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EXHIBIT 1.1
DRAFT OF 1/12/98
PEGASUS SYSTEMS, INC.
____________________ SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
________, 0000
XXXXXXXXX & XXXXX LLC
NATIONSBANC XXXXXXXXXX SECURITIES LLC
XXXXX XXXXX XXXXXX & COMPANY, LLC
x/x Xxxxxxxxx & Xxxxx LLC
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
Pegasus Systems, Inc., a Delaware corporation (herein called the
Company), proposes to issue and sell ____________________ shares of its
authorized but unissued Common Stock, $.01 par value (herein called the Common
Stock), and the stockholders of the Company named in Schedule II hereto (herein
collectively called the Selling Securityholders) propose to sell an aggregate
of ____________________ shares of Common Stock of the Company (said
____________________ shares of Common Stock being herein called the
Underwritten Stock). The Company and the Selling Securityholders propose to
grant to the Underwriters (as hereinafter defined) an option to purchase up to
____________________ additional shares of Common Stock (herein called the
Option Stock and with the Underwritten Stock herein collectively called the
Stock). The Common Stock is more fully described in the Registration Statement
and the Prospectus hereinafter mentioned.
The Company and the Selling Securityholders severally hereby confirm
the agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock 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.
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(1) Plus an option to purchase from the Company and the Selling Securityholders
up to ____________________ additional shares to cover over-allotments.
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1. REGISTRATION STATEMENT. The Company has filed with the
Securities and Exchange Commission (herein called the Commission) a
registration statement on Form S-1 (No. ____________________), including the
related preliminary prospectus, for the registration under the Securities Act
of 1933, as amended (herein called the Securities Act) of the Stock. 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 Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto
after the effective date of such registration statement (herein called 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 Stock 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) and, 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.
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
SECURITYHOLDERS.
(a) The Company hereby represents and warrants as follows:
(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, has
full corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement and
the Prospectus and as being conducted, and is duly qualified as a
foreign corporation and in good standing in all jurisdictions in which
the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where
the failure to be so qualified would not have a material adverse
effect on the business,
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properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole).
(ii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any materially adverse change in 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, other than as set
forth in the Registration Statement and the Prospectus, 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 and the Prospectus which
is required to be so referred to.
(iii) The Registration Statement and the Prospectus comply,
and on the Closing Date (as hereinafter defined) and any later date on
which Option Stock is to be purchased, the Prospectus will comply, in
all material respects, with the provisions of the Securities Act and
the rules and regulations of the Commission thereunder; on the
Effective Date, the Registration Statement did not contain any untrue
statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date the
Prospectus did not and, on the Closing Date and any later date on
which Option Stock is to be purchased, 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 under which they were made, not misleading; provided,
however, that none of the representations and warranties in this
subparagraph (iii) shall apply to statements in, or omissions from,
the Registration Statement or the Prospectus made in reliance upon and
in conformity with information herein or otherwise furnished in
writing to the Company by or on behalf of the Underwriters for use in
the Registration Statement or the Prospectus.
(iv) The Stock is duly and validly authorized, is (or, in
the case of shares of the Stock to be sold by the Company, will be,
when issued and sold to the Underwriters against payment therefor as
provided herein) duly and validly issued, fully paid and nonassessable
and conforms to the description thereof in the Prospectus. No further
approval or authority of the stockholders or the Board of Directors of
the Company will be required for the transfer and sale of the Stock to
be sold by the Selling Securityholders or the issuance and sale of the
Stock as contemplated herein.
(v) The Stock to be sold by the Selling Securityholders
is listed and duly admitted to trading on The Nasdaq National Market,
and prior to the Closing, the Common Stock will be authorized for
listing on the Nasdaq National Market.
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(b) Each of the Selling Securityholders hereby severally and not
jointly represents and warrants as follows:
(i) Such Selling Securityholder has good and valid title
to all the shares of Stock to be sold by such Selling Securityholder
hereunder, free and clear of all liens, encumbrances, equities,
security interests and claims whatsoever, with full right and
authority to deliver the same hereunder, subject, in the case of each
Selling Securityholder, to the rights of the Company, as Custodian
(herein called the Custodian), and that upon the delivery of and
payment for such shares of the Stock hereunder and under the Custody
Agreement and the Power of Attorney (as such terms are defined below),
the several Underwriters will receive good and valid title thereto,
free and clear of all liens, encumbrances, equities, security
interests and claims whatsoever.
(ii) Certificates in negotiable form for the shares of the
Stock to be sold by such Selling Securityholder have been placed in
custody under a Custody Agreement for delivery under this Agreement
with the Custodian; such Selling Securityholder specifically agrees
that the shares of the Stock represented by the certificates so held
in custody for such Selling Securityholder are subject to the
interests of the several Underwriters and the Company, that the
arrangements made by such Selling Securityholder for such custody,
including the Power of Attorney provided for in such Custody
Agreement, are to that extent irrevocable, and that the obligations of
such Selling Securityholder shall not be terminated by any act of such
Selling Securityholder or by operation of law, whether by the death or
incapacity of such Selling Securityholder (or, in the case of a
Selling Securityholder that is not an individual, the dissolution or
liquidation of such Selling Securityholder) or the occurrence of any
other event; if any such death, incapacity, dissolution, liquidation
or other such event should occur before the delivery of such shares of
the Stock hereunder, certificates for such shares of the Stock shall
be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity,
dissolution, liquidation or other event had not occurred, regardless
of whether the Custodian shall have received notice of such death,
incapacity, dissolution, liquidation or other event.
