, approvals and other authorizations from, and has
made all declarations and filings with, all federal, state, local and
other governmental authorities and all courts and other tribunals,
domestic or foreign, necessary to own or lease, as the case may be,
and to operate its properties and to carry on its business as
conducted as of the date hereof, and neither the Company nor any
21
such subsidiary has received any actual notice of any proceeding
relating to revocation or modification of any such license, permit,
certificate, consent, order, approval or other authorization, except
as described in the Registration Statement and the Prospectus; and
each of the Company and its subsidiaries is in compliance with all
laws and regulations relating to the conduct of its business as
conducted as of the date of the Prospectus;
(vi) neither the Company nor any of its subsidiaries is,
or with the giving of notice or lapse of time or both would be, in
violation of or in default under its Certificate of Incorporation or
By-Laws or any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument, that are material to the Company and
its subsidiaries taken as a whole, known to such counsel to which the
Company or any of its subsidiaries is a party or by which it or any of
them or any of their respective properties is bound, except for
violations and defaults which individually and in the aggregate are
not material to the Company and its subsidiaries taken as a whole; the
issue and sale of the Shares being delivered on the Closing Date or
the Additional Closing Date, as the case may be, to be sold by the
Company hereunder, and the performance by the Company of its
obligations under this Agreement and the consummation of the
transactions contemplated herein will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument set forth on Exhibit A to the opinion nor will
any such action result in any violation of the provisions of the
Certificate of Incorporation or the By-Laws of the Company or any
applicable law or statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company, its subsidiaries or any of their respective properties;
(vii) the shares of capital stock of the Company
outstanding prior to the issuance of the Shares to be sold by the
Company hereunder (including the Shares to be sold by the Selling
Stockholders) have been duly authorized and are validly issued, fully
paid and non-assessable; and
(viii) the Shares to be issued and sold by the Company
hereunder have been duly authorized, and when delivered to and paid
for by the Underwriters in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable,
22
and the issuance of the Shares is not subject to any preemptive or
similar rights that have not been waived.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the States of Delaware and Tennessee, to the extent such counsel deems proper
and to the extent specified in such opinion, if at all, upon an opinion or
opinions (in form and substance reasonably satisfactory to Underwriters'
counsel) of other counsel reasonably acceptable to the Underwriters' counsel,
familiar with the applicable laws and (B) as to matters of fact, to the extent
such counsel deems proper, on certificates of responsible officers of the
Company and certificates or other written statements of officials of
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company. The opinion of such counsel for the Company shall
state that the opinion of any such other counsel upon which they relied is in
form satisfactory to such counsel and, in such counsel's opinion, the
Underwriters and they are justified in relying thereon.
The opinion of Baker, Donelson, Bearman & Xxxxxxxx, a professional
corporation, described above shall be rendered to the Underwriters at the
request of the Company and shall so state therein.
(g) Xxxxxx Godward LLP, counsel for the Company, shall have
furnished to the Representatives their written opinion, dated the Closing
Date or the Additional Closing Date, as the case may be, in form and
substance satisfactory to the Representatives, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by the Company;
(ii) the authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the
Prospectus;
(iii) the statements in the Prospectus under "Business --
Legal Proceedings", "Description of Capital Stock" and the contracts
described in "Certain Transactions", and in the Registration
Statement in Items 14 and 15, insofar as such statements constitute a
summary of the terms of the Stock, legal matters, documents or
proceedings referred to therein, fairly present the information called
for with respect to such terms, legal matters, documents or
proceedings;
23
(iv) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act;
(v) such counsel is of the opinion that the Registration
Statement and the Prospectus and any amendments and supplements
thereto (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of the
Securities Act and believes that (other than the financial statements
and related schedules therein, as to which such counsel need express
no belief) the Registration Statement and the prospectus included
therein at the time the Registration Statement became effective did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that the Prospectus, as amended
or supplemented, if applicable, does not contain any untrue statement
of a material fact or omit 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;
(vi) neither the Company nor any of its subsidiaries is, or
with the giving of notice or lapse of time or both would be, in
violation of or in default under any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument, that are
material to the Company and its subsidiaries, taken as a whole, known
to such counsel to which the Company or any of its subsidiaries is a
