Exhibit 1.1
CAIS INTERNET, INC.
6,000,000 Shares of Common Stock
(par value $.01 per share)
UNDERWRITING AGREEMENT
New York, New York
April ___, 1999
Bear, Xxxxxxx & Co. Inc.
Xxxxx Xxxxx Xxxxxx & Company, LLC
First Union Capital Markets Corp.
Friedman, Billings, Xxxxxx & Co., Inc.
As Representatives of the several Underwriters
Wit Capital Corporation
As e-Manager
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
CAIS Internet, 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 several underwriters named in Schedule I
hereto (the "Underwriters") an aggregate of 6,000,000 shares (the "Firm Shares")
of its common stock, par value $0.01 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 900,000 shares
(the "Additional Shares") of 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. The Company represents and
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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 amendments thereto on Form
S-1 (No. 333-72769), 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" and 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.
(b) At the time of the effectiveness of the 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
thereof and supplements thereto complied or will comply in all material
respects with the applicable provisions of the Act and the Regulations and
do not and will not contain an untrue statement of a material fact and did
not and will 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. 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 thereof or supplement thereto was first
filed with the Commission, such preliminary prospectus and any amendments
thereof 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
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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. 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 thereof or supplement thereto in reliance upon and in conformity
with information relating to the Underwriters furnished in writing to the
Company by or on behalf of any Underwriter through you expressly for use in
connection with the preparation thereof. If Rule 434 is used, the Company
will comply with the requirements of Rule 434.
(c) The Company has no subsidiaries other than CAIS, Inc., a Virginia
corporation (the "Subsidiary"), which is a wholly-owned subsidiary of the
Company. The Company does not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation
or have any equity interest in any firm, partnership, joint venture,
association or other entity, other than the Subsidiary. All the
outstanding shares of capital stock of the Subsidiary are duly authorized
and validly issued and are fully paid and nonassessable, are owned solely
by the Company and are free and clear of any security interest, pledge,
claim (legal or equitable), lien, charge, mortgage, encumbrance or other
restriction (each a "Lien") and of shareholders' agreements voting trusts
or defects of title.
(d) Xxxxxx Xxxxxxxx LLP, the accountants who audited the consolidated
financial statements of the Company and the Subsidiary (as defined below)
which are a part of the Registration Statement, the preliminary prospectus
and the Prospectus, are, with respect to the Company and the Subsidiary,
independent public accountants as required by the Act and the Regulations.
(e) 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, there has been no
material adverse change, or any development involving a prospective
material adverse change, in or affecting the business, properties,
management, assets, prospects, stockholders' equity, operations, condition
(financial or other), or results of operations of the Company and the
Subsidiary taken as a whole, whether or not arising from transactions in
the ordinary course of business; and since the date of the latest
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balance sheet presented in the Registration Statement and the Prospectus,
neither the Company nor the Subsidiary has incurred or undertaken any
liability or obligation, direct or contingent, which is material to the
Company and the Subsidiary taken as a whole, except for liabilities or
obligations which are reflected in the Registration Statement and the
Prospectus.
(f) The Company and the Subsidiary have been duly organized and are
validly existing as corporations in good standing under the laws of their
jurisdictions of incorporation, with full power and authority to own, lease
and operate their respective properties and engage in the business in which
they are engaged or propose to engage in as described in the Registration
Statement, the preliminary prospectus and the Prospectus. Each of the
Company and the Subsidiary is duly registered and qualified to do business
as a foreign corporation in good standing in each jurisdiction where the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such registration or qualification
necessary, except where the failure to be so qualified or in good standing,
individually or in the aggregate, would not have a material adverse effect
on the business, operations, assets, properties, condition (financial or
other), stockholders' equity, prospects or results of operations (a
"Material Adverse Effect") on the Company and the Subsidiary taken as a
whole.
(g) The Company has the authorized capital stock as set forth under
the caption "Capitalization" in the Registration Statement, the preliminary
prospectus and the Prospectus; the Common Stock, the Firm Shares, the
Additional Shares and all other shares of capital stock of the Company
conform to the descriptions thereof contained in the Registration
Statement, the preliminary prospectus and the Prospectus; the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, free
and clear of all Liens; the Shares to be issued and sold to the
Underwriters hereunder shall conform to the description thereof and the
statements in relation thereto contained in the Registration Statement, the
preliminary prospectus and the Prospectus and will have been duly
authorized for issuance and, when issued and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be validly issued, fully
paid and nonassessable, and good title to the Shares will be transferred to
the Underwriters free and clear of any Liens; the Shares will not have been
issued in violation of or subject to any preemptive or other rights to
subscribe thereto; and the certificates
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representing the Shares will be in valid and sufficient form. Except as
described in the Registration Statement, the preliminary prospectus and the
Prospectus, there are no outstanding rights (including, without limitation,
preemptive or similar rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any share of capital
stock or other equity interest or ownership interest in the Company or the
Subsidiary or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock or
other equity interest or ownership interest in the Company or the
Subsidiary or to any such convertible or exchangeable securities or
instruments or to any such rights, warrants or options. 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.
(h) Except as otherwise set forth in the Registration Statement, the
preliminary prospectus and the Prospectus, there is (i) no action, suit,
proceeding or investigation before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, pending or, to
the best knowledge of the Company, threatened or contemplated, as to which
the Company or the Subsidiary will be, a party or as to which the business,
assets or property of the Company or the Subsidiary is or will be, subject,
(ii) no statute, rule, regulation or order that has been enacted, adopted
or issued by any governmental agency, body or official, and (iii) no
injunction, restraining order or order of any nature that has been issued
by a federal or state court or foreign court of competent jurisdiction to
which the Company or the Subsidiary is or will be subject or affecting the
business, assets or property of the Company or the Subsidiary, that could
(in the case of clauses (i), (ii) and (iii)), individually or in the
aggregate, result in a Material Adverse Effect on the Company and the
Subsidiary taken as a whole, be required to be disclosed in the
Registration Statement, the preliminary prospectus or the Prospectus or be
otherwise material in the context of the sale of the Shares. There are no
legal or administrative proceedings, statutes, contracts or documents
concerning the Company or the Subsidiary of a character that would be
required to be described in or filed as an exhibit to a registration
statement on Form S-1 under the Securities Act that is not described or
filed, as required, in the Registration Statement, the preliminary
prospectus and the Prospectus.
(i) The consolidated financial statements of the Company and the
Subsidiary, and of a predecessor company, Capital Area Internet Service,
Inc., together with the related notes thereto, which are a part of
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the Registration Statement, the preliminary prospectus and the Prospectus,
present fairly the consolidated financial position and the consolidated
results of operations, changes in stockholders' equity and changes in cash
flows of the Company and the Subsidiary and Capital Area Internet Service,
Inc. as of the respective dates and for the respective periods specified
therein. All of such financial statements and related notes have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved and comply in
form with the applicable accounting requirements included in Regulation S-X
under the Act. The supporting schedules, the Selected Consolidated
Financial and Other Data and the tables included in the Registration
Statement, the preliminary prospectus and the Prospectus fairly present the
information purported to be shown thereby at the respective dates thereof
and for the respective periods covered thereby and have been presented on a
basis consistent with the financial statements therein. No other financial
statements or schedules are required by the Act or Regulation S-X to be
included therein.
(j) (A) The Company and the Subsidiary have good and marketable title
to all properties and assets described in the Registration Statement, the
preliminary prospectus and the Prospectus as being owned by them, free and
clear of Liens, except, individually and in the aggregate, Liens for taxes
not yet due and payable, (B) the Contracts (as defined below) to which the
Company or the Subsidiary are a party are valid and binding agreements,
enforceable against the Company or the Subsidiary, as applicable, in
accordance with their terms, and, to the best of the Company's knowledge,
the other contracting party or parties thereto are not in material breach
or default under any of such agreements, (C) the Company and the Subsidiary
have valid and enforceable leases for the properties leased by them, and
the Company and the Subsidiary enjoy peaceful and undisturbed possession
under all such leases, and such leases conform in all material respects to
the descriptions thereof, if any, set forth in the Registration Statement,
the preliminary prospectus and the Prospectus, and (D) the Company and the
Subsidiary, own, lease or otherwise have rights to use all such properties
and assets as are important to their respective operations as now conducted
and as proposed to be conducted.
