EXHIBIT 1.1
7,500,000 Shares of Common Stock
Digital Island, Inc.
UNDERWRITING AGREEMENT
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[ ], 1999
BEAR, XXXXXXX & CO. INC.
XXXXXX BROTHERS INC.
XXXXXX XXXXXX PARTNERS LLC
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
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
7,500,000 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 1,125,000 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 ("XXXXX"). 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 misleading. 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 XXXXX, 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 conflict, 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 (iii)
violate or conflict with 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
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Blue Sky laws in connection with the purchase and distribution of the Shares
by the Underwriters.
(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
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disclosed in the Registration Statement and the Prospectus, there are no
outstanding shares of capital 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 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
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interest in any other corporation or entity (other than such subsidiaries).
(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 (i) 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 (ii)
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,
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individually or in the aggregate, a Material Adverse Effect.
(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 in all material respects with
generally accepted accounting principles ("GAAP") applied on a consistent basis
through the periods involved (except, with respect to the quarterly and interim
financial statements included in the Registration Statement and the Prospectus,
to the extent such financial statements are subject to normal and recurring
year-end adjustments); the supporting schedules included in the Registration
Statement present fairly in all material respects 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 all material respects 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
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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 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
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do not, individually or in the aggregate, interfere in any material respect
with the use made or proposed to be made of such property by the Company or
its sub 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 enforce able leases in full force and effect with such exceptions
as are not material and which do not interfere in 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
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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 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, offi 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 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,
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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 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
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
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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. 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
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payments required or permitted by the laws of the United States.
(aa) No material business or operations of the Company or
otherwise are conducted by or through any subsidiaries of the Company, and
none of such subsidiaries own any material assets.
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 representation and
warranty by the Company to each Underwriter as to 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 Xxxxxxx,
Xxxxxxx & Xxxxxxxx LLP ("Company Counsel"), Two Embarcadero Place, 0000 Xxxx
Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, 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
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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 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 1,125,000 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
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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
16
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
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
17
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 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
18
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
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 XXXXX, 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
19
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 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, Xxxxxxx & Co. Inc.,
(which consent may be withheld at the sole discretion of Bear, Xxxxxxx & 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
20
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.
(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.
21
Bear Xxxxxxx & 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
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 cost of preparing,
printing, and delivering certificates
22
representing the Shares and (vii) 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, 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, and Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx, LLP, regulatory counsel
to the Company, dated the Closing Date, addressed to the Underwriters and in
form and substance reasonably satisfactory to Underwriters' Counsel,
substantially in
23
the forms of Exhibit A and Exhibit B, attached hereto respectively, subject to
customary assumptions, qualifications, limitations and exceptions.
(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 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
24
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, 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 for the six months ended March 31, 1999 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
25
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 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
26
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).
(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
27
(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 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
28
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 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
29
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 the first, third, fifth, eighth
and ninth 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 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
30
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
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
31
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 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
32
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 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
33
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
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.
34
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) 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
35
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 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
36
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, Xxxxxxx
& Co. Inc., 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxxxx X. Xxxxx, fax no. (000) 000-0000 (with a copy to Xxxxxxx X. Xxxxx, Esq.,
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxx
Xxxx, Xxxxxxxxxx, 00000, fax no. (000) 000-0000); 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., 000 Xxxxxxxxxx Xxxxxx, 00/xx/
Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: X.X. Xxxxxxxx, fax no. (415)
000-0000, with a copy to Xxxxxx X. Mo, Esq., Xxxxxxx, Phleger & Xxxxxxxx LLP,
Two Embarcadero Place, 0000 Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, fax no.
(000) 000-0000.
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, XXXXXXX & CO. INC.
By: ------------------------------
Name:
Title:
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, Xxxxxxx & Co. Inc..................
Xxxxxx Brothers Inc......................
Xxxxxx Xxxxxx Partners LLC...............
