EXHIBIT 1.1
[ ] Shares of Common Stock
ASD Systems, Inc.
UNDERWRITING AGREEMENT
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[ ], 1999
BEAR, XXXXXXX & CO. INC.
PRUDENTIAL SECURITIES INCORPORATED
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
ASD Systems, Inc., a corporation organized and existing under the laws of
Texas (the "Company") proposes, subject to the terms and conditions stated
herein, that the Company issue and sell to the underwriters named in Schedule I
hereto (the "Underwriters"), acting severally and not jointly, an aggregate of [
] shares (the "Firm Shares") of its common stock, par value $0.0001 per share
(the "Common Stock"), and, for the sole purpose of covering over-allotments in
connection with the sale of the Firm Shares, at the option of the Underwriters,
up to an additional [ ] shares (the "Additional Shares") of the Common
Stock. The Firm Shares and any Additional Shares purchased by the Underwriters
are referred to herein as the "Shares." The Shares are more fully described in
the Registration Statement referred to below.
1. Representations and Warranties of the Company. The Company hereby
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represents and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, and may have filed an amendment or
amendments thereto, on Form S-1 (No. 333-85983), for the registration of the
Shares under the Securities Act of 1933, as amended (the "Act"). Such
registration statement, including the prospectus, financial statements and
schedules, exhibits and all other documents filed as a part thereof, as amended
at the time of effectiveness of the registration statement, including any
information deemed to be a part thereof as of the time of effectiveness
pursuant to paragraph (b) of Rule 430A or Rule 434 of
the Rules and Regulations of the Commission under the Act (the "Regulations"),
is herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the Regulations is herein called the "462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The prospectus, in the
form first filed with the Commission pursuant to Rule 424(b) of the Regulations
or filed as part of the Registration Statement at the time of effectiveness if
no Rule 424(b) or Rule 434 filing is required, is herein called the
"Prospectus." The term "preliminary prospectus" as used herein means a
preliminary prospectus as described in Rule 430 of the Regulations. For purposes
of this Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment, supplement or term sheet with
respect to any of the foregoing shall be deemed to include the copy of such
documents filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("XXXXX"). Neither the Commission nor the Blue Sky
or securities authority of any state or other jurisdiction has issued a stop
order suspending the effectiveness of the Registration Statement, preventing or
suspending the use of any preliminary prospectus, the Prospectus, the
Registration Statement or any amendment or supplement or term sheet thereto,
refusing to permit the effectiveness of the Registration Statement or suspending
the registration or qualification of the Shares, nor has any of such authorities
instituted or threatened to institute any proceedings with respect to a stop
order.
(b) At the respective time of the effectiveness of the Registration
Statement or any 462(b) Registration Statement or the effectiveness of any post-
effective amendment to the Registration Statement, when the Prospectus is first
filed with the Commission pursuant to Rule 424(b) or Rule 434 of the
Regulations, when any supplement to or amendment of the Prospectus is filed with
the Commission and at the Closing Date and the Additional Closing Date, if any
(as hereinafter respectively defined), the Registration Statement and the
Prospectus and any amendments and supplements thereto complied or will comply in
all material respects with the applicable provisions of the Act and the
Regulations and do not or will not contain an untrue statement of a material
fact and do not or will not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein (i) in the
case of the Registration Statement, not misleading and (ii) in the case of the
Prospectus, in light of the circumstances under which they were made, not
misleading. When any related preliminary prospectus was first filed with the
Commission (whether filed as part of the registration statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
of the Regulations) and when any amendment or supplement thereto was first filed
with the Commission, such preliminary prospectus and any amendments and
supplements thereto complied in all material respects with the applicable
provisions of the Act and the Regulations and did not contain an untrue
statement of a material fact and did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. In addition, each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering was
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to XXXXX, except to the extent permitted by Regulation S-T.
No representation and warranty is made in this subsection (b), however, with
respect to any information contained in or omitted from the Registration
Statement or the Prospectus or any related preliminary prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
information
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furnished in writing to the Company by or on behalf of any Underwriter through
you as herein stated expressly for use in connection with the preparation
thereof. If Rule 434 is used, the Company will comply with the requirements of
Rule 434 and the Prospectus shall not be "materially different," as such term is
used in Rule 434, from the Prospectus included in the Registration Statement at
the time it became effective.
(c) Ernst & Young LLP, who have certified the financial statements and
supporting schedules included in the Registration Statement, are independent
public accountants as required by the Act and the Regulations.
(d) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as set forth in the
Registration Statement and the Prospectus, (i) there has been no material
adverse effect or any development involving a prospective material adverse
effect on the business, prospects, properties, operations, condition (financial
or other) or results of operations of the Company, including but not limited to
relationships with customers and suppliers of the Company (collectively, a
"Material Adverse Effect"); (ii) there have been no transactions entered into by
the Company, other than those in the ordinary course of business, which are
material with respect to the Company; (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock; and (iv) since the date of the latest balance sheet presented
in the Registration Statement and the Prospectus, the Company has not incurred
or undertaken any liabilities or obligations, direct or contingent, which are
material to the Company, except for liabilities or obligations which are
reflected in the Registration Statement and the Prospectus.
(e) This Agreement and the transactions contemplated herein have been
duly and validly authorized by all necessary corporate action on the part of the
Company, and this Agreement has been duly and validly executed and delivered by
the Company. Assuming due authorization, execution and delivery by the
Representatives, this Agreement constitutes a valid and binding obligation of
the Company, enforceable in accordance with its terms.