(k) The Company and the Subsidiary have all requisite power and
authority (corporate and other), and all licenses, certificates, approvals,
consents, concessions, qualifications, orders, registrations,
authorizations and permits from all state, United States, foreign and other
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governmental and regulatory agencies, bodies and authorities ("Permits")
that are material to the conduct of the business of the Company and the
Subsidiary as such business is currently conducted, all of which are valid
and in full force and effect (and there is no proceeding pending or, to the
best knowledge of the Company, threatened which may cause any such Permit
to be withdrawn, canceled, suspended or not renewed). The Company and the
Subsidiary are not in violation of, or in default under, and have fulfilled
and performed all their obligations with respect to such Permits. No event
has occurred which allows or would allow revocation or termination thereof
or result in any material impairment of the rights of the holder of any
such Permit. The Company reasonably believes that it will be able to obtain
such Permits that are material to the conduct of the business of the
Company and the Subsidiary as such business is proposed to be conducted as
described in the Registration Statement, the preliminary prospectus and the
Prospectus.
(l) The Company and the Subsidiary are not (i) in violation of their
respective certificates of incorporation, as amended, or bylaws, as
amended, (ii) in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, franchise, joint venture, deed of
trust, bond, note, lease, Permit or other agreement or instrument to which
the Company or the Subsidiary is a party or by which the Company or the
Subsidiary may be bound or to which any of the property or assets of the
Company or the Subsidiary may be bound (each a "Contract"), or (iii) in
violation of any law, order, rule or regulation or writ, injunction or
decree of any court or governmental agency, body or authority. No other
party to any material Contract to which the Company or the Subsidiary is a
party is in default in any respect thereunder.
(m) Except as otherwise set forth in the Registration Statement, the
preliminary prospectus and the Prospectus, the Company and the Subsidiary
own or possess adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service
xxxx applications, tradenames, inventions, copyrights, manufacturing
processes, formulae, trade secrets, know-how, franchises, unpatented and/or
unpatentable proprietary or confidential information, systems or procedures
and material intangible property and assets (collectively, "Intellectual
Property") necessary to the conduct of their business as currently
conducted and as proposed to be conducted. The Company reasonably believes
that the Company and the Subsidiary will be able to own or possess adequate
licenses or other rights to use all
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Intellectual Property necessary to the conduct of their business as
proposed to be conducted as described in the Registration Statement, the
preliminary prospectus and the Prospectus. The Company has no knowledge
that it lacks or will be unable to obtain any rights or licenses to use any
of such Intellectual Property. The Registration Statement, the preliminary
prospectus and the Prospectus fairly and accurately describe the Company's
rights with respect to all such Intellectual Property. The Company is not
aware of any claim to the contrary and neither the Company nor the
Subsidiary have received any written notice of infringement or of conflict
with asserted rights or claims of others with respect to any Intellectual
Property. Specifically, and without limitation, the Company is the sole
owner of patent applications filed in Canada, Europe, Mexico, Australia,
and New Zealand (collectively, "Patent Applications"); the Company is a
joint owner and exclusive licensee of U.S. Patent No. 5,010,399, U.S.
Patent No. 5,844,596, nine (9) pending U.S. applications, a Canadian
patent, a European patent, a Korean patent, and a pending PCT application
(collectively, "Patent Rights"), subject only a non-exclusive license of
Terk Technologies, Inc. ("Terk") to use the Patent Rights for single family
residential units, bars, restaurants, coffee shops and other business
establishments earning at least ninety percent of their revenues from the
sale of food and beverages consumed on premises; rights that Terk has in
the Patent Rights will not have a Material Adverse Effect on the Company
and the Subsidiary taken as a whole or adversely affect the ability of the
Company to perform its obligations hereunder or be otherwise material in
the context of the sale of the Shares; the Company had the requisite power
and authority to enter into the Agreement for Cooperative Use of
Communication Patents ("Inline License Agreement") with Inline, Inc.
("Inline") and to exercise the options available to the Company under the
Inline License Agreement; the Company has the right to use of the Patent
Rights worldwide, with the exception of Israel.
(n) Except for the terms of the Inline License Agreement and a
Settlement Agreement signed on January 24, 1999, there are no outstanding
licenses or other agreements that relate to or restrict the Company's use
of the Patent Rights.
(o) With regard to the Inline Patent Rights, the Company has no
knowledge of unpaid maintenance fees, patents that have lapsed, or
abandonment of applications, and knows of no reason why any patent
applications should not be allowed. The Company has no knowledge of
claims, actions, or proceedings, pending or threatened, challenging the
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validity of any of the claims in any of the Patent Rights. The commercial
embodiments of "Overvoice" as currently marketed and as proposed to be
marketed are covered by the Patent Rights.
(p) The Company has no knowledge of the existence of patents or patent
applications owned by third parties that may have a Material Adverse Effect
on the Company and the Subsidiary taken as a whole or adversely affect the
ability of the Company to perform its obligations hereunder or be otherwise
material in the context of the sale of the Shares.
(q) The Company is the sole and exclusive owner of all right, title
and interest in the United States registered trademarks and service marks
CAIS, CAPITAL AREA INTERNET SERVICE, CAIS INTERNET & design, INTERNET
SERVICE FOR THE 21ST CENTURY, OVERVOICE, THE WAIT IS OVER, and WHERE THE
CLUEFUL CONNECT (collectively, "Registered Marks"). The Company has
applied for United States trademarks and service marks for CAIS INTERNET,
LANJACK, and DESKJACK (collectively, "Applied Marks").
(r) The Company has not allowed any Applied Marks or Registered Marks
to be abandoned, canceled, or to lapse. The Company has no knowledge of
claims, actions, or proceedings, pending or threatened, challenging the
validity of any of the Registered Marks or the registration of any Applied
Marks.
(s) The Company has no knowledge of the existence of trademarks or
service marks, or trademark or service xxxx applications, owned by third
parties that may have a Material Adverse Effect on the Company and the
Subsidiary taken as a whole or adversely affect the ability of the Company
to perform its obligations hereunder or otherwise be material in the
context of the sale of the Shares.
(t) The Company has registered with Network Solutions, Inc. the
Internet domain names "XXXXXXXXX.XXX" and "XXXXXXXXX.XXX", and has
administrative control over "XXXXXXXXX.XXX". The Company has no knowledge
of a registered trademark held by a third party that may be used to prevent
the Company from using this domain name.
(u) The Company has taken all economically reasonable steps to secure,
protect, and maintain Registered Marks, Applied Marks, and the
"XXXXXXXXX.XXX" and "XXXXXXXXX.XXX" Internet domain names.
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(v) The Company and the Subsidiary have filed on a timely basis with
the appropriate taxing authorities (or have received an extension for
filing with respect to) all tax returns, reports and other information
required to be filed by it, and each such tax return, report or other
information was, when filed, accurate and complete; and, except as
described in the Registration Statement, the preliminary prospectus and the
Prospectus, the Company and the Subsidiary have duly paid, or has made
adequate provision in the financial statements for, all taxes required to
be paid by it and any other assessment, fine or penalty levied against it;
and no tax deficiency has been or to the best of the Company's knowledge,
might be asserted against the Company or the Subsidiary.
(w) The Company and the Subsidiary maintain insurance of the types and
in the amounts adequate for their business as presently conducted and
consistent with insurance coverage maintained by similar companies in
similar businesses, including, but not limited to, insurance covering
product liability and real and personal property owned or leased against
theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect.
(x) Neither the Company nor the Subsidiary is involved in any labor
dispute, disturbance, lockout, slowdown or stoppage of employees, and, to
the best knowledge of the Company, no such dispute or disturbance is
threatened or imminent.
