Draft of June 30, 1999
NATIONAL INFORMATION CONSORTIUM, INC.
13,000,000 SHARES
COMMON STOCK
UNDERWRITING AGREEMENT
July __, 1999
Xxxxxxxxx & Xxxxx LLC
Xxxxxx Xxxxxx Partners, LLC
FAC/Equities
Xxxxx Brown Xxxxxx & Company
As Representatives of the several Underwriters
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
INTRODUCTORY. National Information Consortium, Inc., a Colorado
corporation (the "Company"), proposes to issue and sell an aggregate of Ten
Million (10,000,000) shares of its Common Stock, no par value (the "Common
Shares"); and National Information Consortium Voting Trust, dated June 30, 1999
(the "Principal Shareholder") and H & F Investors III (the "Secondary
Shareholder" and together with the Principal Shareholder, (the "Selling
Shareholders") severally propose to sell to the Underwriters (as hereinafter
defined) an aggregate of Three Million (3,000,000) Common Shares. The Ten
Million (10,000,000) Common Shares to be sold by the Company and the Three
Million (3,000,000) shares of Common Shares to be sold by the Selling
Shareholders are collectively called the "Firm Shares." In addition, the
Selling Shareholders have severally granted to the Underwriters an option to
purchase up to an additional One Million Nine Hundred Fifty Thousand (1,950,000)
Common Shares (the "Option Shares"), as provided in Section 3, each Selling
Shareholder selling up to the amount set forth opposite such Selling
Shareholder's name in SCHEDULE B. The Firm Shares and, if and to the extent
such option is exercised, the Option Shares are collectively called the
"Shares." The Common Stock is more fully described in the Registration
Statement and the Prospectus hereinafter mentioned.
The Company and each of the Selling Shareholders hereby confirms the
agreements made with respect to the purchase of the Shares by the several
underwriters, for whom you are acting, named in SCHEDULE B hereto (collectively,
the "Underwriters," which term shall also include any underwriter purchasing
Shares pursuant to Section 3(b) hereof). You represent and warrant that you
have been authorized by each of the other Underwriters to enter into this
Agreement on its behalf and to act for it in the manner herein provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1 (No.
333-77939), including the related preliminary prospectus, for the registration
under the Securities Act of 1933, as amended (the "Securities Act") of the
Shares. Copies of such registration statement and of each amendment thereto, if
any, including the related preliminary prospectus (meeting the requirements of
Rule 430A of the rules and regulations of the Commission) heretofore filed by
the Company with the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Shares (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (the "Effective Date"), shall
also mean (from and after the effectiveness of such amendment) such registration
statement as so amended (including any Rule 462(b) registration statement). The
term Prospectus as used in this Agreement shall mean the prospectus, relating to
the Shares first filed with the Commission pursuant to Rule 424(b) and Rule 430A
(or if no such filing is required, as included in the Registration Statement),
in the event of any supplement or amendment to such prospectus after the
Effective Date, shall also mean (from and after the filing with the Commission
of such supplement or the effectiveness of such amendment) such prospectus as so
supplemented or amended and, if applicable, shall also mean an electronic
Prospectus as defined in Section 9(k) hereof. The term Preliminary Prospectus
as used in this Agreement shall mean each preliminary prospectus included in
such registration statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS.
A. The Company and, to the best of its knowledge, the Principal
Shareholder, hereby represent and warrant to each Underwriter as follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each
Preliminary Prospectus and the Prospectus when filed complied in all material
respect with the Securities Act and, if filed by electronic transmission
pursuant to XXXXX (except as may be permitted by Regulation S-T under the
Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares.
Each of the Registration Statement, any Rule 462(b) Registration Statement
and any post-effective amendment thereto, at the time it became effective and
at all subsequent times, complied and will comply in all material respects
with the Securities Act and did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, as of its date and at all subsequent
times, did not and will not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties set forth in the two
immediately preceding sentences do not apply to statements in or omissions
from the Registration Statement, any Rule 462(b) Registration Statement, or
any post-effective amendment thereto, or the Prospectus, or any amendments or
supplements thereto, made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by the
Representative expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or filed
as required.
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company
has delivered to the Representatives four (4) complete conformed copies of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the
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Registration Statement (without exhibits) and each of the Preliminary
Prospectuses and the Prospectus, as amended or supplemented, in such
quantities and at such places as the Representatives have reasonably
requested for each of the Underwriters.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The
Company has not distributed and will not distribute, prior to the latest Closing
Date (as defined in Section 5 below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a Preliminary Prospectus, the
Prospectus or the Registration Statement.
(d) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) AUTHORIZATION OF THE SHARES TO BE SOLD BY THE COMPANY.
The Shares to be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly issued,
fully paid and nonassessable.
(f) AUTHORIZATION OF THE SHARES TO BE SOLD BY THE SELLING
SHAREHOLDERS. The Shares to be purchased by the Underwriters from the Selling
Shareholders, were validly issued, fully paid and nonassessable.
(g) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There
are no persons with registration or other similar rights to have any equity or
debt securities registered for sale under the Registration Statement or included
in the offering contemplated by this Agreement, other than the Selling
Shareholders with respect to the Shares included in the Registration Statement,
except for such rights as have been duly waived.
(h) NO MATERIAL ADVERSE CHANGE. Subsequent to the respective
dates as of which information is given in the Prospectus: (i) there has been no
material adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or otherwise,
or in the earnings, business, operations or prospects, whether or not arising
from transactions in the ordinary course of business of the Company and its
subsidiaries, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct
or contingent, not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of business; and
(iii) there has been no dividend or distribution of any kind declared, paid or
made by the Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any class
of capital stock.
(i) INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, who
have expressed their opinion with respect to the consolidated financial
statements of the Company and its subsidiaries, including the related notes
thereto, filed with the Commission as a part of the Registration Statement and
included in the Prospectus (the "Financial Statements") is an independent public
or certified public accountant as required by the Securities Act.
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(j) PREPARATION OF THE FINANCIAL STATEMENTS. The Financial
Statements filed with the Commission as a part of the Registration Statement
and included in the Prospectus present fairly the consolidated financial
position of the Company and its subsidiaries as of and at the dates indicated
and the results of their operations and cash flows for the periods specified.
Such Financial Statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved, except as may be expressly stated in the related notes
thereto. No other financial statements are required to be included in the
Registration Statement. The financial data set forth in the Prospectus under
the captions "Prospectus Summary--Summary Consolidated Actual and Pro Forma
Financial Information", "Selected Consolidated Actual and Pro Forma Financial
Data" and "Capitalization" fairly present the information set forth therein
on a basis consistent with that of the audited financial statements contained
in the Registration Statement. The pro forma consolidated financial
statements of the company and its subsidiaries and the related notes thereto
included under the captions "Prospectus Summary - Summary Consolidated Actual
and Pro Forma Financial Information", "Selected Consolidated Actual and Pro
Forma Financial Data" and elsewhere in the Prospectus and in the Registration
Statement present fairly the information contained therein, have been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements and have been properly presented on
the bases describes therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to therein. No
other pro forma financial information is required to be included in the
Registration Statement pursuant to Regulation S-X.
(k) COMPANY'S ACCOUNTING SYSTEM. The Company and each of its
subsidiaries maintain a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements 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; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(l) SUBSIDIARIES OF THE COMPANY. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than the subsidiaries listed in Exhibit 21 to the Registration Statement.
(m) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES. Each of the Company and its subsidiaries has been duly organized
and is validly existing as a corporation or limited liability company, as the
case may be, in good standing under the laws of the jurisdiction in which it is
organized with full corporate power and authority to own its properties and
conduct its business as described in the prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification.