Total. . . . . .__________
39
EXHIBIT A
----------
(1) The Company was duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware; the Company has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto); the Company is duly
qualified to transact business and is in good standing in the State of
California, the State of Hawaii, and the State of New York;
(2) The authorized, issued and outstanding capital stock of the
Company as of March 31, 1999 is as set forth under the heading "Actual" under
the caption "Capitalization" in the Prospectus. To our knowledge, based solely
on an officer's certificate provided to us by the Company, the pro forma
---------
authorized, issued and outstanding capital stock of the Company as of March 31,
1999, as adjusted to give effect the issuance and sale by the Company of the
Shares and assuming the conversion of outstanding shares of the Company's
convertible preferred stock into Common Stock and exercise of warrants to
purchase 95,000 shares of the Company's Common Stock, would have been as set
forth under the heading "Pro Forma" under the caption "Capitalization" in the
Prospectus. Since March 31, 1999, the Company has not 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 1998
Stock Option/Stock Issuance Plan (the "Plan"), (ii) options granted
pursuant to the Plan, and (iii) Common Stock of the Company pursuant to the
exercise of previously outstanding and privately granted warrants. To our
knowledge, except as described in the Registration Statement and the
Prospectus, there are no outstanding securities of the Company convertible or
exchangeable into, or evidencing the right to purchase or subscribe for, any
shares of capital stock of the Company and there are no outstanding or
authorized options, warrants or rights of a similar character obligating the
Company to issue any shares of its capital stock or any securities convertible
or exchangeable into, or evidencing the right to purchase or subscribe for,
any shares of such stock. The outstanding options relating to the Common Stock
have been duly authorized and validly issued in accordance with applicable
United States federal and California state laws and each of the Plan and the
stock options granted by the Company in accordance with the Plan conforms in
all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus;
(3) To our knowledge, all the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly authorized and
validly issued, are fully paid and nonassessable, and were not issued in
A-1
violation of or subject to any preemptive rights, co-sale rights, rights of
first refusal or similar rights;
The Shares have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and nonassessable and
free of (A) all liens, encumbrances or claims granted or imposed by the
Company , (B) any preemptive rights arising under the Certificate or the
Delaware General Corporation Law or (C) to our knowledge, any co-sale rights,
registration rights, rights of first refusal and other similar rights that
entitle or will entitle any person to acquire any shares of capital stock of
the Company upon the issuance and sale of the Shares by the Company;
(4) The form of certificate for the Shares conforms in all material
respects to the requirements of the Delaware General Corporation Law and any
applicable requirements of the Certificate and Bylaws;
(5) The Registration Statement and the Prospectus and any supplements
or amendments thereto (except for the consolidated financial statements and the
notes thereto and the schedules and other financial data included therein and
statistical data derived therefrom, as to which we do not express any opinion)
comply as to form in all material respects with the requirements of the
Securities Act and the regulations promulgated thereunder;
(6) The Registration Statement and all post-effective amendments, if
any, have become effective under the Securities Act and, no stop order
suspending the effectiveness of the Prospectus or the Registration Statement has
been issued and no proceedings for that purpose are pending before or
contemplated by the Commission; and any required filing of the Prospectus
pursuant to Rule 424(b) has been made in accordance with Rule 424(b);
(7) The Shares have been approved for quotation on the Nasdaq National
Market, upon issuance as contemplated by the Underwriting Agreement;
(8) The Company has the corporate power and authority to enter into
the Underwriting Agreement and to issue, sell and deliver the Shares to the
Underwriters as provided in the Underwriting Agreement; the Underwriting
A-2
Agreement has been duly authorized, executed and delivered by the Company;
(8) Neither the offer, sale or delivery of the Shares, the execution,
delivery or performance by the Company of the Underwriting Agreement, compliance
by the Company with the provisions of the Underwriting Agreement nor
consummation by the Company of the transactions contemplated by the Underwriting
Agreement (A) violates the Certificate or the Bylaws, or other organizational
documents, of the Company, or (B) constitutes a breach of, or a default under
(or an event which with notice or lapse of time, or both, would constitute a
default), or to our knowledge, results in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company pursuant
to, any agreement, indenture, lease or other instrument to which the Company is
a party or by which the Company, or any of its respective properties is bound
that is an exhibit to the Registration Statement or that is known to us, or (C)
will result in any violation of any existing United States federal or California
State law or regulation (other than applicable state securities and Blue Sky
laws, as to which we express no opinion), the Delaware General Corporation Law,
or any ruling, judgment, injunction, order or decree known to us and applicable
to the Company;
(9) No consent, approval, authorization or other order of, or
registration or filing with, any United States federal or California state
court, regulatory body, administrative agency or other governmental body,
agency, or official is required on the part of the Company (except (A) as have
been obtained under the Securities Act and the Exchange Act, or (B) such as may
be required under state securities or Blue Sky laws governing the purchase and
distribution of the Shares, as to which we express no opinion) for the
execution, delivery and performance of the Underwriting Agreement or the
consummation of the transactions contemplated thereby, including the valid
issuance and sale of the Shares to the Underwriters as contemplated by the
Underwriting Agreement;
(10) To our knowledge, (A) there are no legal or governmental
proceedings pending or threatened in writing against the Company, or to which
the Company or any of its properties is subject, which are required to be
described in the Registration Statement or the Prospectus (or any
A-3
amendment or supplement thereto) that are not so described, and (B) there are
no agreements, contracts, indentures, leases or other instruments that are
required to be described in the Registration Statement or the Prospectus (or
any amendment or supplement thereto) or to be filed as an exhibit to the
Registration Statement that are not so described or filed, as the case may be.