(y) The Company and the Subsidiary (i) are in compliance with any and
all applicable United States, state and local environmental laws, rules,
regulations, treaties, statutes and codes promulgated by any and all
governmental bodies and authorities relating to the protection of human
health and safety, the environment or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct their businesses as currently conducted, and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval. No action, proceeding, revocation proceeding, writ,
injunction or claim is pending or threatened relating to the Environmental
Laws or to the Company's or the Subsidiary's activities involving Hazardous
Materials. "Hazardous Materials" means any material or substance (i) that
is prohibited or regulated by any Environmental Law or (ii) that has been
designated or regulated by any
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governmental body or authority as radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment.
(z) Neither the Company nor the Subsidiary has engaged in the
generation, use, manufacture, transportation or storage of any Hazardous
Materials on any of the Company's or the Subsidiary's properties or former
properties. No Hazardous Materials have been treated or disposed of on any
of the Company's or the Subsidiary's properties or on properties formerly
owned or leased by the Company or the Subsidiary during the time of such
ownership or lease, except in compliance with Environmental Laws.
(aa) No payments or inducements have been made or given, directly or
indirectly, to any federal or local officials in any jurisdiction by the
Company or the Subsidiary, by any of their officers, directors, employees
or agents or, to the best knowledge of the Company, by any other person in
connection with any opportunity, Contract, Permit, license, certificate,
consent, order, approval, waiver or other authorization relating to the
business of the Company or the Subsidiary, except for such payments or
inducements as were lawful under applicable written laws, rules and
regulations. Neither the Company nor the Subsidiary, nor any director,
officer, agent, employee or other person associated with or acting on
behalf of the Company or the Subsidiary, (i) has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977; or (iv) made any bribe, unlawful rebate,
payoff, influence payment, kickback or other unlawful payment in connection
with the business of the Company or the Subsidiary.
(bb) Neither the Company nor the Subsidiary has any liability for any
prohibited transaction (within the meaning of Section 4975(c) of the
Internal Revenue Code of 1986, as amended (the "Code") or Part 4 of Title I
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (or an accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA) or any complete or partial
withdrawal liability (within the meaning of Section 4201 of ERISA), with
respect to any pension, profit sharing or other plan which is subject to
ERISA, to which the Company and the Subsidiary make or ever have made a
contribution and in which any employee of the Company and Subsidiary are or
have ever been a participant. With
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respect to such plans, the Company and the Subsidiary are in compliance in
all material respects with all applicable provisions of ERISA.
(cc) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are appropriately recorded to permit
preparation of financial statements that are in conformity with generally
accepted accounting principles and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences, and (v) assets
are properly accounted for and safeguarded against loss from unauthorized
use. The Company has not received a "material deficiency" letter from its
independent public accountants in connection with their audit of the
Company's financial statements included in the Registration Statement.
(dd) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or the Subsidiary to or for the benefit of any
of the officers, directors or shareholders of the Company or the Subsidiary
or any of the members of the families of any of them, except as disclosed
in the Registration Statement, the preliminary prospectus and the
Prospectus.
(ee) Neither the issuance, offer, sale or delivery of the Shares, the
execution, delivery and performance by the Company of this Agreement nor
the compliance by the Company with all the provisions hereof nor the
consummation of the transactions contemplated hereby (i) conflicts with or
will conflict with, or constitutes or will constitute a breach or violation
of or a default (or an event that, with notice or lapse of time or both,
would constitute a default), under, any of the terms or provisions of the
certificate of incorporation or by-laws or other organizational or
constitutive documents of the Company or the Subsidiary, nor (ii) conflicts
with or will conflict with or constitutes or will constitute a breach or
violation of, or a default under (or an event that with notice or the lapse
of time or both would constitute a default) or the loss of any material
benefit under, or the termination of, or will result in the creation or
imposition of any Lien upon any property or assets of the Company or the
Subsidiary pursuant to, any Contract or Permit, nor
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(iii) violates or conflicts with or will violate or conflict with any law,
statute, rule or regulation applicable to the Company or the Subsidiary or
any judgment, decree or order applicable to the Company or the Subsidiary
of any court or supervisory, regulatory, administrative or governmental
agency, body or authority, or arbitrator having jurisdiction over the
Company or the Subsidiary or any of their respective properties or assets.
No consent, approval, registration, authorization, filing, qualification,
Permit or order of or with any court or supervisory, regulatory,
administrative or governmental agency, body or authority, arbitrator or
others (including securityholders) is required in connection with the
execution and delivery of this Agreement, the issuance, sale or delivery of
the Shares to be issued, sold and delivered by the Company hereunder, or
the consummation of any other of the transactions contemplated herein or
the fulfillment of the terms hereof, except the registration under the Act
of the Shares and such consents, approvals, authorizations, Permits,
registrations, filings or qualifications as may be required under the state
securities or "blue sky" laws in connection with the offer, purchase and
distribution of the Shares by the Underwriters.
(ff) The Company has full power and authority (corporate and other) to
enter into this Agreement and to perform the transactions contemplated
hereby. This Agreement and the transactions contemplated herein have been
duly and validly authorized, executed and delivered by the Company and this
Agreement constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(gg) The Company is not now, and as a result of the offer and sale of
the Securities in the manner contemplated in this Agreement, the
Registration Statement, the preliminary prospectus and the Prospectus and
the application of the net proceeds of such sale as described in the
Registration Statement, the preliminary prospectus and the Prospectus, will
not be, an "investment company" or an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "Investment Company
Act"), without taking account of any exemption arising out of the number or
type of holders of the Company's securities.
(hh) The Company has not incurred any liability for a fee, commission,
or other compensation on account of the employment of a broker or finder in
connection with the transactions contemplated by this Agreement other than
the discount contemplated hereby.
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(ii) Neither of the Company nor the Subsidiary or to the Company's
knowledge, any of its or their officers, directors or affiliates (as
defined under the Act) has taken or will take, directly or indirectly, any
action designed to cause or to result in or that has constituted, or might
reasonably be expected to cause or result in or constitute, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise, the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Shares.
(jj) The Company has not distributed and will not distribute prior to
the later of (A) the Closing Date and (B) completion of the distribution of
the Shares, any offering material in connection with the offering and sale
of the Shares other than the preliminary prospectus and the Prospectus.
(kk) Other than as described in the Registration Statement, the
preliminary prospectus and the Prospectus, there is no tax, duty, levy,
impost, deduction, charge or withholding imposed by any political
subdivision or taxing authority by virtue of the execution, delivery,
performance or enforcement, or to ensure the legality, validity or
admissibility into evidence, of this Agreement and neither is it necessary
that the Shares be submitted to, or filed or recorded with, any court or
other authority to ensure such legality, validity, enforceability or
admissibility into evidence.
(ll) All necessary actions, authorizations, conditions and things
required to be taken, given, fulfilled and done by the Company and the
Subsidiary on or prior to the date of this Agreement, have been, or on the
Closing Date, will have been taken, given, fulfilled and done in connection
with (i) the issue of the Prospectus; (ii) the execution and delivery of
this Agreement; (iii) the execution, delivery and issuance of the Shares,
(iv) the compliance with all provisions of the Shares and this Agreement to
be performed or complied with by such date.
(mm) Each of the Company and the Subsidiary has (i) initiated a review
and assessment of all areas within its business and operations (including
those affected by suppliers, vendors and customers) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
-----------------
applications used by the Company or the Subsidiary (or suppliers, vendors
and customers thereof) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for addressing
the Year 2000 Problem on a timely basis, and
14
(iii) to date, implemented that plan in accordance with that timetable.
Based on the foregoing, each of the Company and the Subsidiary believes
that all computer applications (including those of its suppliers, vendors
and customers) that are material to its business and operations are
reasonably expected on a timely basis to be able on or prior to August 31,
1999 to perform date-sensitive functions for all dates before and after
December 31, 1999.
(nn) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required
by this Agreement to be delivered to you was or will be, when made,
inaccurate, untrue or incorrect in any material respect.