(n) CAPITALIZATION OF THE SUBSIDIARIES. All the outstanding
shares of capital stock of each subsidiary have been duly and validly authorized
and issued and are fully paid and nonassessable, and, except as otherwise set
forth in the Prospectus, all outstanding shares of capital stock of the
subsidiaries are owned by the Company either directly or through wholly owned
subsidiaries free and clear of any security interests, claims, liens or
encumbrances.
(o) NO PROHIBITION ON SUBSIDIARIES FROM PAYING DIVIDENDS OR
MAKING OTHER DISTRIBUTIONS. No subsidiary of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such
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subsidiary from the Company or from transferring any of such subsidiary's
property or assets to the Company or any other subsidiary of the Company,
except as described in or contemplated by the Prospectus.
(p) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The
authorized, issued and outstanding capital stock of the Company is as set forth
in the Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Stock (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding Common Stock were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There
are no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company or any of its subsidiaries other than those accurately described in the
Prospectus. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(q) STOCK EXCHANGE LISTING. The Shares have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(r) NO CONSENTS, APPROVALS OR AUTHORIZATIONS REQUIRED. No
consent, approval, authorization, filing with or order of any court or
governmental agency or regulatory body is required in connection with the
transactions contemplated herein, except such as have been obtained or made
under the Securities Act and such as may be required (i) under the blue sky laws
of any jurisdiction in connection with the purchase and distribution of the
Shares by the Underwriters in the manner contemplated here and in the
Prospectus, (ii) by the National Association of Securities Dealers, LLC and
(iii) by the federal and provincial laws of Canada.
(s) NON-CONTRAVENTION OF EXISTING INSTRUMENTS AND AGREEMENTS.
Neither the issue and sale of the Shares nor the consummation of any other of
the transactions herein contemplated nor the fulfillment of the terms hereof
will conflict with, result in a breach or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, (i) the charter or by-laws of the Company or any of
its subsidiaries, (ii) the terms of any indenture, contract, lease, mortgage,
deed of trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or any of its
subsidiaries is a party or bound or to which its or their property is subject or
(iii) any statute, law, rule, regulation, judgment, order or decree applicable
to the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of its subsidiaries or any of its or their
properties.
(t) NO DEFAULTS OR VIOLATIONS. Neither the Company nor any
subsidiary is in violation or default of (i) any provision of its charter or
by-laws, (ii) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which it is a party or bound or to which
its property is subject or (iii) any statute, law, rule, regulation,
judgment, order or decree of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having jurisdiction
over the Company or such subsidiary or any of its properties, as
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applicable, except any such violation or default which would not, singly or
in the aggregate, result in a Material Adverse Change except as otherwise
disclosed in the Prospectus.
(u) NO ACTIONS, SUITS OR PROCEEDINGS. No action, suit or
proceeding by or before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of its subsidiaries or its or their
property is pending or, to the best knowledge of the Company, threatened that
(i) could reasonably be expected to have a Material Adverse Effect on the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby or (ii) could reasonably be expected to result in a Material
Adverse Effect.
(v) ALL NECESSARY PERMITS, ETC. The Company and each
subsidiary possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct their respective businesses, and neither the
Company nor any subsidiary has received any notice of proceedings relating to
the revocation or modification of, or non-compliance with, any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could result in a Material Adverse
Change.
(w) TITLE TO PROPERTIES. The Company and each of its
subsidiaries has good and marketable title to all the properties and assets
reflected as owned in the Financial Statements referred to above, in each case
free and clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially interfere with
the use made or proposed to be made of such property by the Company or such
subsidiary. The real property, improvements, equipment and personal property
held under lease by the Company or any subsidiary are held under valid and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company or such
subsidiary.
(x) TAX LAW COMPLIANCE. The Company and its subsidiaries have
filed all necessary federal, state and foreign income and franchise tax returns
and have paid all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied against any
of them. The Company has made adequate charges, accruals and reserves in the
applicable Financial Statements referred to above in respect of all federal,
state and foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its subsidiaries has not been finally
determined. The Company is not aware of any tax deficiency that has been or
might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(y) INTELLECTUAL PROPERTY RIGHTS. Each of the Company and
its subsidiaries owns or possesses adequate rights to use all patents, patent
rights or licenses, inventions, collaborative research agreements, trade
secrets, know-how, trademarks, service marks, trade names and copyrights
which are necessary to conduct its businesses as described in the
Registration Statement and Prospectus; the expiration of any patents, patent
rights, trade secrets, trademarks, service marks, trade names or copyrights
would not result in a Material Adverse Change that is not otherwise disclosed
in the Prospectus; the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names or
copyrights; and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of others
with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a Material Adverse Change. There is no claim being made
against the Company regarding patents, patent rights or licenses, inventions,
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collaborative research, trade secrets, know-how, trademarks, service marks,
trade names or copyrights. The Company and its subsidiaries do not in the
conduct of their business as now or proposed to be conducted as described in
the Prospectus infringe or conflict with any right or patent of any third
party, or any discovery, invention, product or process which is the subject
of a patent application filed by any third party, known to the Company or any
of its subsidiaries, which such infringement or conflict is reasonably likely
to result in a Material Adverse Change.
(z) YEAR 2000 PREPAREDNESS. There are no issues related to
the Company's, or any of its subsidiaries', preparedness for the Year 2000
that (i) are of a character required to be described or referred to in the
Registration Statement or by the Securities Act which have not been
accurately described in the Registration Statement or Prospectus or (ii)
might reasonably be expected to result in any Material Adverse Change or that
might materially affect their properties, assets or rights. All internal
computer systems and each Constituent Component (as defined below) of those
systems and all computer-related products and each Constituent Component (as
defined below) of those products of the Company and each of its subsidiaries
fully comply with Year 2000 Qualification Requirements. "Year 2000
Qualifications Requirements" means that the internal computer systems and
each Constituent Component (as defined below) of those systems and all
computer-related products and each Constituent Component (as defined below)
of those products of the Company and each of its Subsidiaries (i) have been
reviewed to confirm that they store, process (including sorting and
performing mathematical operations, calculations and computations), input and
output data containing date and information correctly regardless of whether
the date contains dates and times before, on or after January 1, 2000, (ii)
have been designated to ensure date and time entry recognition and
calculations, and date data interface values that reflect the century, (iii)
accurately manage and manipulate data involving dates and times, including
single century formulas and multi-century formulas, and will not cause an
abnormal ending scenario within the application or generate incorrect values
or invalid results involving such dates, (iv) accurately process any date
rollover, and (v) accept and respond to two-digit year date input in a manner
that resolves any ambiguities as to the century. "Constituent Component"
means all software (including operating systems, programs, packages and
utilities), firmware, hardware, networking components, and peripherals
provided as part of the configuration. The Company has inquired of material
vendors as to their preparedness for the Year 2000 and has disclosed in the
Registration Statement or Prospectus any issues, known to the Company as a
result thereof, that might reasonably be expected to result in any Material
Adverse Change.
(aa) NO TRANSFER TAXES OR OTHER FEES. There are no transfer
taxes or other similar fees or charges under Federal law or the laws of any
state, or any political subdivision thereof, required to be paid in connection
with the execution and delivery of this Agreement or the issuance and sale by
the Company of the shares.
(bb) COMPANY NOT AN "INVESTMENT COMPANY". The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The Company is not, and after
receipt of payment for the Shares will not be, an "investment company" or an
entity "controlled" by an "investment company" within the meaning of the
Investment Company Act and will conduct its business in a manner so that it will
not become subject to the Investment Company Act.
(cc) INSURANCE. Each of the Company and its subsidiaries are
insured by recognized, financially sound and reputable institutions with
policies in such amounts and with such deductibles and covering such risks as
are generally deemed adequate and customary for their businesses including, but
not limited to, policies covering real and personal property owned or leased by
the Company and its subsidiaries against theft, damage, destruction, acts of
vandalism and earthquakes, general liability and Directors and Officers
liability. The Company has no reason to believe that it or any subsidiary will
not be able (i) to renew its existing
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insurance coverage as and when such policies expire or (ii) to obtain
comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
(dd) LABOR MATTERS. To the best of the Company's knowledge, no
labor disturbance by the employees of the Company or any of its subsidiaries
exists or is imminent; and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its principal suppliers, that might
be expected to result in a Material Adverse Change.