All descriptions in the Registration Statement and the Prospectus of contracts
and other documents to which the Company is a party are accurate in all
material respects to the extent so described;
(11) The statements set forth under the caption "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company, provide a fair
summary of such provisions; the statements set forth under the captions "Risk
Factors -- Shares eligible for future sale in the open market could depress our
stock price" and "--We have certain anti-takeover defenses that could delay or
prevent an acquisition of Digital Island;" "Business -- Intellectual Property
Rights," "-- Legal Matters," "Certain Transactions;" "Management -- Classified
Board," "-- Board Committees," and "Shares Eligible for Future Sale" in the
Prospectus, and the statements set forth in Item 15 of Part II of the
Registration Statement, insofar as such statements constitute a summary of the
legal matters, legal documents or legal proceedings referred to therein, provide
a fair summary of such legal matters, legal documents and legal proceedings in
all material respects;
(12) To our knowledge, no holder of any securities of the Company or
any other person has the right, contractual or otherwise, to cause the Company
to sell or otherwise issue to them, or to permit them to underwrite the sale of,
any of the Shares or the right to have any Common Stock or other securities of
the Company included in the Registration Statement or the right, as a result of
the filing of the Registration Statement, to require the Company to register
under the Securities Act any shares of the Common Stock or other securities of
the Company, except for any registration rights in connection with the offering
contemplated hereby that have been waived.
(13) To our knowledge, the Company has not received any notice of
infringement of or conflict with
A-4
asserted rights of any third party's material patents, patent rights,
licenses, inventions, copyrights, know-how, (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, system
or procedures), trademarks, service marks and trade names that, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in any material adverse effect on the business, properties,
operations, conditions (financial or otherwise) or results of operations on
the Company.
In addition, we have participated in conferences with certain
directors, officers and other representatives of the Company, its independent
public accountants, the Underwriters and the Underwriters' counsel at which the
contents of the Registration Statement, the Prospectus and related matters were
discussed. We are not, however, passing upon, and do not assume any
responsibility for, and we have not independently checked or verified, the
accuracy, completeness or fairness of the information contained in the
Registration Statement and the Prospectus.
In addition, we are not experts on issues related to the FCC, state
regulations applicable to intrastate and interstate communications, the
Investment Company Act of 1940, the Telecommunications Act of 1996, the Public
Utility Holding Company Act of 1935, and the other matters being opined on by
Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx, LLP, as required by Section 6(b) of the
Underwriting Agreement, and we are not passing upon, and do not assume any
responsibility for, and we have not independently checked or verified, the
accuracy, completeness or fairness of the information contained in the
Registration Statement and the Prospectus with respect to such issues.
We may state, however, that based upon our participation as described
in the preceding paragraph, (i) we confirm that we have no reason to believe
that (other than the financial statements, including the notes and schedules
thereto, and the other financial and data included therein and the statistical
data derived therefrom, as to which we express no belief), at the time the
Registration Statement became effective and as of the date hereof, the
Registration Statement contained or contains any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
A-5
and (ii) we confirm that we have no reason to believe that (other than the
financial statements, including the notes and schedules thereto, and the other
financial data included therein and statistical data derived therefrom, as to
which we express no belief) the Prospectus, as of the date thereof and as of
the date hereof, contained or contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
A-6
EXHIBIT B
---------
(1) The statements in the Prospectus under the captions "Risk Factors
-- We may be subject to government regulation and legal uncertainties which
could harm us" and "Government Regulation" insofar as such statements purport to
summarize certain statutes, regulations or policies, have been reviewed by us
and are accurate in all material respects.
(2) No filing with, or consent, approval, authorization, order,
registration, filing, qualification, license, or permit of the FCC is necessary
or required under the Act or the published rules, regulations, and
administrative orders promulgated thereunder in connection with the execution or
delivery by the Issuer of the Underwriting Agreement, the performance by the
Issuer of the transactions contemplated thereby, or the issuance or sale of the
Shares.
(3) The statements made under the captions "Risk Factors -- We may be
subject to government regulation and legal uncertainties which could harm us"
and "Government Regulation" in the Prospectus, taken together, insofar as they
are, or refer to, published statements of law, legal conclusions, or summaries
relating to the Act and the rules, regulations and administrative orders
promulgated thereunder, fairly reflect the provisions purported to be summarized
and are in all material respects correct.
We have participated in discussions with you during which the contents
of the Prospectus and related matters were discussed. However, we have made no
independent factual investigation whatsoever with respect to such Statements,
the business of the Issuer or its financial status, any representations or
warranties, written or oral, of the Issuer, its directors, officers, agents or
representatives, or any documents, certificates or agreements with respect to
the Issuer or its business, and we are not passing upon, and do not assume any
responsibility for, and have not independently checked or verified, the
accuracy, completeness or fairness of the information contained in the
Prospectus.
B-1
We have no reason to believe that the Prospectus included in the
Registration Statement, at the time the Registration Statement became effective
and as of the date hereof, contained or contains any untrue statement of
material fact in the description of the Act and rules and regulations
promulgated thereunder; nor do we have any reason to believe that the aforesaid
description omits to state a material fact required to be stated therein or
necessary to make the description of the Act and the rules and regulations
promulgated thereunder not misleading.
B-2