(oo) The Company has taken such action as is necessary to have the
Shares authorized for trading on the Nasdaq National Market System.
(pp) Except as described in the Registration Statement, the
preliminary prospectus and the Prospectus, the Company has not sold or
issued any shares of capital stock within the six month period preceding
the date of the Prospectus, all of which sales and issuances were made in
compliance with the Act and the Regulations.
2. Purchase, Sale and Delivery of the Shares.
-----------------------------------------
(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 an 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 Shares shall be made at the office of Xxxxxxxxxx & Xxxxx LLP, 00
Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, or at such other place as shall be agreed
upon by you and the Company, at 10:00 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
15
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 after such date as shall be agreed upon by
you and the Company (such time and date of payment and delivery being herein
called the "Closing Date"). Payment shall be made to the Company by certified or
official bank check or checks drawn in federal funds or similar same day funds
payable to the order of the Company, against delivery to you for the respective
accounts of the Underwriters of certificates for the Shares to be purchased by
them. Certificates for the 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, the Company hereby grants to the Underwriters the
option to purchase up to 900,000 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 sole purpose of covering over-allotments in
the sale of Firm Shares by the Underwriters. This option may be exercised from
time to time and at any time, in whole or in part, on or before the thirtieth
day following the date of the Prospectus, by written notice by you to the
Company. Such notice shall set forth the aggregate number of Additional Shares
as to which the option is being exercised and the date and time, as reasonably
determined by you, when the Additional Shares are to be delivered (such date and
time being herein sometimes referred to as the "Additional Closing Date");
provided, however, that the Additional Closing Date shall not be earlier than
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the Closing Date or earlier than the second full business day after the date on
which the option shall have been exercised nor later than the eighth full
business day after the date on which the option shall have been exercised
(unless such time and date are postponed in accordance with the provisions of
Section 9 hereof). Certificates for the Additional Shares shall be registered
in such name or names and in such authorized denominations as you may request in
writing at least two full business days prior to the Additional Closing Date.
The Company will permit you to examine and package such certificates for
delivery at least one full business day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter shall
be the number which bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth 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 being purchased
from the Company, subject, however, to such
16
adjustments to eliminate any fractional shares as you in your sole discretion
shall make.
Payment for the Additional Shares shall be made by certified or
official bank check or checks drawn in federal funds or similar same day funds,
payable to the order of the Company as noted above, at the offices or such other
location as may be mutually acceptable, upon delivery of the certificates for
the Additional Shares to you for the respective accounts of the Underwriters
3. Offering. It is understood that the several 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 best efforts to cause the Registration Statement
and any amendments thereto to become effective as promptly as possible, and
if Rule 430A is used or the filing of the Prospectus is otherwise required
under Rule 424(b) or Rule 434, the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to rule 424(b) or
Rule 434 within the prescribed time period and will provide evidence
satisfactory to you of such timely filing. If 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, (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 Commision of any
stop order suspending the effectiveness of the Registration Statement or
any post-effective amendment thereto or of the initiation, or the
threatening, of any proceedings therefor, (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 will make every
17
reasonable effort 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 or any
amendment of or supplement to the Prospectus (including the prospectus
required to be filed pursuant to Rule 424(b) or Rule 434) that differs from
the prospectus on file at the time of the effectiveness of the Registration
Statement before or after the effective date of the Registration Statement
to which you shall reasonable object in writing after being timely
furnished in advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act any event shall have occurred 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 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.
(c) As soon as practicable, but not later than 45 days after the end
of its fiscal quarter in which the first anniversary date or the effective
date of the Registration Statement occurs, the Company will make generally
available (within the meaning of Section 11(a) of the Act) to its security
holders and to you an earnings statement or statements of the Company which
will satisfy the provisions of Section 11(a) of the Act and Rule 158 of the
Regulations, covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement; and will,
during the period of five years from the date of the Prospectus, make
generally available (within the meaning of Section 11(a) of the Act) to its
security holders as soon as practicable after the end of each fiscal year,
an annual report (including a balance sheet and statements of financial
condition, operations, cash flows and changes in stockholders' equity of
the Company, certified by the Company's independent public accountants)
and, as soon as practicable after the end of each of the first three
quarters of each fiscal year (beginning with the fiscal quarter ending
after the effective date of the Registration
18
Statement), consolidated summary financial information of the Company for
such quarter in reasonable detail.
(d) The Company will furnish without charge to you and counsel for the
Underwriters signed copies of the Registration Statement (including
exhibits thereto), and to each other Underwriter a copy of the Registration
Statement (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as many
copies of each preliminary prospectus and the Prospectus and any supplement
thereto as you may reasonably request. The Company will furnish or cause
to be furnished to you copies of all reports on Form SR as may be required
by Rule 463 under the Act.
(e) The Company will arrange for the qualification of the Shares for
sale under the laws of such jurisdictions as you may designate and will
maintain such qualifications in effect for so long as required for the
distribution of the Shares, provided, however, that in no event shall the
-------- -------
Company be required to qualify to do business in any such jurisdiction in
which it is not already qualified or to file a general consent to service
of process in any jurisdiction. The Company will cooperate with you and
counsel for the Underwriters in connection with the filings required to be
made by you with the NASD and will pay the fee of the NASD in connection
with its review of the offering of the Shares and will use its best efforts
to cause the Shares to be quoted on the Nasdaq National Market System.
(f) During the period of five years from the effective date of the
Registration Statement, the Company will promptly furnish to you and, upon
request, to each of the several Underwriters, without charge, copies, in
such quantities as you or the Underwriters may reasonably request from time
to time, of (i) all reports or other communications (financial or other)
furnished generally by the Company to its securityholders, and (ii) reports
furnished to or filed by the Company with the Commission or any other
supervisory, regulatory, administrative or governmental agency, body or
authority whether pursuant to the Exchange Act or otherwise or any national
securities exchange or system on which any class of securities of the
Company is listed or quoted.
(g) For a period of 180 days from the date of the Prospectus,
without your prior written consent, each of the Company and its executive
officers, directors and stockholders shall not, directly or indirectly:
(1) issue, offer for sale, contract to sell, sell, pledge or otherwise
dispose
19
of (or enter into any transaction or device which is designed to, or could
be expected to, result in the disposition by any person at any time in the
future of) any shares of Common Stock or securities convertible into,
exercisable or exchangeable for, or represent the right to receive, Common
Stock or sell or grant options, rights or warrants with respect to any
shares of Common Stock or any of the foregoing or register for sale any of
the foregoing or any outstanding shares of Common Stock except that the
Company may grant options and issue and sell Common Stock pursuant to the
Company's employee stock plan and dividend reinvestment plan; or (2) enter
into any swap or other derivatives transaction that transfers to another,
in whole or in part, any of the economic benefits or risks of ownership of
such shares of Common Stock or securities, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or other securities, in cash or otherwise. In addition, during such
period, the Company and the Subsidiary also agree not to file any
registration statement (other than a Form S-8 registration statement filed
in connection with shares of Common Stock received under a Company employee
stock plan, stock ownership plan, employment agreement or dividend
reinvestment plan) with respect to, and each of the executive officers,
directors and stockholders of the Company and the Subsidiary has agreed not
to make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock without your prior
written consent.
(h) During the period when the delivery of a prospectus by an
Underwriter or dealer may be required by the Act, the Company will comply,
at its own expense, with all requirements imposed upon it by the
Commission, the Act and the Exchange Act, and the rules and regulations of
the Commission promulgated thereunder, so far as necessary to permit the
continuance of sales of or dealing in the Shares during such period in
accordance with the provisions hereof and the Prospectus.
(i) The Company will conduct its business in compliance in all
material respects with all applicable laws, rules, regulations, decisions,
directives and orders. The Company will do and perform all things required
or necessary to be done and performed under this Agreement by the Company
prior to the Closing Date or settlement date, as applicable, and to comply
or cause to be satisfied, to the extent such are within their control, the
conditions precedent to the several obligations of the Underwriters
specified in Section 8 hereof.