(ee) NO PRICE STABILIZATION OR MANIPULATION. The Company has
not taken and will not take, directly or indirectly, any action designed to or
that might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.
(ff) LOCK-UP AGREEMENTS. Each officer and director of the
company, each Selling Shareholder and each beneficial owner of one or more
percent of the outstanding issued share capital of the Company has signed an
agreement substantially in the form attached hereto as EXHIBIT A (the "Lock-up
Agreements"). The Company has provided to counsel for the Underwriters a
complete and accurate list of all securityholders of the Company and the number
and type of securities held by each securityholder. The Company has provided to
counsel for the Underwriters true, accurate and complete copies of all of the
Lock-up Agreements presently in effect or effected hereby. The Company hereby
represents and warrants that it will not release any of its officers, directors
or other Shareholders from any Lock-up Agreements currently existing or
hereafter effected without the prior written consent of Xxxxxxxxx & Xxxxx LLC.
(gg) RELATED PARTY TRANSACTIONS. There are no business
relationships or related-party transactions involving the Company or any
subsidiary or any other person required to be described in the Prospectus which
have not been described as required.
(hh) CERTIFICATES. Any certificate signed by an officer of the
Company and delivered to the Representatives or to counsel for the Underwriters
shall be deemed to be a representation and warranty by the Company to each
Underwriter as to the matters set forth therein.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
Selling Shareholder represents and warrants to each Underwriter as follows:
(a) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by or on behalf of each such Shareholder and
is a valid and binding agreement of each such Selling Shareholder, enforceable
in accordance with its terms, except as rights to indemnification hereunder may
be limited by applicable law and except as the enforcement hereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(b) THE CUSTODY AGREEMENT AND POWER OF ATTORNEY. Each of the
(i) Custody Agreement signed by such Selling Shareholder and [___], as custodian
(the "Custodian"), relating to the deposit of the Shares to be sold by such
Selling Shareholder (the "Custody Agreement") and (ii) Power of Attorney
appointing certain individuals named therein as such Selling Shareholder's
attorneys-in-fact (each, an "Attorney-in-Fact") to the extent set forth therein
relating to the transactions contemplated hereby and by the Prospectus (the
"Power of Attorney"), of such Selling Shareholder has been duly authorized,
executed and delivered by
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such Selling Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles. Each Selling
Shareholder agrees that the Shares to be sold by such Selling Shareholder on
deposit with the Custodian is subject to the interests of the Underwriters,
that the arrangements made for such custody are to that extent irrevocable,
and that the obligations of such Selling Shareholder hereunder shall not be
terminated, except as provided in this Agreement or in the Custody Agreement,
by any act of the Selling Shareholder, by operation of law, by death or
incapacity of such Selling Shareholder or by the occurrence of any other
event. If such Selling Shareholder should die or become incapacitated, or in
any other event should occur, before the delivery of the Shares to be sold by
such Selling Shareholder hereunder, the documents evidencing the Shares to be
sold by such Selling Shareholder then on deposit with the Custodian shall be
delivered by the Custodian in accordance with the terms and conditions of
this Agreement as if such death, incapacity or other event had not occurred,
regardless of whether or not the Custodian shall have received notice thereof.
(c) TITLE TO SHARES TO BE SOLD. Such Selling Shareholder is
the lawful owner of the Shares to be sold by such Selling Shareholder hereunder
and upon sale and delivery of, and payment for, such Shares, as provided herein,
such Selling Shareholder will convey good and marketable title to such Shares,
free and clear of all liens, encumbrances, equities and claims whatsoever.
(d) ALL AUTHORIZATIONS OBTAINED. Such Selling Shareholder
has, and on each Closing Date (as defined below) will have, good and valid title
to all of the Shares which may be sold by such Selling Shareholder pursuant to
this Agreement on such date and the legal right and power, and all
authorizations and approvals required by law and under its trust agreement to
enter into this Agreement and its Custody Agreement and Power of Attorney, to
sell, transfer and deliver all of the Shares which may be sold by such Selling
Shareholder pursuant to this Agreement and to comply with its other obligations
hereunder and xxxxxxxxxx.
(e) NO FURTHER CONSENTS, AUTHORIZATION OR APPROVALS. No
consent, approval, authorization or order of any court or governmental agency or
body is required for the consummation by such Selling Shareholder of the
transactions contemplated herein, except such as may have been obtained under
the Securities Act and such as may be required under the federal and provincial
securities laws of Canada or the blue sky laws or any jurisdiction in connection
with the purchase and distribution of the Shares by the Underwriters and such
other approvals as have been obtained.
(f) NON-CONTRAVENTION. Neither the sale of the Shares being
sold by such Selling Shareholder nor the consummation of any other of the
transactions herein contemplated by such Selling Shareholder or the fulfillment
of the terms hereof by such Selling Shareholder will conflict with, result in a
breach or violation of, or constitute a default under any law or the terms of
any indenture or other agreement or instrument to which such Selling Shareholder
is party or bound, any judgment, order or decree applicable to such Selling
Shareholder or any court or regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over such Selling Shareholder.
(g) NO REGISTRATION OR OTHER SIMILAR RIGHTS. Such Selling
Shareholder does not have any registration or other similar rights to have any
equity or debt securities registered for sale by the Company under the
Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as are described in the Prospectus under
"Description of Capital Stock."
9
(h) NO PREEMPTIVE, CO-SALE OR OTHER RIGHTS. Such Selling
Shareholder does not have, or has waived prior to the date hereof, any
preemptive right, co-sale right or right of first refusal or other similar right
to purchase any of the Shares that are to be sold by the Company or any of the
other Selling Shareholders to the Underwriters pursuant to this Agreement; and
such Selling Shareholder does not own any warrants, options or similar rights to
acquire, and does not have any right or arrangement to acquire, any capital
stock, right, warrants, options or other securities from the Company, other than
those described in the Registration Statement and the Prospectus.
(i) DISCLOSURE MADE BY SUCH SELLING SHAREHOLDER IN THE
PROSPECTUS. All information furnished by or on behalf of such Selling
Shareholder in writing expressly for use in the Registration Statement and
Prospectus is, and on each Closing Date (as defined below) will be, true,
correct, and complete in all material respects, and does not, and on each
Closing Date will not, contain any untrue statement of a material fact or omit
to state any material fact necessary to make such information not misleading.
Such Selling Shareholder confirms as accurate the number of shares of Company
Common Stock set forth opposite such Selling Shareholder's name in the
Prospectus under the caption "Principal and Selling Shareholders" (both prior to
and after giving effect to the sale of the Shares).
(j) NO PRICE STABILIZATION OR MANIPULATION. Such Selling
Shareholder has not taken and will not take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Shares.
(k) NO TRANSFER TAXES OR OTHER FEES. There are no transfer
taxes or other similar fees or charges under Federal law or the laws of any
state, or any political subdivision thereof, required to be paid in connection
with the execution and delivery of this Agreement or the sale by the Selling
Shareholders of the Shares.
(l) DISTRIBUTION OF OFFERING MATERIALS BY THE SELLING
SHAREHOLDERS. The Selling Shareholders have not distributed and will not
distribute, prior to the later of the latest Closing Date (as defined below) and
the completion of the Underwriters' distribution of the Shares, any offering
material in connection with the offering and sale of the Shares by such Selling
Shareholder other than a preliminary prospectus, the Prospectus or the
Registration Statement.
(m) CERTIFICATES. Any certificate signed by or on behalf of
any Selling Shareholder and delivered to the Representative or to counsel for
the Underwriters shall be deemed to be a representation and warranty by such
Selling Shareholder to each Underwriter as to the matters covered thereby.