(f) The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
conflict with or result in a breach of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time, or both,
would constitute a default) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
pursuant to, any debenture, note, contract, indenture, mortgage, deed of trust,
lease, joint venture or other agreement, instrument, franchise, license or
permit to which the Company is a party or by which any of its properties or
assets may be bound, (ii) violate or conflict with any provision of the Articles
of Incorporation or By-Laws of the Company, or (iii) violate or conflict with
any judgment, writ, decree, order, law, statute, rule or regulation of any court
or any public, governmental or regulatory agency or body having jurisdiction
over the Company or any of its respective properties, assets or operations other
than any violation or conflict that would not have a Material Adverse Effect on
the Company. No consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its respective properties or assets is necessary or required for the
execution, delivery and
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performance of this Agreement or the consummation of the transactions
contemplated hereby, including the issuance, sale and delivery of the Shares to
be issued, sold and delivered by the Company hereunder, except (i) the
registration under the Act of the offer and sale of the Shares, (ii) the
registration of the shares of Common Stock under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and (iii) such consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses and
permits as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters.
(g) All of the outstanding shares of capital stock of the Company are
duly and validly authorized and issued, fully paid and nonassessable, and none
of such shares was issued in violation of or is now subject to any preemptive
rights, co-sale rights, registration rights, rights of first refusal or similar
rights which have not otherwise been waived in writing. All of the outstanding
shares of capital stock and all other outstanding securities of the Company have
been issued in compliance in all material respects with applicable Federal and
state laws. The Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued, delivered and sold in
accordance with this Agreement, will be duly and validly issued and outstanding,
fully paid and nonassessable, free and clear of all liens, encumbrances or
claims, will not have been issued in violation of or be subject to any
preemptive rights, co-sale rights, registration rights, rights of first refusal
or similar rights and no holder of Shares will be subject to personal liability
by reason of being such a holder. The authorized, issued and outstanding capital
stock of the Company as of the date set forth in the Prospectus under the
caption "Capitalization" is as set forth in the Prospectus under such caption,
and, after giving effect to the offering will be as set forth under such caption
and as referred to on an "as adjusted basis." Since that date, the Company has
not issued any securities other than (i) Common Stock of the Company pursuant to
the exercise of previously outstanding and privately granted options pursuant to
the ASD Systems, Inc. 1999 Long-Term Incentive Plan (the "Plan"), (ii) options
granted in the ordinary course of business pursuant to the Plan, (iii) Series A
Convertible Preferred Stock issued in connection with the Company's private
placement closed August 23, 1999 (the "Preferred Financing"); (iv) Series B
Redeemable Preferred Stock issued in connection with the Preferred Financing,
and (v) Common Stock Purchase Warrants issued in connection with the Preferred
Financing. The authorized capital stock of the Company, including the Common
Stock, the Firm Shares and the Additional Shares, conforms in all material
respects to the descriptions thereof contained in the Registration Statement and
the Prospectus and such descriptions conform in all material respects to the
rights set forth in the instruments defining the same. Except as disclosed in
the Registration Statement and the Prospectus, there are no outstanding shares
of capital stock, options, warrants or other securities or other rights calling
for the issuance of, and no commitments, obligations, plans or arrangements to
issue, any securities of the Company. The outstanding stock options relating to
the Common Stock have been duly authorized and validly issued and each of the
Plan and stock options granted by the Company conform in all material respects
to the descriptions thereof contained in the Registration Statement and the
Prospectus.
(h) The Company has no subsidiaries. The Company has been duly
organized and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation. The Company is duly qualified and in
good standing as a foreign corporation in
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each jurisdiction in which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business makes such
qualification necessary, except for those failures to be so qualified or in good
standing which would not have a Material Adverse Effect on the Company, either
individually or in the aggregate. Except as described in the Prospectus, the
Company has no agreements, commitments, or understandings with respect to
acquiring or selling the business, stock or material assets, except those assets
acquired in the ordinary course of business, of the Company or any other person
or entity. Except for shares held in the Company's 401(k) plan, the Company does
not own any capital stock or any other interest in any other corporation or
entity.
(i) The Company has all requisite power and authority, and all
necessary consents, approvals, authorizations, orders, registrations,
qualifications, licenses and permits (collectively, "Governmental Licenses") of
and from all appropriate federal, state, local or foreign public, regulatory or
governmental agencies and bodies, to own, lease and operate its properties and
conduct its business as now being conducted, or as proposed to be conducted, and
as described in the Registration Statement and the Prospectus, except where the
failure to possess such Governmental Licenses would not have a Material Adverse
Effect on the Company. Each material Governmental License is valid and in full
force and effect, the Company is in compliance with the terms and conditions of
all such Governmental Licenses, and no such Governmental License contains a
materially burdensome restriction not disclosed in the Prospectus, and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses.