20
(j) Neither the Company nor any of its affiliates (as defined in
Regulation D under the Act), will take, directly or indirectly, any action
designed to cause or result in, or which constitutes or which might
reasonably be expected to cause, result in, or constitute under the
Exchange Act, or otherwise, stabilization or manipulation of the price of
the shares of Common Stock of the Company to facilitate the offering and
distribution of the Securities or any other action prohibited by Regulation
M under the Exchange Act.
(k) The Company will apply the net proceeds from the offering and sale
of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds."
(l) The Company shall take all economically reasonable steps to
enforce the Patent Rights and all other Intellectual Property against
potential infringers.
(m) The Company shall cause to be prepared and delivered, at its
expense, within one business day from the date hereof to the Underwriters
an "electronic Prospectus" to be used by the Underwriters in connection
with the offering and sale of the Shares . As used herein, the term
"electronic Prospectus" means a form of Prospectus, and any amendment or
supplement thereto, that meets each of the following conditions: (i) it
shall be encoded in an electronic format, satisfactory to you, that may be
transmitted electronically by the Underwriters to offerees and purchasers
of the Shares for at least during the period when the Prospectus is
required to be delivered under the Act or the Exchange Act (the "Prospectus
Delivery Period"); (ii) it shall disclose the same information as the paper
Prospectus and Prospectus filed pursuant to XXXXX, except to the extent
that graphic and image material cannot be disseminated electronically, in
which case such graphic and image material shall be replaced in the
electronic Prospectus with a fair and accurate narrative description or
tabular representation of such material, as appropriate; and (iii) it shall
be in or convertible into a paper format or an electronic format,
satisfactory to you, that will allow investors to store and have
continuously ready access to the Prospectus at any future time, without
charge to investors (other than any fee charged for subscription to the
system as a whole and for on-line time). The Company hereby confirms that
it has included or will include in the Prospectus filed pursuant to XXXXX
or otherwise with the Commission and in the Registration Statement at the
effective date of the Registration Statement an undertaking that, upon
receipt of a request by an investor or his or her
21
representative within the Prospectus Delivery Period, the Company shall
transmit or cause to be transmitted promptly, without charge, a paper copy
of the Prospectus.
5. Payment of Expenses. (a) Whether or not the transactions
-------------------
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company will pay, or reimburse if paid by the Underwriters, all costs and
expenses incident to the performance of the obligations of the Company under
this Agreement, including but not limited to costs and expenses of or relating
to (i) the preparation by the Company, printing and filing of the Registration
Statement and exhibits to it, each preliminary prospectus, the Prospectus and
any amendment or supplement to the Registration Statement or the Prospectus
(including, without limitation, the fees and expenses of the Company's counsel
and accountants), (ii) the preparation and delivery of certificates representing
the Shares, (iii) the printing of this Agreement and Underwriter's
Questionnaires, Underwriter's Powers of Attorney, Blue Sky Memorandum, Master
Agreements Among Underwriters and Master Selling Agreements, and all other
documents relating to the public offering of the Shares (including those
documents supplied to the Underwriters in quantities as hereinabove stated) and
furnishing (including costs of shipping and mailing) such copies of the
Registration Statement, the Prospectus and any preliminary prospectus, and all
amendments and supplements thereto, as may be reasonably requested for use in
connection with the offering and sale of the Shares by the Underwriters or by
dealers to whom Shares may be sold, (iv) the quotation of the Shares on the
Nasdaq National Market, (v) any filings required to be made with the NASD and
with the Nasdaq National Market, and the fees, disbursements and other charges
of the Underwriters' counsel in connection therewith, (vi) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of such jurisdictions designated pursuant to Section 4(e), including the
fees, disbursements and other charges of the Underwriters' counsel in connection
therewith, and the preparation and printing of preliminary, supplemental and
final Blue Sky memoranda, (vii) the issuance, transfer and delivery of the
Shares to the Underwriters, including any transfer or other taxes payable
thereon and (viii) the transfer agent or registrar for the Shares.
(b) If this Agreement shall be terminated by the Company or if for any
reason the Company shall fail to perform its obligations hereunder or if any
condition to the obligations of the Underwriters set forth in Section 8 hereof
is not satisfied, the Company will reimburse the Representative for all out-of-
pocket expenses (including the fees, disbursements and other charges of the
Underwriters' counsel) incurred by them in connection herewith.
22
6. Indemnification. (a) The Company agrees to indemnify and hold
---------------
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim 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 or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Shares, as originally filed
or any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any supplement thereto or amendment thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; 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 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 relating to
an Underwriter furnished to the Company by or on behalf of any Underwriter
through you expressly for use therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have including 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 or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the registration statement for the registration
of the
23
Shares, as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information relating to an Underwriter furnished
to the Company by or on behalf of any Underwriter through you expressly for use
therein; provided, however, that in no case shall any Underwriter be liable or
-------- -------
responsible for any amount in excess of the underwriting discount applicable to
the Shares purchased by such Underwriter hereunder. This indemnity will be in
addition to any liability which any Underwriter may otherwise have including
under this Agreement. The Company acknowledges that the statements set forth in
the first and thirteenth paragraphs under the caption "Underwriting" in the
Prospectus constitute the only information furnished in writing relating to an
Underwriter by or on behalf of any Underwriter expressly for use in the
registration statement relating to the Shares as originally filed 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 thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6). 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 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
24
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
-------- -------
that such consent was not unreasonably withheld.
7. Contribution. In order to provide for contribution in
------------
circumstances in which the indemnification provided for in Section 6 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 and
the Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement and
directors of the Company) as incurred to which the Company and one or more of
the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company and the Underwriters 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 6 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 and the Underwriters 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 and the Underwriters 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 on the
cover page of the Prospectus. The relative fault of the Company and of the
Underwriters shall be determined by
25
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 7 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 7, (i) in no case shall any
Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder, and (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 7 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 7, 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 7. 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 7 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent,
provided that such consent was not unreasonably withheld.
8. Conditions to Obligation of the Underwriters. The several
--------------------------------------------
obligations of the Underwriters to purchase and pay for the Firm Shares and the
Additional Shares, as provided herein, shall be subject to the accuracy of the
26
representations and warranties on the part of the Company contained herein as of
the date hereof, the Closing Date and any Additional Closing Date pursuant to
Section 2 hereof, to the absence from any certificates, opinions, written
statements or letters furnished to you or to Underwriters' counsel pursuant to
this Section 8 of any misstatement or omission, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than, if pricing pursuant to Rule 430A, 5:30 P.M., New York time on the
date of this Agreement, and if pricing pursuant to a pricing amendment,
12:00 P.M., New York time on the date an amendment to the Registration
Statement containing the public offering price has been filed with the
Commission, 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; no order suspending the
qualification or registration of the Shares under the securities or blue
sky laws of any jurisdiction shall be in effect and no proceeding for such
purpose shall be pending before or threatened or contemplated by the
Commission or the authorities of any such jurisdiction; any request for
additional information on the part of the staff of the Commission or any
such authorities shall have been complied with to the satisfaction of the
staff of the Commission or such authorities and to your reasonable
satisfaction; after the date hereof no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a
copy thereof was first submitted to you and you did not reasonably object
thereto; the NASD, upon review of the terms of the public offering of the
Shares, shall not have objected to such offering, such terms or the
Underwriters' participation in the same.