3. PURCHASE OF THE SHARES BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell Ten Million (10,000,000) shares of the Firm Shares and each of
the Selling Shareholders agree to issue and sell Three Million (3,000,000)
shares of the Firm Shares to the several Underwriters and each of the
Underwriters agrees to purchase from the Company and the Selling Shareholders,
respectively, the respective aggregate number of Shares set forth opposite their
names in Schedule A and Schedule B, respectively. The price at which the Shares
shall be sold by the Company and the Selling Shareholders, respectively, and
purchased by the several Underwriters shall be $___ per share. In making this
Agreement, each Underwriter is contracting severally and not jointly; except as
provided in paragraphs (b) and (c) of this Section 3, the agreement of
10
each Underwriter is to purchase only the respective number of shares of the
Shares specified in Schedule B.
(b) If for any reason one or more of the Underwriters shall
fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 8 or 9 hereof)
to purchase and pay for the number of shares of Firm Shares agreed to be
purchased by such Underwriter or Underwriters, the Company shall immediately
give notice thereof to you, and the non-defaulting Underwriters shall have
the right within 24 hours after the receipt by you of such notice to
purchase, or procure one or more other Underwriters to purchase, in such
proportions as may be agreed upon between you and such purchasing Underwriter
or Underwriters and upon the terms herein set forth, all or any part of the
shares of the Firm Shares which such defaulting Underwriter or Underwriters
agreed to purchase. If the non-defaulting Underwriters fail so to make such
arrangements with respect to all such shares and portion, the number of
shares of the Firm Shares which each non-defaulting Underwriter is otherwise
obligated to purchase under this Agreement shall be automatically increased
on a pro rata basis to absorb the remaining shares and portion which the
defaulting Underwriter or Underwriters agreed to purchase; PROVIDED, HOWEVER,
that the non-defaulting Underwriters shall not be obligated to purchase the
shares and portion which the defaulting Underwriter or Underwriters agreed to
purchase if the aggregate number of such shares of the Firm Shares exceeds
10% of the total number of shares of the Firm Shares which all Underwriters
agreed to purchase hereunder. If the total number of shares of the Firm
Shares which the defaulting Underwriter or Underwriters agreed to purchase
shall not be purchased or absorbed in accordance with the two preceding
sentences, the Company shall have the right, within 24 hours next succeeding
the 24-hour period above referred to, to make arrangements with other
underwriters or purchasers satisfactory to you for purchase of such shares
and portion on the terms herein set forth. In any such case, either you or
the Company shall have the right to postpone the Closing Date determined as
provided in Section 5 hereof for not more than seven business days after the
date originally fixed as the Closing Date pursuant to said Section 5 in order
that any necessary changes in the Registration Statement, the Prospectus or
any other documents or arrangements may be made. If neither the
non-defaulting Underwriters nor the Company shall make arrangements within
the 24-hour periods stated above for the purchase of all the shares of the
Shares which the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter and without any liability on the part of any non-defaulting
Underwriter to the Company. Nothing in this paragraph (b), and no action
taken hereunder, shall relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions herein set
forth, the Selling Shareholders grant an option to the several Underwriters to
purchase, severally and not jointly, up to One Million Nine Hundred Fifty
Thousand (1,950,000) shares in the aggregate of the Option Shares from the
Selling Shareholders at the same price per share as the Underwriters shall pay
for the Firm Shares. Said option may be exercised only to cover over-allotments
in the sale of the Firm Shares by the Underwriters and may be exercised in whole
or in part at any time (but not more than once) on or before the thirtieth day
after the date of this Agreement upon written or telegraphic notice by you to
each of the Selling Shareholders and the Company setting forth the aggregate
number of shares of the Option Shares as to which the several Underwriters are
exercising the option. Delivery of certificates for the shares of Option
Shares, and payment therefor, shall be made as provided in Section 5 hereof.
The number of shares of the Option Shares to be purchased by each Underwriter
shall be the same percentage of the total number of shares of the Option Shares
to be purchased by the several Underwriters as such Underwriter is purchasing of
the Firm Shares, as adjusted by you in such manner as you deem advisable to
avoid fractional shares.
(d) The Company and the Underwriters agree that up to
[______] of the Common Shares to be purchased by the Underwriters (the
"Directed Shares") shall be reserved for sale by the Underwriters to
eligible directors, officers, employees, business affiliates and related
persons of the Company ("eligible purchasers") as part of the distribution of
the Shares by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association
of Securities Dealers, LLC and all other applicable laws, rules and
regulations. To the extent that the Directed Shares are not purchased by
eligible purchasers of the Company, the Directed Shares may be offered to the
public as part of the public offering contemplated hereby.
11
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the
Underwriters of the Shares to be purchased by them shall be as set forth in the
Prospectus. The Underwriters may from time to time change the public offering
price after the closing of the initial public offering and increase or decrease
the concessions and discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the
front cover page and under "Underwriting" in the Registration Statement, any
Preliminary Prospectus and the Prospectus relating to the Shares filed by the
Company (insofar as such information relates to the Underwriters) constitutes
the only information furnished by the Underwriters to the Company and the
Selling Shareholders for inclusion in the Registration Statement, any
Preliminary Prospectus, and the Prospectus, and you on behalf of the respective
Underwriters represent and warrant to the Company and the Selling Shareholders
that the statements made therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE SHARES.
(a) Delivery of certificates for the shares of the Firm Shares
and the Option Shares (if the option granted by Section 3(c) hereof shall have
been exercised not later than 7:00 A.M., San Francisco time, on the date two
business days preceding the Closing Date), and payment therefor, shall be made
at the office of Xxxxxxxx & Xxxxxxxx LLP, 000 Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX
00000, at 7:00 a.m., San Francisco time, on the fourth business day after the
date of this Agreement, or at such time on such other day, not later than seven
full business days after such fourth business day, as shall be agreed upon in
writing by the Company and you. The date and hour of such delivery and payment
(which may be postponed as provided in Section 3(b) hereof) are herein called
the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be
exercised after 7:00 a.m., San Francisco time, on the date two business days
preceding the Closing Date, delivery of certificates for the shares of Option
Shares, and payment therefor, shall be made at the office of Xxxxxxxx & Xxxxxxxx
LLP, 000 Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000, at 7:00 a.m., San Francisco
time, on the third business day after the exercise of such option.
(c) Payment for the Shares purchased from the Company and the
Selling Shareholders shall be made to the Company and the Selling Shareholders
or their order by one or more wire transfers in same day funds. Such payment
shall be made upon delivery of certificates for the Shares to you for the
respective accounts of the several Underwriters against receipt therefor signed
by you. Certificates for the Shares to be delivered to you shall be registered
in such name or names and shall be in such denominations as you may request at
least one business day before the Closing Date, in the case of Firm Shares, and
at least one business day prior to the purchase thereof, in the case of the
Option Shares. Such certificates will be made available to the Underwriters for
inspection, checking and packaging at the offices of Lewco Securities
Corporation, 0 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on the business day prior to
the Closing Date or, in the case of the Option Shares, by 3:00 p.m., New York
time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Shareholders for shares to be purchased by any Underwriter whose
wire transfer shall not have been received by you on the Closing Date or any
later date on which Option Shares is purchased for the account of such
Underwriter. Any such payment by you shall not relieve such Underwriter from
any of its obligations hereunder.
12
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(a) The Company and the Selling Shareholders covenant and
agree as follows:
(i) The Company will (a) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A and (b) not file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you shall have reasonably objected in
writing or which is not in compliance with the Securities Act or the rules and
regulations of the Commission.