(j) The Company is not in violation of any provision of its Articles of
Incorporation or Bylaws, as the case may be, and the Company is not in breach of
any of the terms or provisions of or in default (or would be in default with
notice or lapse of time, or both) under any debenture, note, contract,
indenture, mortgage, deed of trust, lease, joint venture or other agreement,
instrument, franchise, license or permit to which the Company is a party or by
which any of its properties, assets or operations may be bound, which such
breach or default would have, individually or in the aggregate, a Material
Adverse Effect on the Company, or in violation of any judgment, writ, decree,
order, law, statute, rule or regulation of any court or any public, governmental
or regulatory agency or body having jurisdiction over the Company or any of its
respective properties, assets or operations, the violation of which would have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(k) Except as described in the Prospectus, there is no litigation,
action, suit, proceeding, inquiry or governmental proceeding or investigation to
which the Company is a party or to which any property of the Company is subject
or which is pending or threatened, or, to the knowledge of the Company,
contemplated against the Company that would be required to be disclosed in the
Prospectus.
(l) The Company has not taken nor will it take, directly or indirectly,
any action designed to cause or result in, or which constitutes or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock in violation of Regulation M under the
Exchange Act.
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(m) The financial statements, including the notes thereto, and
supporting schedules, if any, included in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of the dates
indicated and the results of their operations, shareholders' equity and cash
flows for the periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis through the periods involved, except as otherwise stated
therein; the supporting schedules included in the Registration Statement, if
any, present fairly the information required to be stated therein; and the
selected financial data, the summary financial information, and the
capitalization information included in the Registration Statement and the
Prospectus (including the pro forma information contained therein) present
fairly in accordance with GAAP and the Regulations the information shown therein
and have been compiled on a basis consistent with that of the financial
statements included in the Registration Statement and the Prospectus. No
financial statements are required to be included in the Registration Statement
that have not been so included.
(n) All material federal, state and local tax returns required to be
filed by the Company have been filed and all such returns are true, complete,
and correct in all material respects. All material taxes that are due or claimed
to be due from the Company have been paid other than those (i) currently payable
without penalty or interest or (ii) being contested in good faith and by
appropriate proceedings and, to the extent required by GAAP, for which adequate
reserves have been established in accordance with GAAP. Except as disclosed in
the Registration Statement and the Prospectus, there is no material tax
deficiency that has been, or may reasonably be expected to be, asserted against
the Company.
(o) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
adequate for its business, including, without limitation, insurance coverage for
real and personal property owned or leased by them against theft, damage,
destruction, acts of vandalism, and all other material risks customarily insured
against, all of which insurance is in full force and effect. The Company has no
reason to believe that it will not be able to renew existing insurance coverage
as and when such coverage expires or to obtain similar coverage from insurers of
recognized financial responsibility as may be necessary to continue its
business. The officers and directors of the Company are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary for officers and directors liability
insurance of a public company and as would cover claims which could be made in
connection with the issuance of the Shares; and the Company has no reason to
believe that it will not be able to renew its existing directors and officers
liability insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to cover its officers
and directors.
(p) The Company has good and marketable title to all personal property
and assets owned by it, free and clear of all mortgages, pledges, security
interests, claims, restrictions, liens, encumbrances and defects except as do
not, individually or in the aggregate, interfere with the use made or proposed
to be made of such property by the Company. Any real property and buildings held
under lease by the Company are held under valid, existing and enforceable leases
in full force and effect with such exceptions as are not material and do not
inter-
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fere with the use made or proposed to be made of such property and buildings by
the Company, and the Company has no notice of any claims of any sort that has
been asserted by anyone adverse to the rights of the Company under any such
leases.
(q) The Company owns or possesses legal and valid rights to use all
patents, inventions, copyrights, software, databases, know-how, Internet domain
names, trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures, trademarks, service marks,
trade names, rights of publicity pertaining to the name, likeness, voice,
signatures, and/or biographical information of real persons and other
intellectual property necessary to carry on its business as currently conducted,
and as proposed to be conducted and described in the Prospectus (collectively,
"Intellectual Property"), free and clear of all liens, claims and encumbrances.
The Company has not received any notice or is otherwise aware of (i) any claim,
action or demand of any person in the United States or elsewhere or any
proceeding in the United States or elsewhere, pending or threatened, that (A)
challenges the ownership of the Company in or its right to use any Intellectual
Property or (B) alleges that any product or service of the Company infringes or
misappropriates the Intellectual Property rights of others or constitutes unfair
competition or (ii) any facts or circumstances that would render any
Intellectual Property owned or used by the Company or any Intellectual Property
license agreement to which the Company is a party, invalid or inadequate to
protect the interest of the Company or any of its subsidiaries therein or
thereunder. The Company has taken reasonable steps to protect, maintain and
safeguard its rights in all Intellectual Property owned or used by the Company
and to maintain the secrecy of all such Intellectual Property as to which
improper or unauthorized disclosure would impair its value or validity,
including the execution of appropriate nondisclosure and confidentiality
agreements.
(r) No relationship, direct or indirect, exists between or among the
Company or any of its affiliates, on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company, on the other hand, that is
required by the Act to be described in the Registration Statement and the
Prospectus that is not so described. Except as disclosed in the Registration
Statement and the Prospectus, there are no outstanding loans, advances or
guarantees of indebtedness by the Company to or for the benefit of any of the
executive officers or directors of the Company or any of the members of the
families of any of them.
(s) The Shares have been duly authorized for listing on the Nasdaq
National Market, subject to official notice of issuance.
(t) Except as described in the Prospectus, no holder of securities of
the Company has any rights (other than rights which have been waived in writing
or satisfied) 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.
(u) The Company is not, and upon consummation of the transactions
contemplated hereby and the application of the net proceeds of the offering of
the Shares as described in the Prospectus will not be, subject to registration
as an "investment company" or an entity "controlled" by an "investment company"
under the Investment Company Act of 1940, as amended.