party or by which it or any of them or any of their respective
properties is bound, except for violations and defaults which
individually and in the aggregate are not material to the Company and
its subsidiaries taken as a whole; the issue and sale of the Shares
being delivered on the Closing Date or the Additional Closing Date, as
the case may be, to be sold by the Company hereunder, and the
performance by the Company of its obligations under this Agreement and
the consummation of the transactions contemplated herein will not
conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such
counsel to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to which
any of the property or
24
assets of the Company or any of its subsidiaries is subject, nor will
any such action result in any violation of any applicable law or
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company, its subsidiaries
or any of their respective properties;
(vii) to counsel's knowledge, such counsel does not know of
any legal or governmental proceedings pending or threatened to which
the Company or any of its subsidiaries is a party or to which any of
the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registrations Statement or
the Prospectus and are not so described or of any statutes,
regulations, contracts or other documents that are required to be
described in the Registrations Statement or the Prospectus or to be
filed as exhibits to the Registrations Statement that are not
described or filed as required;
(viii) no consent, approval, authorization, order, license,
registration or qualification of or with any court or governmental
agency or body is required for the issuance by the Company of the
Shares to be sold by it hereunder or the consummation by the Company
of the transactions contemplated by this Agreement, except such
consents, approvals, authorizations, orders, licenses, registrations
or qualifications as have been obtained under the Securities Act and
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the States of Delaware and California, to the extent such counsel deems proper
and to the extent specified in such opinion, if at all, upon an opinion or
opinions (in form and substance reasonably satisfactory to Underwriters'
counsel) of other counsel reasonably acceptable to the Underwriters' counsel,
familiar with the applicable laws and (B) as to matters of fact, to the extent
such counsel deems proper, on certificates of responsible officers of the
Company and certificates or other written statements of officials of
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company. The opinion of such counsel for the Company shall
state that the opinion of any such other counsel upon which they relied is in
form satisfactory to such counsel and, in such counsel's opinion, the
Underwriters and they are justified in relying thereon. With respect to the
matters to be covered in Section 6(g)(vi) above counsel may state their opinion
and belief is based upon their participation in the preparation of
25
the Registration Statement and the Prospectus and any amendment or supplement
thereto and review and discussion of the contents thereof but is without
independent check or verification except as specified.
The opinion of Xxxxxx Godward LLP described above shall be rendered to the
Underwriters at the request of the Company and shall so state therein.
(h) ______________, counsel for the Selling Stockholders, shall
have furnished to the Representatives their written opinion, dated the
Closing Date or Additional Closing Date, as the case may be, in form and
substance satisfactory to the Representatives, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by or on behalf of each of the Selling Stockholders;
(ii) a Power of Attorney and a Custody Agreement have been
duly authorized, executed and delivered by each Selling Stockholder
and constitute valid and binding agreements of each Selling
Stockholder in accordance with their terms;
(iii) each Selling Stockholder is the record owner of all of
the Shares to be sold by such Selling Stockholder and upon payment and
delivery in accordance with this Agreement and assuming the
Underwriters purchase the Shares in good faith without notice or
adverse claim within the meaning of the UCC, delivery of the
certificates representing the Shares will pass good and marketable
title to the Shares without any adverse claim; and
(iv) the sale of the Shares and the execution and delivery
by the Selling Stockholder of, and the performance by the Selling
Stockholder of its obligations under, this Agreement, and the
consummation of the transactions contemplated herein, (i) have been
duly authorized on the part of each Selling Stockholder, and (ii) will
not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other material agreement or
instrument to which any Selling Stockholder is a party or by which any
Selling Stockholder is bound or to which any of the property or assets
of any Selling Stockholder is subject, nor will any such action result
in any violation of the provisions of the Certificate of Incorporation
or the By-Laws of any Selling Stockholder if such Selling Stockholder
is a corporation, the partnership agreement if such Selling
Stockholder is a partnership or any applicable law or statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Selling Stockholder or any of its
properties; and no consent,
26
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
sale of the Shares or the consummation by the Selling Stockholder of
the transactions contemplated by this Agreement, except such consents,
approvals, authorizations, registrations or qualifications as have
been obtained under the Securities Act and as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters.