(ii) The Company will promptly notify each Underwriter in the
event of (a) the request by the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional information,
(b) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, (c) the institution or notice of
intended institution of any action or proceeding for that purpose, (d) 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 (e) the receipt by
it of notice of the initiation or threatening of any proceeding for such
purpose. The Company will make every reasonable effort to prevent the issuance
of such a stop order and, if such an order shall at any time be issued, to
obtain the withdrawal thereof at the earliest possible moment.
(iii) The Company will (a) on or before the Closing Date,
deliver to you a signed copy of the Registration Statement as originally filed
and of each amendment thereto filed prior to the time the Registration Statement
becomes effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (b) as promptly
as possible deliver to you and send to the several Underwriters, at such office
or offices as you may designate, as many copies of the Prospectus as you may
reasonably request, and (c) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an Underwriter or
dealer, likewise send to the Underwriters as many additional copies of the
Prospectus and as many copies of any supplement to the Prospectus and of any
amended prospectus, filed by the Company with the Commission, as you may
reasonably request for the purposes contemplated by the Securities Act.
(iv) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event relating
to or affecting the Company, or of which the Company shall be advised in writing
by you, shall occur as a result of which it is necessary, in the opinion of
counsel for the Company or of counsel for the Underwriters, to supplement or
amend the Prospectus in order to make the Prospectus not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser of the
Shares, the Company will forthwith prepare and file with the Commission a
supplement to the Prospectus or an amended prospectus so that the Prospectus as
so supplemented or amended will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time such
Prospectus is delivered to such purchaser, not misleading. If, after the
initial public offering of the Shares by the Underwriters and during such
period, the Underwriters shall propose to vary the terms of offering thereof by
reason of changes in general market conditions or otherwise, you will advise the
Company in writing of the proposed variation, and, if in the opinion either of
counsel for the Company or of counsel for the Underwriters such proposed
13
variation requires that the Prospectus be supplemented or amended, the
Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus setting forth such variation. The
Company authorizes the Underwriters and all dealers to whom any of the Shares
may be sold by the several Underwriters to use the Prospectus, as from time
to time amended or supplemented, in connection with the sale of the Shares in
accordance with the applicable provisions of the Securities Act and the
applicable rules and regulations thereunder for such period.
(v) Prior to the filing thereof with the Commission, the
Company will submit to you, for your information, a copy of any post-effective
amendment to the Registration Statement and any supplement to the Prospectus or
any amended prospectus proposed to be filed.
(vi) The Company will cooperate, when and as requested by
you, in the qualification of the Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as you may designate and,
during the period in which a prospectus is required by law to be delivered by
an Underwriter or dealer, in keeping such qualifications in good standing
under said securities or blue sky laws; PROVIDED, HOWEVER, that the Company
shall not be obligated to file any general consent to service of process or
to qualify as a foreign corporation in any jurisdiction in which it is not so
qualified. The Company will, from time to time, prepare and file such
statements, reports, and other documents as are or may be required to
continue such qualifications in effect for so long a period as you may
reasonably request for distribution of the Shares.
(vii) During a period of five years commencing with the date
hereof, the Company will furnish to you, and to each Underwriter who may so
request in writing, copies of all periodic and special reports furnished to
shareholders of the Company and of all information, documents and reports
filed with the Commission.
(viii) Not later than the 45th day following the end of the
fiscal quarter first occurring after the first anniversary of the Effective
Date, the Company will make generally available to its security holders an
earnings statement in accordance with Section 11(a) of the Securities Act and
Rule 158 thereunder.
(ix) The Company and the Selling Shareholders jointly and
severally agree to pay all costs and expenses incident to the performance of
their obligations under this Agreement, including all costs and expenses
incident to (a) the preparation, printing and filing with the Commission and
the National Association of Securities Dealers, Inc. (the "NASD") of the
Registration Statement, any Preliminary Prospectus and the Prospectus (b) the
furnishing to the Underwriters of copies of any Preliminary Prospectus and of
the several documents required by paragraph (iii) of this Section 6 to be so
furnished, (c) the printing of this Agreement and related documents delivered
to the Underwriters, (d) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph (iv) of
this Section 6, (e) the furnishing to you and the Underwriters of the reports
and information referred to in paragraph vii of this Section 6 and (f) the
printing and issuance of stock certificates including the transfer agents
fees. The Selling Shareholders will pay any transfer taxes incident to the
transfer to the Underwriters of the shares of Stock being sold by the Selling
Shareholders.
(x) The Company and the Selling Shareholders jointly and
severally agree to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including counsel
fees and disbursements and cost of printing memoranda for the Underwriters)
paid by or for the account of the Underwriters or their counsel in qualifying
the Shares under state securities or blue sky laws and in the review of the
offering by the NASD.
14
(xi) The Company hereby agrees that, without the prior
written consent of Xxxxxxxxx & Xxxxx LLC on behalf of the Underwriters, which
consent shall be given or withheld in the reasonable judgement of Xxxxxxxxx &
Xxxxx LLC, the Company will not, for a period of 180 days following the
commencement of the public offering of the Shares by the Underwriters, (the
"Lock-Up Period") directly or indirectly, (a) sell, offer, contract to sell,
make any short sale, pledge, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to purchase or otherwise transfer or dispose of any shares of Common Stock or
any securities convertible into or exchangeable or exercisable for or any
rights to purchase or acquire Common Stock or (b) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (a) or (b) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (A) the Shares to be sold to the Underwriters pursuant to
this Agreement (B) grants of options, warrants or other rights to purchase
Common Stock, or the issuance of Common Stock pursuant to the exercise of
such options, warrants or other rights, so long as such grants and issuances
are pursuant to a stock bonus or other stock plan or arrangement described in
the Prospectus, or (C) shares of Common Stock issued in connection with
acquisitions by the Company; provided, however, that the holders of shares
issued pursuant to the options, warrants or other rights described in (B) or
the acquisitions described in (C) agree in writing to be bound by agreements
substantially the same as the Lock-Up Agreements.
(xii) If at any time during the 25-day period after the
Registration Statement becomes effective any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price for the Shares has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, and to the extent counsel to you or to the Company shall
reasonably believe necessary, forthwith prepare, consult with you concerning
the substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
(b) COVENANTS OF THE SELLING SHAREHOLDERS. Each Selling
Shareholder further covenants and agrees with each Underwriter:
(i) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES.
Such Principal Selling Shareholder will not, during the Lock-Up Period, make a
disposition of securities (AS DEFINED IN EXHIBIT A HERETO) now owned or
hereafter acquired directly by such person or with respect to which such person
has or hereafter acquires the power of disposition, otherwise than (a) as a bona
fide gift or gifts, provided the donee or donees thereof agree in writing to be
bound by this restriction, (b) as a distribution to partners or shareholders of
such person, provided that the distributees thereof agree in writing to be bound
by the terms of this restriction, (c) with respect to dispositions of Common
Shares acquired on the open market or (d) with the prior written consent of
Xxxxxxxxx & Xxxxx LLC. The foregoing restriction has been expressly agreed to
preclude the holder of such securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a disposition of securities during the Lock-Up Period, even if such securities
would be disposed of by someone other than such holder. Such prohibited hedging
or other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any securities or
with respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from
securities. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the securities held by such person except in compliance with this
restriction.
(ii) DELIVERY OF FORMS W-8 AND W-9. To deliver to the
Representative prior to the First Closing Date a properly completed and
executed United States Treasury Department Form W-8 (if the Selling
Shareholder is a non-United States person) or Form W-9 (if the Selling
Shareholder is a United States Person).