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(v) No labor dispute with the employees of the Company exists or, to
the knowledge of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers, customers or contractors that are likely, individually
or in the aggregate, to have a Material Adverse Effect on the Company.
(w) The Company is in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), except where such
noncompliance would not in the aggregate have a material adverse effect on the
Company.
(x) There are no contracts or documents which are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits thereto which have not been so described and filed as required. The
descriptions of contracts in the Registration Statement and the Prospectus are
accurate and complete in all material respects; all contracts described in the
Registration Statement and the Prospectus are valid, binding and enforceable and
are in full force and effect, and neither the Company nor, to the Company's
knowledge, any other party is in breach of or default under any provisions of
such contracts.
(y) Each employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Securities Act of 1974, as amended ("ERISA"),
that is maintained, administered or contributed to by the Company for employees
or former employees of the Company has been maintained in compliance with its
respective terms and the requirements of any applicable statutes, order, rules
and regulations, including but not limited to ERISA and the Internal Revenue
Code of 1986, as amended (the "Code"). No prohibited transaction, within the
meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with
respect to any such plan, excluding transactions effected pursuant to a
statutory or administrative exemption. For each such plan that is subject to the
funding rules of Section 412 of the Code or Section 302 of ERISA, no
"accumulated funding deficiency", as defined in Section 412 of the Code, has
been incurred, whether or not waived, and the fair market value of the assets of
each such plan (excluding for these purposes accrued but unpaid contributions)
exceeded the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions. The description of the Company's Plan
and the options or other rights granted and exercised thereunder set forth in
the Registration Statement and the Prospectus accurately and fairly describe, in
all material respects, the information required to be shown with respect to such
Plan, options and rights.
(z) The Company maintains a system of internal accounting controls that
are sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the
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existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(aa) The statistical and market-related data included in the
Registration Statement and the Prospectus are derived from sources which the
Company reasonably and in good faith believes to be accurate, reasonable and
reliable, and such data agrees with the sources from which they were derived.
(ab) Since incorporation, the Company has not at any time in any
jurisdiction (i) made any unlawful contribution to any candidate for office, or
failed to disclose fully any contribution in violation of law, or (ii) made any
payment to any governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States.
Any certificate signed by any director or officer of the Company delivered
to the Representatives or to Jenkens & Xxxxxxxxx, a Professional Corporation
(the "Underwriters' Counsel") shall be deemed a representation and warranty by
the Company to each Underwriter as the matters covered thereby.
2. Purchase, Sale and Delivery of the Shares.
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(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters and the Underwriters,
severally and not jointly, agree to purchase from the Company, at a purchase
price per share of $[ ], the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any Firm Shares
or Additional Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of certificates
for, the Firm Shares shall be made at the offices of Bear, Xxxxxxx & Co. Inc.,
at the address listed above, or at such other place as shall be agreed upon by
you and the Company, at 8:00 A.M. on the third or fourth Business Day (as
permitted under Rule 15c6-1 under the Exchange Act) (unless postponed in
accordance with the provisions of Section 9 hereof) following the date of the
effectiveness of the Registration Statement (or, if the Company has elected to
rely upon Rule 430A of the Regulations, the third or fourth Business Day (as
permitted under Rule 15c6-1 under the Exchange Act) after the determination of
the initial public offering price of the Shares), or such other time not later
than ten Business Days (as hereinafter defined) after such date as shall be
agreed upon by you and the Company (such time and date of payment and delivery
being herein called the "Closing Date"). It is understood that each Underwriter
has authorized you for its account, to accept delivery of, receipt for, and make
payment of th e purchase price for, the Firm Shares and the Additional Shares,
if any, which it has agreed to purchase. As used herein, the term "Business Day"
means any day other than a day on which banks are permitted or required to be
closed in New York. Payment for the Firm Shares shall be made to the Company by
wire transfer in same day funds, against delivery to you at the offices of Bear,
Xxxxxxx & Co. Inc. or such other location as may be mutually acceptable, for the
respective accounts of the
9
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, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants to the Underwriters the
option to purchase, severally and not jointly, up to [ ] Additional Shares at
the same purchase price per share to be paid by the Underwriters to the Company
for the Firm Shares as set forth in this Section, for the purpose of covering
over-allotments, if any, in the sale of Firm Shares by the Underwriters. This
option may be exercised at any time, or from time to time, in whole or in part,
on or before the thirtieth day following the date of the Prospectus, by written
notice by you to the Company. Such notice shall set forth the aggregate number
of Additional Shares as to which the option is being exercised and the date and
time, as reasonably determined by you, when the Additional Shares are to be
delivered (such date and time being herein sometimes referred to as the
"Additional Closing Date"); provided, however, that the Additional Closing Date
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shall not be earlier than the Closing Date or earlier than the second full
Business Day after the date on which the option shall have been exercised nor
later than the eighth full Business Day after the date on which the option shall
have been exercised (unless such time and date are postponed in accordance with
the provisions of Section 9 hereof). Certificates for the Additional Shares
shall be registered in such name or names and in such authorized denominations
as you may request in writing at least two full Business Days prior to the
Additional Closing Date. The Company will permit you to examine and package such
certificates for delivery at least one full Business Day prior to the Additional
Closing Date.