(b) The Company shall have furnished to you the opinion of Xxxxxxx
Berlin Shereff Xxxxxxxx, LLP, counsel for the Company, dated the Closing
Date, addressed to the Underwriters and in form and substance satisfactory
to Xxxxxxxxxx & Xxxxx LLP, Underwriters' counsel, to the effect that:
(i) Each of the Company and the Subsidiary has been duly
incorporated and is validly existing as a corporation in good
27
standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to own, lease and operate its
properties and engage in the business in which it is engaged or
proposes to engage in as described in the Registration Statement, the
preliminary prospectus and the Prospectus. Each of the Company and the
Subsidiary is duly registered and qualified to do business as a
foreign corporation in good standing in each jurisdiction set forth on
Exhibit A hereto, which, to such counsel's knowledge, are the only
jurisdictions where the character or location of its properties
(owned, leased or licensed) or the nature or conduct of its business
requires such registration or qualification, except where the failure
to so register or qualify, individually or in the aggregate, would not
have a Material Adverse Effect on the Company and the Subsidiary taken
as a whole. To such counsel's knowledge, except as set forth in the
Registration Statement, the preliminary prospectus and the Prospectus,
the Company does not own or control, directly or indirectly, any
shares of stock or any other equity or long-term debt securities of
any corporation or have an equity interest in any firm, partnership,
association, joint venture or other entity, other than the Subsidiary.
(ii) All the outstanding shares of capital stock of the
Subsidiary have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of statutory
or to such counsel's knowledge, other preemptive rights, and, to our
knowledge except as otherwise set forth in the Registration Statement,
the preliminary prospectus and the Prospectus, all outstanding shares
of capital stock of the Subsidiary are directly owned by the Company,
free and clear of any Liens, shareholders' agreements, voting trusts
or defects of title.
(iii) The Company's authorized equity capitalization is as set
forth in the Registration Statement, the preliminary prospectus and
the Prospectus; the Common Stock, the Firm Shares, the Additional
Shares and all others shares of capital stock of the Company conform,
in all material respects, to the description thereof contained in the
Registration Statement, the preliminary prospectus and the Prospectus.
The outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
The Shares to be issued and sold to the Underwriters pursuant to the
Underwriting
28
Agreement have been duly authorized, and when issued and delivered to
and paid for by the Underwriters pursuant to the Underwriting
Agreement, will be validly issued and fully paid and nonassessable,
and delivered to the Underwriters free and clear of all Liens and will
not have been issued in violation of or subject to any statutory or to
such counsel's knowledge, any other preemptive rights. The
certificates for the Shares are in valid and sufficient form. The
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive, co-sale, registration, right of first refusal
or other rights in respect of the Shares. Except as described in the
Registration Statement, the preliminary prospectus and the Prospectus,
to such counsel's knowledge, (1) there are no outstanding rights
(including, without limitation, preemptive or similar rights),
warrants or options to acquire, or instruments convertible into or
exchangeable for, any share of capital stock or other equity interest
or ownership interest in the Company or the Subsidiary or any
contract, commitment, agreement, understanding or arrangement of any
kind relating to the issuance of any capital stock or other equity
interest or ownership interest in the Company or the Subsidiary or any
such convertible or exchangeable securities or instruments or any such
rights, warrants or options and (2) 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 by
the Underwriting Agreement.
(iv) To the knowledge of such counsel, there is (A) no action,
suit, proceeding or investigation before or by any court, arbitrator
or governmental agency, body or official, domestic or foreign,
pending, threatened or contemplated, as to which the Company or the
Subsidiary will be, a party or as to which the business, assets or
property of the Company or the Subsidiary is or will be, subject, (B)
no statute, rule, regulation or order that has been enacted, adopted
or issued by any governmental agency, body or official, and (C) no
injunction, restraining order or order of any nature that has been
issued by a federal or state court or foreign court of competent
jurisdiction to which the Company or the Subsidiary is or will be
subject or affecting the business, assets or property of the Company
or the Subsidiary, in each case that is of a character required to be
disclosed in the Registration Statement, the preliminary prospectus or
the Prospectus which has not been
29
properly disclosed therein or that might, in the case of clauses (A),
(B) and (C), individually or in the aggregate, result in a Material
Adverse Effect on the Company and the Subsidiary taken as a whole, or
be otherwise material in the context of the sale of the Shares. To
such counsel's knowledge, there are no legal or administrative
proceedings, actions, suits, investigations pending or threatened, or
statutes, or franchises, Contracts, Permits or other documents
concerning the Company or the Subsidiary, of a character that would be
required to be described in or filed as an exhibit to a registration
statement on Form S-1 under the Act that are not described in the
Registration Statement, the preliminary prospectus and the Prospectus
or so filed as required. The statements in the Registration Statement,
the preliminary prospectus and the Prospectus relating to pending
litigation or actions taken by the courts or taken or requested by
regulatory bodies fairly summarize, in all material respects, the
matters referred to therein.
(v) The Registration Statement has become effective under the
Act; all filings required by Rule 424(b) of the Regulations have been
made in the manner and within the time period required by Rule 424(b).
To the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or threatened. The
Registration Statement, the preliminary prospectus and the Prospectus
and each supplement thereto comply as to form in all material respects
with the applicable requirements of the Act and the Regulations.
(vi) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company and is enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, or similar laws affecting rights of creditors
and other obligees in general or by general principles of equity and
except that rights to indemnification may be limited by public policy
considerations.
(vii) The Company and the Subsidiary have all requisite
corporate power and authority, and all Permits that are material to
the conduct of the business of the Company and the Subsidiary as such
business is currently conducted as described in the
30
Registration Statement, the preliminary prospectus or the Prospectus.
To the knowledge of such counsel, (a) the Company and the Subsidiary
are not in violation of, or in default under, and have fulfilled and
performed all their obligations with respect to such Permits, other
than those obligations which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and the
Subsidiary taken as a whole and (b) no event has occurred which allows
or would allow revocation or, termination thereof or result in any
material impairment of the rights of the holder of any such Permit.
(viii) To the knowledge of such counsel, the Company and the
Subsidiary are not (i) in violation of their respective certificates
of incorporation, as amended, or bylaws, as amended or (ii) in breach
or default (or an event has occurred that with notice or the lapse of
time or both would constitute a default) in the performance or
observance of any Contract or Permit or in violation of any law,
order, rule, regulation or writ, injunction or decree of any court or
governmental agency, body or authority, except in the case of this
clause (ii) for such breaches, defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect on
the Company and the Subsidiary taken as a whole or be otherwise
material in the context of the sale of the Shares.
(ix) Neither the issuance, offer, sale or delivery of the
Shares, the execution, delivery and performance by the Company of the
Underwriting Agreement nor the compliance by the Company with all the
provisions thereof nor the consummation of the transactions
contemplated thereby, (i) conflicts with or will conflict with, or
constitutes or will constitute a breach or violation of or a default
(or an event that with notice or the lapse of time or both would
constitute a default) under, any of the terms or provisions of the
certificate of incorporation or by-laws or other organizational or
constitutive documents of the Company or the Subsidiary, nor (ii)
conflicts with or will conflict with or constitutes or will constitute
a breach or violation of, or a default (or an event that with notice
or the lapse of time or both would constitute a default) or the loss
of any material benefit under, or the termination of, or will result
in the creation or imposition of any Lien upon any property or assets
of the Company or the Subsidiary pursuant to, any Contract or Permit,
nor (iii) violates or conflicts with or will violate or conflict with
any law, statute, rule or regulation applicable to the Company or the
31
Subsidiary or any judgment, decree or order known to such counsel and
applicable to the Company or the Subsidiary of any court or
supervisory, regulatory, administrative or governmental agency, body
or authority, or arbitrator having jurisdiction over the Company or
the Subsidiary or any of their property or assets, the default under
or the breach or violation of which, in the case of clauses (ii) and
(iii) above, individually or in the aggregate, could have a Material
Adverse Effect on the Company and the Subsidiary taken as a whole or
an adverse effect on the issuance and sale of the Shares.
(x) To the knowledge of such counsel, (a) the Company and the
Subsidiary have conducted and are conducting their businesses in
compliance in all material respects with all applicable laws, rules or
regulations and all decisions, directives and orders to which the
Company and the Subsidiary is a party or by which, to such counsel's
knowledge, any of them or their property is bound or affected, the
failure to comply with, individually or in the aggregate, could have a
Material Adverse Effect on the Company and the Subsidiary taken as a
whole or an adverse effect on the issuance or sale of the Shares, and
(b) are not subject to any directive or order from any agency, body,
authority, court or arbitrator or competent jurisdiction to make any
material change in the method of conducting their businesses.