15
(iii) NOTIFICATION OF UNTRUE STATEMENTS, ETC. If, at anytime
prior to the date on which the distribution of the Common Shares as contemplated
herein and in the Prospectus has been completed, as determined by the
Representative, such Principal Selling Shareholder has knowledge of the
occurrence of any event as a result of which the Prospectus or the Registration
Statement, in each case as then amended or supplemented, would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, such Selling Shareholder will promptly notify the Company
and the Representative.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Each of the Company, the Principal Shareholder and the
Secondary Shareholder, jointly and severally, agrees to indemnify and hold
harmless each Underwriter and each person (including each partner or officer
thereof) who controls any Underwriter within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Exchange Act of 1934, as
amended (the "Exchange Act"), or the common law or otherwise, and the Company
agrees to reimburse each such Underwriter and controlling person for any legal
or other expenses (including, except as otherwise hereinafter provided,
reasonable fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement), 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 (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that (1) the indemnity agreements of the Company and the Selling Shareholders
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was made in
reliance upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of any Underwriter
for use in any Preliminary Prospectus or the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto and (2) the
indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Shares which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (iii) of Section 6 hereof; and PROVIDED, FURTHER,
that notwithstanding the foregoing, the indemnity agreements of the Secondary
Shareholders contained in this paragraph (a) shall only apply to any such
losses, claims, damages, liabilities or expenses if such statement or omission
was made in reliance upon and in conformity with information furnished as herein
stated or otherwise furnished in writing to the Company by or on behalf of the
Secondary Shareholder for use in any Preliminary Prospectus or the Registration
Statement or the Prospectus. The indemnity agreements of the Company and the
Selling Shareholders contained in this paragraph (a) and the
16
representations and warranties of the Company and the Selling Shareholders
contained in Section 2 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the
Shares.
(b) Each Underwriter severally agrees to indemnify and hold
harmless each of the Company, each of its officers who signs the Registration
Statement on his own behalf or pursuant to a power of attorney, each of its
directors, the Selling Shareholders, each other Underwriter and each person
(including each partner or officer thereof) who controls the Company, the
Selling Shareholders or any such other Underwriter within the meaning of
Section 15 of the Securities Act, from and against any and all losses,
claims, damages or liabilities, joint or several, to which such indemnified
parties or any of them may become subject under the Securities Act, the
Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any
investigation or inquiry of, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (including the Prospectus as
part thereof and any Rule 462(b) registration statement) or any
post-effective amendment thereto (including any Rule 462(b) registration
statement) 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 the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any
amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, if such statement or omission was made in reliance upon and in
conformity with information furnished as herein stated or otherwise furnished
in writing to the Company by or on behalf of such indemnifying Underwriter
for use in the Registration Statement or the Prospectus or any such amendment
thereof or supplement thereto. The indemnity agreement of each Underwriter
contained in this paragraph (b) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the
Shares.
(c) Without limitation and in addition to its obligations
under the other paragraphs of this Section 7, the Company agrees to indemnify
and hold harmless Xxxxxxxxx & Xxxxx LLC ("H&Q") and each person, if any, who
controls H&Q within the meaning of the Securities Act or the Exchange Act from
and against any loss, claim, damage, liabilities or expense, as incurred,
arising out of or based upon H&Q acting as a "qualified independent underwriter"
(within the meaning of Rule 2720 to the NASD's Conduct Rules) in connection with
the offering contemplated by this Agreement, and agrees to reimburse each such
indemnified person for any legal or other expense reasonably incurred by them in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action; PROVIDED, HOWEVER, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense results from the gross negligence or
willful misconduct of H&Q.
(d) Each party indemnified under the provision of
paragraphs (a), (b) and (c) of this Section 7 agrees that, upon the service of a
summons or other initial legal process upon it in any action or suit instituted
against it or upon its receipt of written notification of the commencement of
any investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (the "Notice") of such service
or notification to the party or
17
parties from whom indemnification may be sought hereunder. No
indemnification provided for in such paragraphs shall be available to any
party who shall fail so to give the Notice if the party to whom such Notice
was not given was unaware of the action, suit, investigation, inquiry or
proceeding to which the Notice would have related and was prejudiced by the
failure to give the Notice, but the omission so to notify such indemnifying
party or parties of any such service or notification shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of such
indemnity agreement. Any indemnifying party shall be entitled at its own
expense to participate in the defense of any action, suit or proceeding
against, or investigation or inquiry of, an indemnified party. Any
indemnifying party shall be entitled, if it so elects within a reasonable
time after receipt of the Notice by giving written notice (the "Notice of
Defense") to the indemnified party, to assume (alone or in conjunction with
any other indemnifying party or parties) the entire defense of such action,
suit, investigation, inquiry or proceeding, in which event such defense shall
be conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to
the indemnified party or parties; PROVIDED, HOWEVER, that (i) if the
indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of
the indemnified party or parties in conducting the defense of such action,
suit, investigation, inquiry or proceeding or that there may be legal
defenses available to such indemnified party or parties different from or in
addition to those available to the indemnifying party or parties, then
counsel for the indemnified party or parties shall be entitled to conduct the
defense to the extent reasonably determined by such counsel to be necessary
to protect the interests of the indemnified party or parties and (ii) in any
event, the indemnified party or parties shall be entitled to have counsel
chosen by such indemnified party or parties participate in, but not conduct,
the defense. If, within a reasonable time after receipt of the Notice, an
indemnifying party gives a Notice of Defense and the counsel chosen by the
indemnifying party or parties is reasonably satisfactory to the indemnified
party or parties, the indemnifying party or parties will not be liable under
paragraphs (a) through (d) of this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party or parties in connection with
the defense of the action, suit, investigation, inquiry or proceeding, except
that (A) the indemnifying party or parties shall bear the legal and other
expenses incurred in connection with the conduct of the defense as referred
to in clause (i) of the proviso to the preceding sentence and (B) the
indemnifying party or parties shall bear such other expenses as it or they
have authorized to be incurred by the indemnified party or parties. If,
within a reasonable time after receipt of the Notice, no Notice of Defense
has been given, the indemnifying party or parties shall be responsible for
any legal or other expenses incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding.
(e) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a), (b) or (c) of this Section 7, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims,
damages or liabilities referred to in paragraph (a), (b) or (c) of this
Section 7 (i) in such proportion as is appropriate to reflect the relative
benefits received by each indemnifying party from the offering of the Shares
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of each indemnifying party in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, or actions in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company, the Selling Shareholders and the
Underwriters shall be deemed to be in the same respective proportions as the
total net proceeds from the offering of the Shares received by each of the
Company and the Selling Shareholders and the total underwriting discount
received by the Underwriters, as set forth in the table on the cover page of
the Prospectus, bear to the aggregate public offering price of the Shares.
Relative fault
18
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 each
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (e) were to be 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 into account the equitable
considerations referred to in the first sentence of this paragraph (e). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (e). Notwithstanding the provisions of this paragraph
(e), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this paragraph (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (d) of this Section 7).
(f) Neither the Company nor any Selling Shareholder will,
without the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Underwriter or any person who controls such Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter and each such controlling person from all liability arising out of
such claim, action, suit or proceeding.
(g) The liability of each Selling Shareholder under the
indemnity and reimbursement agreements contained in the provisions of this
Section 7 and Section 11 hereof shall be limited to an amount equal to the
initial public offering price of the stock sold by such Selling Shareholder to
the Underwriters. The Company and the Selling Shareholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible. No indemnification provided for in Section 7(a) by the
Principal Shareholder shall be available to any Underwriter, or any person who
controls any Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (each an "Underwriter Indemnified Party")
until such Underwriter Indemnified Party has first used its reasonable efforts
to pursue all remedies it may have against the Company under Section 7(a).