The number of Additional Shares to be sold to each Underwriter shall be the
number which bears the same ratio to the aggregate number of Additional Shares
being purchased as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number increased as set forth in
Section 9 hereof) bears to the total number of Firm Shares subject, however, to
such adjustments to eliminate any fractional shares as you in your sole
discretion shall make.
Payment of the purchase price for the Additional Shares shall be made to
the Company by wire transfer in same day funds to such account as specified by
the Company to the Representatives in writing at least two full Business Days
prior to the Additional Closing Date against delivery to you at the offices of
Bear, Xxxxxxx & Co. Inc., or such other location as may be mutually acceptable,
of the certificates for the Additional Shares to you for the respective accounts
of the Underwriters.
3. Offering. Upon your delivery of the Firm Shares, the Underwriters
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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
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Underwriters that:
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(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 and in compliance with Rule 424(b) or Rule
434 within the prescribed time period and will provide evidence satisfactory to
you of such timely filing. If, with your consent, the Company elects to rely on
Rule 434, the Company will prepare and file a term sheet that complies with the
requirements of Rule 434.
The Company will notify you immediately (and, if requested by you, will
confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iii) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any post-
effective amendment thereto or any order preventing or suspending the use of any
preliminary prospectus, or of the initiation, or the threatening, of any
proceedings with respect to any of the foregoing, (v) of the receipt of any
comments from the Commission, and (vi) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for that purpose. If the Commission shall propose or enter a stop order at any
time, the Company will make every 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, make any filing under Rule 462(b) of the Regulations, or file any
amendment of or supplement to the Prospectus (including the prospectus required
to be filed pursuant to Rule 424(b)or Rule 434 of the Regulations) before or
after the effective date of the Registration Statement to which you shall
reasonably object in writing after being timely furnished in advance a copy
thereof.
(b) The Company will comply with the Act and the Regulations so as to
permit the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If at any time when a prospectus relating to the
Shares is required to be delivered under the Act any event shall have occurred
or a condition shall exist as a result of which the Prospectus as then amended
or supplemented would, in the judgment of the Underwriters' Counsel 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 and the Company will furnish to the Underwriters such number of copies
of such amendment or supplement as the Underwriters may reasonably request.
11
(c) The Company will promptly deliver to you four signed copies of the
Registration Statement, including exhibits and all amendments thereto, and
signed copies of all consents, and the Company will promptly deliver to each of
the Underwriters, without charge, during the period when the Prospectus is
required to be delivered under the Act, such number of copies of any preliminary
prospectus, the Prospectus, the Registration Statement, and all amendments of
and supplements to such documents, if any, as you may reasonably request, and
the Company hereby consents to the use of such copies for purposes permitted by
the Act. The copies of the Registration Statement and Prospectus and each
amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
XXXXX, except to the extent permitted by Regulation S-T.
(d) The Company will endeavor in good faith, in cooperation with you,
at or prior to the time of effectiveness of the Registration Statement, to
qualify the Shares for offering and sale under the securities laws relating to
the offering or sale of the Shares of such jurisdictions, domestic or foreign,
as you may designate and to maintain such qualification in effect for so long as
required for the distribution thereof; except that in no event shall the Company
be obligated in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction where it is
not so qualified or subject.
(e) The Company will make generally available (within the meaning of
Section 11(a) of the Act) to its security holders and to you as soon as
practicable, but not later than 45 days after the end of its fiscal quarter in
which the first anniversary date of the effective date of the Registration
Statement occurs, an earnings statement (in form complying with the provisions
of Rule 158 of the Regulations) covering a period of at least twelve consecutive
months beginning after the effective date of the Registration Statement.
(f) During the period of 180 days from the date of the Prospectus, the
Company will not directly or indirectly, without the prior written consent of
Bear, Xxxxxxx & Co. Inc. (which consent may be withheld at the sole discretion
of Bear, Xxxxxxx & Co. Inc.), directly or indirectly (i) issue, offer to sell,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for such Common Stock (or, in the case of the Company, any other securities of
the Company), whether now owned or hereafter acquired by such person or with
respect to which such person has or hereafter acquires the power of disposition;
or (ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic consequence
of ownership of the Common Stock or convertible into or exchangeable for Common
Stock whether any such swap transaction is to be settled by delivery of Common
Stock or other securities, in cash or otherwise; provided, however, that nothing
in this Section shall preclude the Company from (A) granting stock options under
the Plan, (B) issuing shares of Common Stock upon the exercise of stock options
granted under the Plan, (C) converting the Company's Series A Convertible
Preferred Stock into shares of Common Stock upon the terms therein specified or
(D) issuing shares of Common Stock upon exercise of Common Stock Purchase
Warrants outstanding on the date hereof; provided, that any such shares which
are issued or options which vest during the period
12
of 180 days from the date of the Prospectus shall be subject to the restrictions
set forth above in this Section and, in connection therewith, the Company shall
cause any holder of such shares or vested options to execute an appropriate
Lock-Up Agreement containing such provisions. The Company will obtain the
undertaking of each of its officers, directors, optionees and shareholders not
to engage in any of the aforementioned transactions in a form acceptable to
Bear, Xxxxxxx & Co. Inc.
(g) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its shareholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or any
national securities exchange. The Company, during the period when the
Prospectuses are required to be delivered under the Act, will file all documents
required to be filed with the Commission pursuant to the Exchange Act within the
time periods required by the Exchange Act and the rules and regulations of the
Commission thereunder.