(xi) The descriptions in the Registration Statement, the
preliminary prospectus and the Prospectus which purport to summarize
the provisions of statutes, regulations, contracts and other documents
are accurate summaries in all material respects and such descriptions
fully and fairly present in all material respects the information
shown. To the knowledge of such counsel, there is no law, statute,
regulation, contract or other document applicable to the Company or
the Subsidiary of a character required to be described in the
Registration Statement, the preliminary prospectus or the Prospectus
or required to be filed as an exhibit to the Registration Statement
which is not described or filed as required. The descriptions in the
Registration Statement, the preliminary prospectus and the Prospectus
that concern matters of law or legal conclusions that have been
prepared or reviewed by such counsel are in all material respects
accurate and fully and fairly summarize the matters therein described.
32
(xii) The Company is not now, and as a result of the offer and
sale of the Shares in the manner contemplated in the Underwriting
Agreement, the Registration Statement, the preliminary prospectus and
the Prospectus and the application of the net proceeds of such sale as
described in the Registration Statement, the preliminary prospectus
and the Prospectus, will not be, an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company" within the meaning of the Investment Company
Act, without taking account of any exemption arising out of the number
or type of holders of the Company's securities.
(xiii) No consent, approval, authorization, filing,
qualification, Permit or order of any court or governmental agency or
body is required for the Company's execution, delivery and performance
of the Underwriting Agreement or the consummation of the transactions
contemplated in the Underwriting Agreement, except such as have been
obtained under the Act and such as may be required under the blue sky
laws of any jurisdiction in connection with the purchase and
distribution of the Shares by the Underwriters and such other
approvals (specified in such opinion) as have been obtained.
(xiv) The Shares to be sold under the Underwriting Agreement to
the Underwriters are duly authorized for quotation on the National
Association of Securities Dealers Automated Quotation National Market
System.
(xv) The securities of the Company issued or sold within the
period of one year prior to the date of the Underwriting Agreement
were issued and sold in compliance with the registration requirements
of the Act and the Regulations.
(xvi) In addition, such opinion shall also contain a statement
that such counsel has participated in conferences with officers and
representatives of the Company, representatives of the independent
public accountants for the Company and the Underwriters at which the
contents of the Prospectus and related matters were discussed and no
facts have come to the attention of such counsel which would lead such
counsel to believe that either the Registration Statement at the time
it became effective (including the information deemed to be part of
the Registration
33
Statement at the time of effectiveness pursuant to Rule 430A(b) or
Rule 434, if applicable), or any amendment thereof made prior to the
Closing Date as of the date of such amendment, contained an untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the Closing Date
as of the date of such amendment or supplement) and as of the Closing
Date contained or contains an untrue statement of a material fact or
omitted or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief or opinion with
respect to the financial statements and schedules and other financial
data included or incorporated by reference therein).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the States
of Delaware and Virginia, the District of Columbia, or the United States,
to the extent they deem proper and specified in such opinion, upon the
opinion of other counsel of good standing whom they believe to be reliable
and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of
the Company and the Subsidiary, provided that copies of any such statements
or certificates shall be delivered to Underwriters' counsel. The opinion
of such counsel for the Company shall state that the opinion of any such
other counsel is in form satisfactory to such counsel and, in their
opinion, you and they are justified in relying thereon.
(c) The Company shall have furnished to the Underwriters the opinions
of Jacobson, Price, Xxxxxx & Xxxxx, Intellectual Property counsel for the
Company, and Fish & Xxxxxxxxxx, P.C., Intellectual Property counsel for
Inline Connection corporation, each dated the Closing Date, in form and
substance satisfactory to Xxxxxxxxxx & Xxxxx LLP, counsel to the
Underwriters.
(d) All proceedings taken in connection with the sale of the Shares as
herein contemplated shall be satisfactory in form and
34
substance to you and to Underwriters' counsel. The Underwriters shall have
received from Xxxxxxxxxx & Xxxxx, LLP, Underwriters' counsel, a favorable
opinion, dated the Closing Date, with respect to the issuance and sale of
the Shares, the Registration Statement, the Prospectus and other related
matters as you may reasonably require, and the Company and the Subsidiary
shall have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(e) At the Closing Date (and the Additional Closing Date, if
applicable) you shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of the Company, dated the Closing Date
to the effect that (i) the condition set forth in subsection (a) of this
Section has been satisfied, (ii) as of the date hereof and as of the
Closing Date (and the Additional Closing Date, if applicable) the
representations and warranties of the Company set forth in Section 1 hereof
are accurate, (iii) as of the Closing Date (and the Additional Closing
Date, if applicable) the obligations of the Company to be performed
hereunder on or prior thereto have been duly performed and (iv) subsequent
to the respective dates as of which information is given in the
Registration Statement and the Prospectus, the Company and the Subsidiary
have not sustained any material loss or interference with their respective
business or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
any legal or governmental proceeding, and there has not been any material
adverse change, or any development involving a material adverse change, in
the business prospects, management, properties, operations, condition
(financial or otherwise), or results of operations of the Company and the
Subsidiary taken as a whole, except in each case as described in or
contemplated by the preliminary prospectus and the Prospectus.
(f) At the time this Agreement is executed and at the Closing Date
(and the Additional Closing Date, if applicable), Xxxxxx Xxxxxxxx, LLP
shall have furnished to you a letter or letters, dated respectively as of
the time this Agreement is executed and as of the Closing Date, in form and
substance satisfactory to you to the effect that they are independent
public accountants with respect to the Company within the meaning of the
Act and Regulation S-X, stating that the answer to item 10 of the
Registration Statement is correct as it relates to them and that:
(i) in their opinion the audited consolidated financial
statements, the audited consolidated financial statement schedule
35
and the audited financial statements of Capital Area Internet Service,
Inc. included in the Registration Statement and the Prospectus and
reported on by them comply in form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and the Subsidiary; carrying
out certain specified procedures (but not an examination in accordance
with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of the
meetings of the stockholders and the board of directors of the Company
and the Subsidiary; and inquiries of certain officials of the Company
and the Subsidiary who have responsibility for financial and
accounting matters of the Company and the Subsidiary as to
transactions and events subsequent to December 31, 1998, nothing came
to their attention which caused them to believe that:
(1) at April ____, 1999, there was any change in the capital
stock, increase in long-term debt, decrease in consolidated net
current assets, or an increase greater than $15,500,000 in total
stockholders' deficit of the consolidated companies as compared
with amounts shown in the December 31, 1998, audited consolidated
balance sheet included in the Registration Statement and the
Prospectus, or
(2) for the period from January 1, 1999, to April ___, 1999,
there were, as compared to the corresponding period in the
preceding year, any decreases in consolidated net revenues or
increases in the total amount of loss from continuing operations
in excess of $4,000,000 and total net loss in excess of
$5,000,000, except in all instances for changes, increases, or
decreases that the Registration Statement and the Prospectus
discloses have occurred or may occur.
(iii) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
36
accounting, financial or statistical information derived from the
general accounting records of the Company and the Subsidiary) set
forth in the Registration Statement and the Prospectus, which have
been specified by you prior to the date of such letter, agrees with
the accounting records of the Company and its subsidiaries, excluding
any questions of legal interpretation.
(iv) they have performed an SSAE 8 examination of the
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the Registration Statement and the
Prospectus and have determined that:
(1) the presentation includes, in all material respects,
the required elements of the applicable rules and regulations
under the Act;
(2) the historical financial amounts have been accurately
derived in all material respects from the Company's audited
financial statements; and
(3) the underlying information, determinations, estimates
and assumptions of the Company provide a reasonable basis for the
disclosures contained therein.
In the event that the letters to be delivered referred to above set
forth notes any changes, decreases or increases in the financial
information included in the Registration Statement and the Prospectus, it
shall be a further condition to the obligations of the Underwriters that
the Underwriters shall have reasonably determined, after discussions with
officers of the Company responsible for financial and accounting matters
and with the Accountants, that such changes, decreases or increases as are
set forth in such letters do not reflect a material adverse change in the
stockholders' equity or long-term debt of the Company as compared with the
amounts shown in the latest balance sheet of the Company included in the
Prospectus, or a material adverse change in total net revenues or net
income of the Company, in each case as compared with the corresponding
period of the prior year.