Notwithstanding the foregoing, if, in the reasonable judgment of any Underwriter
Indemnified Party, the applicable statute of limitations for any potential
action, suit or proceeding by such Underwriter Indemnified Party for
indemnification against the Principal Shareholder will expire, such Underwriter
Indemnified Party may name the Principal Shareholder in any action, suit or
proceeding to which the Company is also a party solely for purposes of
preserving any rights such Underwriter
19
Indemnified Party may have to seek indemnification from the Principal
Shareholder after using its reasonable efforts to pursue and exhaust all
remedies it may have against the Company. Notwithstanding anything else
herein to the contrary, for purposes of this paragraph an Underwriter
Indemnified Party shall be deemed to have used its reasonable efforts to
pursue and exhaust all remedies it may have against the Company forty five
(45) days after such Underwriter Indemnified Party first delivers Notice to
the Company pursuant to paragraph (d) hereof.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and each
Selling Shareholder if after the date of this Agreement trading in the Common
Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States on
or after the date hereof, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States would, in the
Underwriters' reasonable judgment, make the offering or delivery of the Shares
impracticable, (iii) suspension of trading in securities generally or in the
Underwriters reasonable judgement, a material adverse decline in value of
securities generally on the New York Stock Exchange, the American Stock
Exchange, or The Nasdaq Stock Market, or limitations on prices (other than
limitations on hours or numbers of days of trading) for securities on either
such exchange or system, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of, or
commencement of any proceeding or investigation by, any court, legislative body,
agency or other governmental authority which in the Underwriters' reasonable
opinion materially and adversely affects or will materially or adversely affect
the business or operations of the Company, (v) declaration of a banking
moratorium by either federal or state authorities or (vi) the taking of any
action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in the Underwriters' reasonable opinion has a
material adverse effect on the securities markets in the United States, other
than minor changes in the Federal Reserve interest rates as announced by the
Federal Reserve Board. If this Agreement shall be terminated pursuant to this
Section 8, there shall be no liability of the Company or the Selling
Shareholders to the Underwriters and no liability of the Underwriters to the
Company or the Selling Shareholders; PROVIDED, HOWEVER, that in the event of any
such termination the Company and each of the Selling Shareholders agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and each of the Selling
Shareholders under this Agreement, including all costs and expenses referred to
in paragraphs (ix) and (x) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares shall be subject to the
performance by the Company and each of the Selling Shareholders of all their
obligations to be performed hereunder at or prior to the Closing Date or any
later date on which Option Shares are to be purchased, as the case may be, and
to the following further conditions:
(a) The Registration Statement shall have become effective;
and no stop order suspending the effectiveness thereof shall have been issued
and no proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Shares
hereunder and the validity and form of the certificates representing the Shares,
all corporate proceedings and other legal matters incident to the foregoing, and
the form of the Registration Statement and of the Prospectus (except as to the
financial statements contained therein), shall have been approved at or prior to
the Closing Date by Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the
Underwriters.
20
(c) You shall have received from Xxxxxxxx & Xxxxxxxx LLP,
counsel for the Company and the Selling Shareholders, an opinion, addressed to
the Underwriters and dated the Closing Date, covering the matters set forth in
Annex A hereto, and if Option Shares are purchased at any date after the Closing
Date, additional opinions from each such counsel, addressed to the Underwriters
and dated such later date, confirming that the statements expressed as of the
Closing Date in such opinions remain valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date,
the statements made in the Registration Statement and the Prospectus were true
and correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein,
(iv) neither the Company nor any of its subsidiaries has any material contingent
obligations which are not disclosed in the Registration Statement and the
Prospectus, (v) there are not any pending or known threatened legal proceedings
to which the Company or any of its subsidiaries is a party or of which property
of the Company or any of its subsidiaries is the subject which are material and
which are not disclosed in the Registration Statement and the Prospectus,
(vi) there are not any franchises, contracts, leases or other documents which
are required to be filed as exhibits to the Registration Statement which have
not been filed as required, (vii) the representations and warranties of the
Company herein are true and correct in all material respects as of the Closing
Date or any later date on which Option Shares is to be purchased, as the case
may be, and (viii), in the reasonable opinion of the Underwriters, there has not
been any material change in the market for securities in general or in
political, financial or economic conditions from those reasonably foreseeable as
to render it impracticable in your reasonable judgment to make a public offering
of the Shares, or a material adverse change in market levels for securities in
general (or those of companies in particular) or financial or economic
conditions which render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased a certificate, dated the Closing
Date or such later date, as the case may be, and signed by the President and the
Chief Financial Officer of the Company, stating that the respective signers of
said certificate have carefully examined the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (vii) of paragraph (d) of this Section 9 are true and
correct.
(f) You shall have received from PriceWaterhouseCoopers LLC, a
letter or letters, addressed to the Underwriters and dated the Closing Date and
any later date on which Option Shares are purchased, confirming that they are
independent public accountants with respect to the Company within the meaning of
the Securities Act and the applicable published rules and regulations thereunder
and based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (the "Original Letter"), but
carried out to a date not more than three business days prior to the Closing
Date or such later date on which Option Shares is purchased (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date,
21
as the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are
necessary to reflect any changes in the facts described in the Original
Letter since the date of the Original Letter or to reflect the availability
of more recent financial statements, data or information. The letters shall
not disclose any change, or any development involving a prospective change,
in or affecting the business or properties of the Company or any of its
subsidiaries which, in your sole judgment, makes it impractical or
inadvisable to proceed with the public offering of the Shares or the purchase
of the Option Shares as contemplated by the Prospectus.
(g) You shall have received from PriceWaterhouseCoopers LLC, a
letter stating that their review of the Company's system of internal accounting
controls, to the extent they deemed necessary in establishing the scope of their
examination of the Company's financial statements as at ____________, 1999, did
not disclose any weakness in internal controls that they considered to be
material weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (vi) of Section 6 hereof.
(i) Prior to the Closing Date, the Shares to be issued and
sold by the Company shall have been duly authorized for quotation on the Nasdaq
National Market upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have received
from all directors, officers, and beneficial holders of more than 1% of the
outstanding Common Stock shareholder agreements, in form reasonably satisfactory
to Xxxxxxxxx & Xxxxx LLC, stating that without the prior written consent of
Xxxxxxxxx & Xxxxx LLC on behalf of the Underwriters, such person or entity will
not, for a period of 180 days following the commencement of the public offering
of the Shares by the Underwriters, directly or indirectly, (i) sell, offer,
contract to sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise.
(k) The Company shall cause to be prepared and delivered, at
its expense, within one business day from the effective date of this Agreement,
to the Representatives 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 the Representatives, that may
be transmitted electronically by the Representatives to offerees and purchasers
of the Shares for at least 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 the Representatives, 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). Such electronic
Prospectus may consist of a Rule 434 preliminary prospectus, together with the
applicable term sheet, provided that it otherwise satisfies the format and
conditions
22
described in the immediately preceding sentence. 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 time it was declared effective an undertaking that, upon receipt of a
request by an investor or his or her representative within the Prospectus
delivery period, the Company shall transmit or cause to be transmitted
promptly, without charge, a paper copy of the Prospectus.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the
Underwriters, in their reasonable professional judgment, shall be satisfied that
they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and each Selling Shareholder. Any such termination shall be without
liability of the Company or the Selling Shareholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Shareholders; PROVIDED, HOWEVER, that (i) in the event of such termination, each
of the Company and each Selling Shareholder agrees to indemnify and hold
harmless the Underwriters from all costs or expenses incident to the performance
of the obligations of the Company under this Agreement, including all costs and
expenses referred to in paragraphs (ix) and (x) of Section 6 hereof, and (ii) if
this Agreement is terminated by you because of any refusal, inability or failure
on the part of the Company or the Selling Shareholders to perform any agreement
herein, to fulfill any of the conditions herein, or to comply with any provision
hereof other than by reason of a default by any of the Underwriters, the Company
and each Selling Shareholder will reimburse the Underwriters severally upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY AND THE SELLING
SHAREHOLDERS. The obligation of the Company and the Selling Shareholders to
deliver the Shares shall be subject to the conditions that (a) the Registration
Statement shall have become effective and (b) no stop order suspending the
effectiveness thereof shall be in effect and no proceedings therefor shall be
pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company by giving notice to
you. Any such termination shall be without liability of the Company or the
Selling Shareholders to the Underwriters and without liability of the
Underwriters to the Company or the Selling Shareholders; PROVIDED, HOWEVER, that
in the event of any such termination the Company and the Selling Shareholders
agree to indemnify and hold harmless the Underwriters from all costs or expenses
incident to the performance of the obligations of the Company under this
Agreement, including all costs and expenses referred to in paragraphs (ix) and
(x) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement, the Company and each Selling
Shareholder hereby agree to reimburse on a quarterly basis the Underwriters for
all reasonable legal and other expenses incurred in connection with
investigating or defending any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in paragraph (a) of Section 7 of this
Agreement, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this Section 11 and the
possibility that such payments might later be held to be improper; PROVIDED,
HOWEVER, that (i) to the extent any such payment is ultimately held to be
improper, the persons receiving such payments shall promptly refund them and
(ii) such persons
23
shall provide to the Company and each Selling Shareholder, upon request,
reasonable assurances of their ability to effect any refund, when and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of the Company, each of the Selling Shareholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, each of the Selling Shareholders
and the several Underwriters) indemnified under the provisions of said
Section 7, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Shares from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters,
shall be mailed, telegraphed or delivered to Xxxxxxxxx & Xxxxx LLC, Xxx Xxxx
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000; if to the Company, shall be mailed,
telegraphed or delivered to it at its office, 12 Corporate Xxxxx, 00000 Xxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxx, 00000, Attention: Xxxxx X. Xxxx,
and if to the Selling Shareholders, ____________________. All notices given
by telegraph shall be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the Shares under this Agreement; PROVIDED, HOWEVER, that if this
Agreement is terminated prior to the Closing Date, the provisions of paragraph
(xi) of Section 6 hereof shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.