(h) The Company will apply the proceeds from the sale of the Shares as
set forth under "Use of Proceeds" in the Prospectus and file with the Commission
such reports and report such use of proceeds as may be required pursuant to Rule
463 of the Regulations.
(i) The Company will use its best efforts to cause the Shares to be
listed on the Nasdaq National Market.
(j) The Company will use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to or after the Closing Date or any Additional Closing Date, as
the case may be, and to satisfy all conditions precedent to the delivery of the
Shares.
5. Payment of Expenses. Whether or not the transactions contemplated in
-------------------
this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement, as originally filed and all amendments thereof (including all
financial statements and exhibits thereto), any preliminary prospectus, the
Prospectus and any amendments or supplements thereto (including, without
limitation, fees and expenses of the Company's accountants and counsel and
advisors), the underwriting documents (including this Agreement and the
Agreement Among Underwriters) all other documents related to the public offering
of the Shares (including those supplied to the Underwriters in quantities as
hereinabove stated), (ii) the issuance, transfer and delivery of the Shares to
the Underwriters, including any transfer or other taxes or duties payable
thereon, (iii) the qualification of the Shares under state or foreign securities
or Blue Sky laws, including the costs of printing and mailing a preliminary and
final "Blue Sky Survey" and any supplements thereto and the filing fees and the
fees the Underwriters' Counsel and such counsel's disbursements in relation
thereto, (iv) listing the Shares on the Nasdaq National Market, (v) filing fees
of the Commission and the National Association of Securities Dealers, Inc. and
the fees and disbursements of the Underwriters' Counsel in connection with the
review by the NASD of the terms of the sale of the Shares, (vi) the
transportation and other expenses incurred by the Company in connection with
presentations
13
to prospective purchasers of the Shares, (vii) the cost of preparing, printing,
and delivering certificates representing the Shares and (viii) the fees and
expenses of any transfer agent or registrar.
6. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to (i) the accuracy of the representations
and warranties of the Company herein contained, as of the date hereof and as of
the Closing Date (for purposes of this Section, "Closing Date" shall refer to
the Closing Date for the Firm Shares and any Additional Closing Date, if
different, for the Additional Shares), (ii) the absence from any certificates,
opinions, written statements or letters furnished to you or to Underwriters'
Counsel pursuant to this Section of any misstatement or omission, (iii) the
performance by the Company of its covenants and other obligations hereunder, and
(iv) the following additional conditions:
(a) The Registration Statement, including any Rule 462(b) Registration
Statement, shall have become effective and all necessary approvals of the Nasdaq
National Market shall have been received not later than 5:30 P.M., New York
time, on the date of this Agreement, or at such later time and date as shall
have been consented to in writing by you; if the Company shall have elected to
rely upon Rule 430A or Rule 434 of the Regulations, the Prospectus shall have
been filed with the Commission in a timely fashion in accordance with Section
4(a) hereof; and at or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof shall have been issued and no proceedings therefor shall have been
initiated or threatened by the Commission or any state securities authority and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of the Underwriters.
(b) At the Closing Date you shall have received the opinion of Xxxxx &
Xxxxxx LLP, counsel for the Company, dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel,
and in the form of Exhibit A attached hereto:
(c) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be satisfactory in
form and substance to you and to Underwriters' Counsel, and the Underwriters
shall have received from said Underwriters' Counsel a favorable opinion, dated
as of the Closing Date in customary form and covering such matters as you may
reasonably request, and the Company shall have furnished to Underwriters'
Counsel such documents as they request for the purpose of enabling them to pass
upon such matters. In giving such opinion Underwriters' Counsel may rely, as to
all matters governed by the laws of jurisdictions other than the law of the
State of Texas, the federal law of the United States and the General Corporation
Law of the State of Delaware, upon the opinions of counsel satisfactory to the
Representatives. Underwriters' Counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its subsidiaries and
certificates of public officials.
14
(d) At the Closing Date you shall have received a certificate of each
of the Chairman of the Board of Directors, the Chief Executive Officer and Chief
Financial Officer of the Company, dated the Closing Date to the effect that (i)
the conditions set forth in subsection (a) of this Section have been satisfied,
(ii) as of the date hereof and as of the Closing Date, the representations and
warranties of the Company set forth in Section 1 hereof are accurate, (iii) as
of the Closing Date, 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 has not sustained any material loss or interference with
its 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
effect on the Company, except in each case as described in or contemplated by
the Prospectus.
(e) At the time this Agreement is executed and at the Closing Date, you
shall have received a letter from Ernst & Young LLP, independent public
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Underwriters and in form
and substance satisfactory to you, stating that, among other things: (i) they
are independent certified public accountants with respect to the Company within
the meaning of the Act and the Regulations and stating that the information
provided in response to Item 10 of the Registration Statement is correct insofar
as it relates to them; (ii) in their opinion, the financial statements and
schedules of the Company included in the Registration Statement and the
Prospectus and covered by their opinion therein comply as to form in all
material respects with the applicable accounting requirements of the Act and the
applicable published rules and regulations of the Commission thereunder; (iii)
on the basis of procedures consisting of a reading of the latest available
unaudited interim financial statements of the Company, a reading of the minutes
of meetings and consents of the shareholders and board of directors of the
Company and the committees of such board subsequent to December 31, 1998,
inquiries of officers and other employees of the Company who have responsibility
for financial and accounting matters of the Company with respect to transactions
and events subsequent to December 31, 1998, a review of interim financial
information in accordance with the standards established by the American
Institute of Certified Public Accountants in Statement of Auditing Standards No.