27
In rendering such opinions, such counsel may rely as to
matters involving the application of laws other than the laws of the
United States and the States of Delaware and California, to the extent
such counsel deems proper and to the extent specified in such opinion,
if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' counsel) of other counsel
reasonably acceptable to the Underwriters' counsel, familiar with the
applicable laws. The opinion of such counsel for the Selling
Stockholders shall state that the opinion of any such other counsel is
in form satisfactory to such counsel and, in such counsel's opinion,
the Underwriters and they are justified in relying thereon.
(i) on the effective date of the Registration Statement and the
effective date of the most recently filed post-effective amendment to the
Registration Statement and also on the Closing Date or Additional Closing
Date, as the case may be, Deloitte & Touche LLP, PricewaterhouseCoopers LLP
and Xxxxx and Company, CPA's, P.C. shall have furnished to you letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to you, containing statements and information of the type
customarily 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;
(j) the Representatives shall have received on and as of the
Closing Date or Additional Closing Date, as the case may be, an opinion of
Xxxxx Xxxx &Wardwell, counsel to the Underwriters, with respect to the
Registration Statement, the Prospectus and other related matters as the
Representatives may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
28
(k) the Shares to be delivered on the Closing Date or Additional
Closing Date, as the case may be, shall have been approved for listing on
the Nasdaq National Market, subject to official notice of issuance;
(l) on or prior to the Closing Date or Additional Closing Date, as
the case may be, the Company and the Selling Stockholders shall have
furnished to the Representatives such further certificates and documents as
the Representatives shall reasonably request; and
(m) the "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Stock or certain other securities, delivered to you on or
before the date hereof, shall be in full force and effect on the Closing
Date or Additional Closing Date, as the case may be.
7. The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the legal fees and other expenses incurred in connection
with any suit, action or proceeding or any claim asserted) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use therein.
Each of the Selling Stockholders severally in proportion to the number of
Shares to be sold by such Selling Stockholder hereunder agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to each Underwriter, but only with reference to information
relating to such Selling Stockholder furnished to the Company in writing by such
Selling Stockholder expressly for use in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any preliminary prospectus.
29
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement and each person who controls the Company within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act and each of the
Selling Stockholders to the same extent as the foregoing indemnity from the
Company to each Underwriter, but only with reference to information relating to
such Underwriter furnished to the Company in writing by such Underwriter through
the Representatives expressly for use in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to the preceding paragraphs
of this Section 7, such person (the "Indemnified Person") shall promptly notify
the person or persons against whom such indemnity may be sought (each an
"Indemnifying Person") in writing, and such Indemnifying Persons, upon request
of the Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
and not the Indemnifying Persons unless (i) the Indemnifying Persons and the
Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Persons has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both an
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that no Indemnifying Person
shall, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed as they are incurred and such control
persons of Underwriters shall be designated in writing by X.X. Xxxxxx Securities
Inc., and any such separate firm for the Company, its directors, its officers
who sign the Registration Statement and such control persons of the Company
shall be designated in writing by the Company, and any such separate firm for
the Selling Stockholders shall be designated in writing by the Attorney-in-Fact.
No Indemnifying Person shall be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, each Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment.
30
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, such Indemnifying Person agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in the first four paragraphs of this
Section 7 is unavailable to an Indemnified Person or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other hand from the offering of the Shares or (ii)
if the allocation provided by clause (i) above 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 and the Selling Stockholders on the one hand and the Underwriters on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other hand shall be
deemed to be in the same respective proportions as the net proceeds from the
offering (before deducting expenses) received by the Selling Stockholders and
the total underwriting discounts and the commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate public offering price of the Shares. The
relative fault of the Company and the Selling Stockholders on the one hand and
the Underwriters on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Stockholders or by the
Underwriters and
31
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Selling Stockholders 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 Selling Stockholders or the
Underwriters were treated as one entity for such purposes) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an Indemnified Person as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall an Underwriter be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 7 are several in proportion to the respective number of Shares set forth
opposite their names in Schedule I hereto, and not joint.
The remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Company and the Selling Stockholders
set forth in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of the Company, its officers or directors or any other person
controlling the Company or the Selling Stockholders and (iii) acceptance of and
payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement (or the
obligations of the several Underwriters with respect to the Optional Shares) may
be terminated in the absolute discretion of the Representatives, by notice given
to the Company and the Selling Stockholders, if after the execution and delivery
of
32
this Agreement and prior to the Closing Date (or, in the case of the Optional
Shares, prior to the Additional Closing Date) (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange or the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of or guaranteed by the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities, or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the Representatives, is material and
adverse and which, in the judgment of the Representatives, makes it
impracticable to market the Shares being delivered at the Closing Date or the
Additional Closing Date, as the case may be, on the terms and in the manner
contemplated in the Prospectus.
9. This Agreement shall become effective upon the later of (x)
execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
If on the Closing Date or the Additional Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares
which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Shares to be purchased on such date, the other Underwriters
shall be obligated severally in the proportions that the number of Shares set
forth opposite their respective names in Schedule I bears to the aggregate
number of Underwritten Shares set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as the Representatives may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 9 by an
amount in excess of one-tenth of such number of Shares without the written
consent of such Underwriter. If on the Closing Date or the Additional Closing
Date, as the case may be, any Underwriter or Underwriters shall fail or refuse
to purchase Shares which it or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be purchased
on such date, and arrangements satisfactory to the Representatives, the Company
and the Selling Stockholders for the purchase of such Shares are not made within
36 hours after such default, this Agreement (or the obligations of the
33
several Underwriters to purchase the Optional Shares, as the case may be) shall
terminate without liability on the part of any non-defaulting Underwriter, the
Company or the Selling Stockholders. In any such case either you or the Company
and the Selling Stockholders shall have the right to postpone the Closing Date
(or, in the case of the Optional Shares, the Additional Closing Date), but in no
event for longer than seven days, in order that the required changes, if any, in
the Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
10. If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of the Company or the
Selling Stockholders to comply with the terms or to fulfill any of the
conditions of this Agreement, or if for any reason any of the Company or the
Selling Stockholders shall be unable to perform its obligations under this
Agreement or any condition of the Underwriters' obligations cannot be fulfilled,
the Company and the Selling Stockholders agree to reimburse the Underwriters or
such Underwriters as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
expenses of its counsel) reasonably incurred by the Underwriter in connection
with this Agreement or the offering contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon
the Company, the Selling Stockholders and the Underwriters, any controlling
persons referred to herein and their respective successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm or corporation any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. No purchaser of Shares from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
12. Any action by the Underwriters hereunder may be taken by the
Representatives jointly or by X.X. Xxxxxx Securities Inc. alone on behalf of the
Underwriters, and any such action taken by the Representatives jointly or by
X.X. Xxxxxx Securities Inc. alone shall be binding upon the Underwriters. 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. Notices to the Underwriters shall be given to the
Representatives, c/o X.X. Xxxxxx Securities Inc., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (telefax:______); Attention: Syndicate Department. Notices to the
Company shall be given to it at 0000 Xxxxxx Xxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxx
00000, (telefax:________); Attention:____________. Notices to the
34
Selling Stockholders shall be given to the Attorneys-in-Fact at Five Palo Alto
Square, 0000 Xx Xxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, (telefax: __________);
Attention: _______________.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS
OF LAWS PROVISIONS THEREOF.
If the foregoing is in accordance with your understanding, please sign
and return four counterparts hereof.
Very truly yours,
CORTELCO SYSTEMS, INC.
By:__________________________________
Name:
Title:
Selling Stockholders named in Schedule II
to this Agreement
By:__________________________________
Name:
Title:
As Attorneys-in-Fact acting on behalf of each of the
Selling Stockholders named in Schedule II to this
Agreement.
Accepted:_________, 1999
X.X. Xxxxxx Securities Inc.
Xxxxxxx & Company, Inc.
X.X. Xxxxxxx & Sons, Inc.
35
Acting severally on behalf of themselves
and the several Underwriters listed
in Schedule I hereto.
By: X.X. Xxxxxx Securities Inc.
Acting on behalf of itself and the several
Underwriters listed in Schedule I
hereto.
By:_______________________________________________
Title:
36
SCHEDULE I
___________ ________________
Underwriter Number of Shares
To Be Purchased
X.X. Xxxxxx Securities Inc...............................
Xxxxxxx & Company, Inc...................................
X.X. Xxxxxxx & Sons, Inc.................................
[ ]..............................
Total
SCHEDULE II
____________________ ___________________
Selling Stockholders Number of
Underwritten Shares