24
Please sign and return to the Company and each of the Selling Shareholders
the enclosed duplicates of this letter, whereupon this letter will become a
binding agreement between the Company, each of the Selling Shareholders and the
several Underwriters in accordance with its terms.
Very truly yours,
National Information Consortium, Inc.
By
--------------------------------------
[Name]
[Title]
SELLING SHAREHOLDERS:
[list names]
By
--------------------------------------
Attorney-in-Fact
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
XXXXXXXXX & XXXXX LLC
Co-Manager
By Xxxxxxxxx & Xxxxx LLC
By
------------------------------------------------
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
25
SCHEDULE A
SELLING SECURITYHOLDERS
SCHEDULE B
UNDERWRITERS
UNDERWRITERS NUMBER OF SHARES
TO BE PURCHASED
------------------------------------------------------ ----------------
Xxxxxxxxx & Xxxxx LLC . . . . . . . . . . . . . . . .
Xxxxxx Xxxxxx Partners LLC . . . . . . . . . . . . .
---------------
Xxxxx Brown Xxxxxx & Company . . . . . . . . . . . .
FAC/Equities . . . . . . . . . . . . . . . . . . . .
---------------
---------------
Total . . . . . . . . . . . . . . .
---------------
---------------
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF XXXXXXXX & XXXXXXXX
COUNSEL FOR THE COMPANY
AND THE SELLING SHAREHOLDERS
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, is duly qualified
as a foreign corporation and in good standing in each state of the United
States of America in which its ownership or leasing of property requires
such qualification except where the failure to be so qualified would not
have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole, and has full corporate power and authority to own or
lease its properties and conduct its business as described in the
Registration Statement; all the issued and outstanding capital stock of
each of the subsidiaries of the Company has been duly authorized and
validly issued and is fully paid and nonassessable, and is owned by the
Company free and clear of all liens, encumbrances and security interests,
and to the best of such counsel's knowledge, no options, warrants or other
rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in such subsidiaries are outstanding;
(ii) the authorized capital stock of the Company consists of
_______ shares of Common Stock, $____ par value, of which there are
outstanding _________ shares (including the Firm Shares plus the number of
shares of Option Shares issued on the date hereof) proper corporate
proceedings have been taken validly to authorize such authorized capital
stock; all of the outstanding shares of such capital stock (including the
Firm Shares and the shares of Option Shares issued, if any) have been duly
and validly issued and are fully paid and nonassessable; any Option Shares
purchased after the Closing Date, when issued and delivered to and paid for
by the Underwriters as provided in the Underwriting Agreement, will have
been duly and validly issued and be fully paid and nonassessable; and no
preemptive rights of, or rights of refusal in favor of, shareholders exist
with respect to the Shares, or the issue and sale thereof, pursuant to the
Articles of Incorporation or Bylaws of the Company and, to the knowledge of
such counsel, there are no contractual preemptive rights that have not been
waived, rights of first refusal or rights of co-sale which exist with
respect to the Shares being sold by the Selling Shareholders or with
respect to the issue and sale of the Shares;
(iii) the Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus is in effect and no proceedings for
that purpose have been instituted or are pending or contemplated by the
Commission;
(iv) the Registration Statement and the Prospectus (except as to
the financial statements and schedules and other financial data contained
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Securities Act
and with the rules and regulations of the Commission thereunder;
(v) such counsel has no reason to believe that the Registration
Statement (except as to the financial statements and schedules and other
financial data contained or incorporated by reference therein, as to which
such counsel need not express any opinion or belief) at the Effective Date
contained any untrue statement of a material fact or
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omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus (except as to the financial statements and schedules and
other financial data contained or incorporated by reference therein, as
to which such counsel need not express any opinion or belief) as of its
date or at the Closing Date (or any later date on which Option Shares
is purchased), contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading;
(vi) the information required to be set forth in the Registration
Statement in answer to Items 9, 10 (insofar as it relates to such counsel)
and 11(c) of Form S-1 is to the best of such counsel's knowledge accurately
and adequately set forth therein in all material respects or no response is
required with respect to such Item and the description of the Company's
stock option plan and the options granted and which may be granted
thereunder in the Prospectus accurately and fairly presents the information
required to be shown with respect to said plan and options to the extent
required by the Securities Act and the rules and regulations of the
Commission thereunder;
(vii) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion
of such counsel are of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not described and filed as required;
(viii) the Underwriting Agreement has been duly authorized, executed
and delivered by the Company;
(ix) the Underwriting Agreement has been duly executed and
delivered by or on behalf of the Selling Shareholders and the Custody
Agreement between the Selling Shareholders and __________, as Custodian,
and the Power of Attorney referred to in such Custody Agreement have been
duly executed and delivered by the several Selling Shareholders;
(x) the issue and sale by the Company of the shares of Shares sold
by the Company as contemplated by the Underwriting Agreement will not
conflict with, or result in a breach of, the Articles of Incorporation or
Bylaws of the Company or any of its subsidiaries or any agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or any applicable law or regulation, or so far as
is known to such counsel, any order, writ, injunction or decree, of any
jurisdiction, court or governmental instrumentality;
(xi) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights
or such rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration Statement;
(xii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated in the Underwriting Agreement, except such as
have been obtained under the Securities Act and such as may be required
under state securities or blue sky laws in connection with the purchase and
distribution of the Shares by the Underwriters; and
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(xiii) good and marketable title to the Shares sold by the Selling
Shareholders under the Underwriting Agreement, free and clear of all liens,
encumbrances, equities, security interests and claims, has been transferred
to the Underwriters who have severally purchased such Shares under the
Underwriting Agreement, assuming for the purpose of this opinion that the
Underwriters purchased the same in good faith without notice of any adverse
claims; and
(xiv) the Stock sold by the Selling Shareholders is listed and duly
admitted to trading on the Nasdaq National Market, and the Stock issued and
sold by the Company will been duly authorized for listing by the Nasdaq
National Market Stock Exchange upon official notice of issuance.
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Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or of the State of Colorado, upon
opinions of local counsel satisfactory in form and scope to counsel for the
Underwriters. Copies of any opinions so relied upon shall be delivered to the
Representatives and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such local counsel.
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