(g) Subsequent to the date this Agreement is executed or, if earlier,
the dates as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of any
supplement thereto), there shall not have been (i) any
37
change or decrease specified in the letter or letters referred to in
paragraph (f) of this Section or (ii) any change, or any development
involving a prospective change, in or affecting the business or properties
of the Company and the Subsidiary the effect of which, in any case referred
to in clause (i) or (ii) above, is, in your judgment, so material and
adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Registration
Statement (exclusive of any amendment thereof) and the Prospectus
(exclusive of any supplement thereto).
(h) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change, or any development involving a prospective
material adverse change, in the general affairs, business, prospects,
properties, management, key personnel, condition (financial or other) or
results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, in each case other than as
set forth in the Registration Statement and the Prospectus (or, in the case
of a prospective change, other than as contemplated by the Registration
Statement and the Prospectus), and (ii) the Company shall not have
sustained any material loss or interference with its business or properties
from fire, explosion, flood, hurricane or other casualty or calamity,
whether or not covered by insurance, or from any labor dispute or any court
or legislative or other governmental action, order or decree, which is not
set forth in the Registration Statement and the Prospectus, if in your
judgment any such development makes it impracticable or inadvisable to
consummate the sale and delivery of the Securities at the public offering
price.
(i) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
officers or directors in their capacities as such, before or by any
federal, state, or local court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation
or proceeding an unfavorable ruling, decision or finding could have a
Material Adverse Effect on the Company and the Subsidiary taken as a whole.
(j) At the time of execution of this Agreement, the Company shall have
furnished to you a letter addressed to you from each officer and director
of the Company and each shareholder or other person heretofore
38
designated by you, in which each such person agrees not to (1) offer for
sale, contract to sell, sell, pledge or otherwise dispose of (or enter into
any transaction or device which is designed to, or could be expected to,
result in the disposition by any person at any time in the future of) any
shares of Common Stock or securities convertible into, exercisable or
exchangeable for, or represent the right to receive, Common Stock or sell
or grant options, rights or warrants with respect to any shares of Common
Stock or register for sale any outstanding shares of Common Stock; or (2)
enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of
ownership of such shares of Common Stock or securities, whether any such
transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or other securities, in cash or otherwise for a
period of 180 days following the time of execution of this Agreement
without your prior written consent, other than shares of Common Stock
disposed of as bona fide gifts.
(k) The Securities shall be qualified for sale in such states as you
shall have requested, each such qualification shall be in effect and not
subject to any stop order or other proceeding on the Closing Date and the
Additional Closing Date, if applicable.
(l) The Shares shall have been authorized for quotation on the Nasdaq
National Market upon official notice of issuance.
(m) You shall not have advised the Company that the Registration
Statement or the Prospectus, or any amendment or any supplement thereto,
contains an untrue statement of fact which, in your judgment, is material,
or omits to state a fact which, in your judgment, is material and is
required to be stated therein or necessary to make the statements therein
not misleading and the Company shall not have cured such untrue statement
of fact or omission of such statement of fact.
(n) The Company shall have furnished to you such certificates, in
addition to those specifically mentioned herein, as you may have requested
as to the accuracy and completeness at the Closing Date and the Additional
Closing Date, if applicable, of any statement in the Registration Statement
or the Prospectus, as to the accuracy at the Closing Date and the
Additional Closing Date, if applicable, of the representations, warranties
and covenants of the Company herein, as to the performance by the Company
of its obligations hereunder, or as to the
39
fulfillment of the conditions concurrent and precedent to your obligations
hereunder.
(o) Prior to the Closing Date and the Additional Closing Date, if
applicable, the Company shall have furnished to the Underwriters such
further information, certificates and documents as you may reasonably
request.
If any of the conditions specified in this Section shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to you and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by you. Notice of such cancellation shall be given
to the Company in writing or by telephone or telegraph confirmed in writing.
9. Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or their
obligations 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, to which the default relates shall be
purchased by the non-defaulting Underwriters in proportion to the
respective proportions which the numbers of Firm Shares set forth opposite
their respective names in Schedule I hereto bear to the aggregate number of
Firm Shares set forth opposite the names of the non-defaulting
Underwriters.
(b) In the event that such default relates to more than 10% of the
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, 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
40
Additional Shares shall thereupon terminate, without liability on the part
of the Company with respect thereto (except in each case as provided in
Section 5, 6(a) and 7 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
the 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 with like effect as if it had
originally been a party to this Agreement with respect to such Firm Shares
and Additional Shares.
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 4,
the indemnity agreements contained in Section 6 and the contribution agreements
contained in Section 7, 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, 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, 6, 7 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 when (i)
you and the Company shall have received notification of the effectiveness
of the Registration Statement or (ii) the execution of this Agreement. If
either the initial public offering price or the purchase price
41
per Share has not been agreed upon prior to 5:00 P.M., New York time, on
the fifth full business day after the Registration Statement shall have
become 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, 6 and 7 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, if (A) any domestic or international event or act
or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, the market for the Company's
securities or securities in general; or (B) if trading on the New York or
American Stock Exchanges or NASDAQ National Market 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
the New York or American Stock Exchanges or the NASDAQ National Market by
the New York or American Stock Exchanges, by NASDAQ or by order of the
Commission or any other governmental authority having jurisdiction; or (C)
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 (D)(i) 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 (ii) if there shall have been such change in political,
financial or economic conditions if the effect of any such event in (i) or
(ii) 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, 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
42
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 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 out-of-pocket expenses (including the fees and
expenses of their counsel), incurred by the Underwriters in connection
herewith.
12. Notices. Any notice or notification in any form to be given
-------
hereunder shall be in writing and shall be delivered in person or sent by
telephone or facsimile transmission (but in the case of a notification by
telephone, with subsequent confirmation by letter or facsimile transmission).
Any notice or notification to you shall be addressed to:
Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:
Any notice or notification to the Company shall be addressed to the
Company at:
CAIS Internet Inc.
0000 00 Xxxxxx X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Vice President General Counsel
Any notice or notification shall (subject to confirmation when
required) take effect at the time of receipt.
13. Parties. This Agreement shall insure 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 Section 6 and
7, 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 herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Shares from any of the Underwriters.
43
14. Miscellaneous. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of New York. This Agreement
may be executed in one or more counterparts, and if executed in more than one
counterpart, the executed counterparts shall together constitute a single
instrument. The descriptive headings in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof. Time shall
be of the essence of this Agreement.
If any provision or portion of any provision of the Agreement, or the
application of any such provision or any portion thereof to any party or
circumstances, shall be held invalid or unenforceable, the remaining portion of
such provision and the remaining portion of such provision and the remaining
provisions of this agreement, and the application of such provision or portion
of such provision as is held invalid or unenforceable to any parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and such remaining portion of such provision and
the remaining provisions of this Agreement shall continue to be valid and in
full force and effect.
44
If the foregoing is in accordance with the Underwriters' understanding
of our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
Underwriters in accordance with its terms.
This Agreement may be signed in counterparts which together shall
constitute one and the same instrument.
Very truly yours,
CAIS INTERNET, INC.
By: ___________________________________
Name: Xxxxxxx X. Xxxxx, XX
Title: President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
BEAR, XXXXXXX & CO. INC.
By: _____________________________________________,
On behalf of themselves and the other
Underwriters named in Schedule I hereto
45
SCHEDULE I
Name of Underwriter Number of Shares
------------------- ----------------
Bear, Xxxxxxx & Co. Inc.
Xxxxx Xxxxx Xxxxxx & Company, LLC
First Union Capital Markets Corp.
Friedman, Billings, Xxxxxx & Co., Inc.
Wit Capital Corporation
As e-Manager
Total:
46