71, Interim Financial Information with respect to the [six-month period ended
June 30, 1999] and other specified procedures and inquiries to a date not more
than five days prior to the date of such letter, nothing has come to their
attention that would cause them to believe that: (A) the unaudited financial
statements and schedules of the Company presented in the Registration Statement
and the Prospectus, including the quarterly information set forth under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations," do not comply as to form in all material respects with the
applicable accounting requirements of the Act and, if applicable, the Exchange
Act and the applicable published rules and regulations of the Commission
thereunder or that such unaudited consolidated financial statements are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements included in the Registration Statement and the Prospectus; (B) with
respect to the period subsequent to [June 30, 1999], there were, as of the date
of the most recently available monthly consolidated financial statements of the
Company, if any, and as of a specified date not more than five days prior to the
date of such letter, any changes in the capital stock or long-term indebtedness
of the
15
Company or any decrease in the net current assets or shareholders' equity of the
Company, in each case as compared with the amounts shown in the most recent
balance sheet presented in the Registration Statement and the Prospectus, except
for changes or decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur or which are set forth in such letter; (C)
that during the period from [July 1, 1999] to the date of the most recent
available monthly financial statements of the Company, if any, and to a
specified date not more than five days prior to the date of such letter, there
was any decrease, as compared with the corresponding period in the prior fiscal
year, in total revenues, or total or per share net income, except for decreases
which the Registration Statement and the Prospectus disclose have occurred or
may occur or which are set forth in such letter; (D) the unaudited pro forma
income statements and balance sheets presented in the Registration Statement and
the Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and, if applicable, the Exchange
Act and the applicable published rules and regulations of the Commission
thereunder, that such unaudited pro forma income statements and balance sheets
are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the audited
financial statements included in the Registration Statement and the Prospectus
or that the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements; or (E) any other
unaudited pro forma income statement data or balance sheet items included in the
Registration Statement or Prospectus do not agree with the corresponding amounts
in the pro forma income statements or balance sheets included in the
Registration Statement and Prospectus; and (iv) they have compared specific
dollar amounts, numbers of shares, percentages of revenues and earnings, and
other financial information pertaining to the Company set forth in the
Registration Statement and the Prospectus, which have been specified by you
prior to the date of this Agreement, to the extent that such amounts, numbers,
percentages, and information may be derived from the general accounting and
financial records of the Company or from schedules furnished by the Company, and
excluding any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries, and
other appropriate procedures specified by you set forth in such letter, and
found them to be in agreement.
(f) Prior to the Closing Date, the Company shall have furnished to you
such further information, certificates and documents as you or Underwriters'
Counsel may reasonably request.
(g) At the Closing Date, the Shares shall have been duly authorized for
listing on the Nasdaq National Market, subject to official notice of issuance.
(h) You shall have received from each person who is a director,
officer, optionee or shareholder of the Company an agreement satisfactory to you
regarding the matters set forth in Section 4(f).
If any of the conditions specified in this Section shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to you or to Underwriters'
Counsel pursuant to this Section shall not be in all material respects
satisfactory in form and substance to you and to Underwriters' Counsel, all
obligations
16
of the Underwriters hereunder may be cancelled by you at, or at any time prior
to, the Closing Date, and the obligations of the Underwriters to purchase the
Additional Shares may be canceled by you at, or at any time prior to, the
Additional Closing Date. Notice of such cancellation shall be given to the
Company in writing, or by telephone or facsimile, confirmed in writing.
7. Indemnification.
---------------
(a) The Company hereby agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim or inquiry whatsoever, and any
and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act, the common law, state law or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of, relate to or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus or the Prospectus or
in any supplement thereto or amendment thereof or the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the Company will not be liable in any
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such case to the extent but only to the extent that any such loss, liability,
claim, damage or expense arises out of, relates to or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made in any preliminary prospectus or the Prospectus or in any supplement
thereto or amendment thereof in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter
expressly for use therein. 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, the common law, state law or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of, relate to or are based upon (i) any
untrue statem ent or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not
17
misleading; or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus or in
any supplement thereto or amendment thereof or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; in each case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of, relates to or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter
expressly for use therein; provided, however, that in no case shall any
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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 second, fourth, eighth and
fifteenth paragraphs under the caption "Underwriting" in the Prospectus
constitute the only information furnished in writing by or on behalf of any
Underwriter expressly for use in the Registration Statement or in any amendment
thereof, any related preliminary prospectus or the Prospectus or in any
amendment thereof or supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement of such action (but the failure so
to notify an indemnifying party shall not relieve it from any liability which it
may have under this Section). 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 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. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to local counsel, as
necessary) for all indemnified parties in connection with any one action or
separate but similar or related actions arising out of the same set of
allegations or circumstances. The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty Business Days after the
indemnifying
18
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request.
8. Contribution. In order to provide for contribution in circumstances in
------------
which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, the Company, on the one hand, and the
Underwriters, on the other, shall contribute to the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
losses, claims, damages, liabilities and expenses suffered by the Company, any
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement and
directors of the Company) as incurred to which the Company and one or more of
the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Underwriters, on the other, from the offering of the Shares or, if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company, on the one hand, and the Underwriters, on the
other, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as (x) the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
and (y) the underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company, on the one hand, and of the
Underwriters, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 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, (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
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
19
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, 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. 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 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its consent; provided, however, that such consent was not unreasonably
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withheld.
9. Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if the
Firm Shares or Additional Shares with respect to which such default relates do
not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, as the case may be, the Firm Shares or Additional Shares
to which the default relates shall be purchased by the non-defaulting
Underwriters in proportion to the respective proportions which the numbers of
Firm Shares set forth opposite their respective names in Schedule I hereto bear
to the aggregate number of Firm Shares set forth opposite the names of the non-
defaulting Underwriters.
(b) In the event that such default relates to more than 10% of the
total number of Firm Shares or Additional Shares, as the case may be, you may in
your discretion arrange for yourself or for another party or parties (including
any non-defaulting Underwriter or Underwriters who so agree) to purchase such
Firm Shares or Additional Shares, as the case may be, to which such default
relates on the terms contained herein. In the event that within five 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 Additional Shares shall thereupon
terminate, without liability on the part of the Company (except in each case as
provided in Section 5, 7(a) and 8 hereof) or the Underwriters, but nothing in
this Agreement shall relieve a defaulting Underwriter or Underwriters of its or
their liability, if any, to the other Underwriters and the Company for damages
occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to which
such default relates are to be purchased by the non-defaulting Underwriters, or
are to be purchased by another party or parties as aforesaid, you or the Company
shall have the right to postpone the Closing Date or Additional Closing Date, as
the case may be, for a period not exceeding five
20
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, as the case
may be.
10. Survival of Representations and Agreements. All representations and
------------------------------------------
warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including the agreements contained in Section 5
hereof, the indemnity agreements contained in Section 7 hereof and the
contribution agreements contained in Section 8 hereof, and in certificates of
directors or officers of the Company provided pursuant hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter or any controlling person thereof or by or on
behalf of the Company or any of its officers and directors or any controlling
person thereof and shall survive delivery of and payment for the Shares to and
by the Underwriters. The representations contained in Section 1 and the
agreements contained in Sections 5, 7, 8, 10 and 11(d) hereof shall survive the
termination of this Agreement, including termination pursuant to Section 9 or 11
hereof.
11. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective upon the later of (i) such
time as you and the Company shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of this
Agreement. If either the initial public offering price or purchase price 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 parties 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 and of Sections 1, 5, 7, 8 and 10 hereof shall at all times be in full
force and effect.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the obligations of the Underwriters to purchase the
Additional Shares at any time prior to the Additional Closing Date, as the case
may be (i) if any domestic or international event or act or occurrence has
materially disrupted, or in your opinion will in the immediate future materially
disrupt, the market for the Company's securities or securities in general; (ii)
if trading on the New York or American Stock Exchanges or the Nasdaq National
Market (collectively the "Exchanges") shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required, on any of the Exchanges by the
authorities of such Exchanges or by order of the Commission or any other
governmental authority having jurisdiction; or (iii) if a banking moratorium has
been declared by a state or federal authority or if any new restriction
materially adversely affecting the distribution of the Firm Shares or the
Additional Shares, as the case may be, shall have become effective; or (iv)(A)
if the United States becomes engaged in hostilities or
21
there is an escalation of hostilities involving the United States or there is a
declaration of a national emergency or war by the United States or (B) if there
shall have been such change in political, financial or economic conditions, if
the effect of any such event in (A) or (B) as in your judgment makes it
impracticable or inadvisable to proceed with the offering, sale and delivery of
the Firm Shares or the Additional Shares, as the case may be, on the terms
contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section shall be by
telephone or facsimile, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, subject to demand by you, reimburse the Underwriters for all
reasonable out-of-pocket expenses (including the fees and expenses of their
counsel), incurred by the Underwriters in connection herewith.
12. Notices. All communications hereunder, except as may be otherwise
-------
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, sent by facsimile, telex or telegraph
and confirmed in writing by letter, to such Underwriter c/o either Bear, Xxxxxxx
& Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, c/o Xxx Xxxxxxx (with a
copy to L. Xxxxxx Xxxxxx, Esq., Jenkens & Xxxxxxxxx, a Professional Corporation,
0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, fax no. (000) 000-0000),
copies to Prudential Securities Incorporated, Xxxxxxxx, Xxxxxxxx & Xxxxxx, c/o
Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; if sent to
the Company, shall be mailed, delivered, or sent by facsimile, and confirmed in
a letter to the Company, ASD Systems, 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx 00000, c/o Xxxx Xxxxxxx, fax no. (000) 000-0000, with a copy to Xxxx X.
Xxxxxxx, Xxxxx & Xxxxxx, LLP, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000.
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Section 7 and
8, and their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision contained herein.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of any Shares from any of the Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
22
15. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
23
If the foregoing correctly sets forth the understanding between you and the
Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
ASD SYSTEMS, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
PRUDENTIAL SECURITIES INCORPORATED
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Each on behalf of itself and the other
Underwriters named in Schedule I hereto.
24
SCHEDULE I
Name of Underwriter Firm Shares to be Purchased
------------------- ---------------------------
Bear, Xxxxxxx & Co. Inc. .......................
Prudential Securities Incorporated .............
Friedman, Billings, Xxxxxx & Co., Inc. .........
...................... -----------------
Total........................................... =================
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