(iii) Such Selling Securityholder has reviewed the
Registration Statement and Prospectus and, although such Selling
Securityholder has not independently verified the accuracy or
completeness of all the information contained therein, nothing has
come to the attention of such Selling Securityholder that would lead
such Selling Securityholder to believe that on the Effective Date, the
Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; or that would lead such Selling Securityholder to believe
that on the Effective Date the Prospectus contained and, on the
Closing Date and any later date on which Option Stock is to be
purchased, contains any untrue statement of a material fact or omitted
or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
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3. PURCHASE OF THE STOCK 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 ____________________ shares of the Underwritten Stock to the several
Underwriters, each Selling Securityholder severally agrees to sell to the
several Underwriters the number of shares of the Underwritten Stock set forth
in Schedule II opposite the name of such Selling Securityholder, and each of
the Underwriters agrees to purchase from the Company and the Selling
Securityholders the respective aggregate number of shares of Underwritten Stock
set forth opposite its name in Schedule I. The price at which such shares of
Underwritten Stock shall be sold by the Company and the Selling Securityholders
and purchased by the several Underwriters shall be $____________________ per
share. The obligation of each Underwriter to the Company and each of the
Selling Securityholders shall be to purchase from the Company and the Selling
Securityholders that number of shares of the Underwritten Stock which
represents the same proportion of the total number of shares of the
Underwritten Stock to be sold by each of the Company and the Selling
Securityholders pursuant to this Agreement as the number of shares of the
Underwritten Stock set forth opposite the name of such Underwriter in Schedule
I hereto represents of the total number of shares of the Underwritten Stock to
be purchased by all Underwriters pursuant to this Agreement, as adjusted by you
in such manner as you deem advisable to avoid fractional shares. 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 each Underwriter is to purchase only the respective number of shares of the
Underwritten Stock specified in Schedule I.
(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 the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company or the Selling Securityholders 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 Stock 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 Stock
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 Stock exceeds 10% of the total number of shares of
the Stock which all Underwriters agreed to purchase hereunder. If the total
number of shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase shall not be purchased or absorbed in accordance with the
two preceding sentences, the Company and the Selling Securityholders shall have
the right, within 24 hours next succeeding the 24-hour period above referred
to, to make arrangements
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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 and the Selling Securityholders 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 and
the Selling Securityholders shall make arrangements within the 24-hour periods
stated above for the purchase of all the shares of the Stock 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 or the Selling Securityholders to any
non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company or the Selling Securityholders.
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
Company and the Selling Securityholders grant an option to the several
Underwriters to purchase, severally and not jointly, up to ____________________
shares in the aggregate of the Option Stock from the Company and the Option
Selling Securityholder at the same price per share as the Underwriters shall
pay for the Underwritten Stock. Said option may be exercised only to cover
over-allotments in the sale of the Underwritten Stock 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 the Company setting forth the aggregate number of
shares of the Option Stock as to which the several Underwriters are exercising
the option and the date on which such shares of the Option Stock are to be
delivered, as determined by you but in no event earlier than the date that the
Underwritten Stock is delivered hereunder. Delivery of certificates for the
shares of Option Stock, and payment therefor, shall be made as provided in
Section 5 hereof. The number of shares of the Option Stock to be purchased by
each Underwriter shall be the same percentage of the total number of shares of
the Option Stock to be purchased by the several Underwriters as such
Underwriter is purchasing of the Underwritten Stock, as adjusted by you in such
manner as you deem advisable to avoid fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters
of the Stock to be purchased by them hereunder 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, in the last paragraph on the page following the front cover page
and under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed
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by the Company (insofar as such information relates to the Underwriters)
constitutes the only information furnished by the Underwriters to the Company
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 Securityholders that the statements made
therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten
Stock and the Option Stock (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 offices of Xxxxx Xxxxxxx Rain Xxxxxxx, 0000 Xxxx Xxxxxx, Xxxxx
0000, Xxxxxx, Xxxxx, at 9:00 a.m., Dallas 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, the Selling Securityholders 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
Stock, and payment therefor, shall be made at the offices of Xxxxx Xxxxxxx Rain
Xxxxxxx, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx, at 9:00 a.m., Dallas
time, on the third business day after the exercise of such option; provided
that any such payment and delivery that under the terms of this subsection 5(b)
should occur on the first or second business day immediately following the
Closing Date shall occur on the third business day following the Closing Date,
unless otherwise agreed by the parties hereto.
(c) Payment for the Stock purchased from the Company shall be made
to the Company or its order, and payment for the Stock purchased from the
Selling Securityholders shall be made to the Custodian, for the account of the
Selling Securityholders, in each case by one or more certified or official bank
check or checks in same day funds. Such payment shall be made upon delivery
of certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the
Stock 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 Underwritten Stock, and at least one
business day prior to the purchase thereof, in the case of the Option Stock.
Certificates for the Underwritten Stock 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 Stock, 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 Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on
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the Closing Date or any later date on which Option Stock is purchased for the
account of such Underwriter. Any such payment by you shall not relieve such
Underwriter from any of its obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The Company and, only to the extent expressly applicable to
the Selling Securityholders, each Selling Securityholder severally covenants
and agrees as follows:
(a) The Company will (i) 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 (ii) 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 promptly and reasonably objected in writing
or which is not in compliance with the Securities Act or the rules and
regulations of the Commission.
(b) The Company will promptly notify each Underwriter in
the event of (i) the request by the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, (ii) the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement,
(iii) the institution or notice of intended institution of any action
or proceeding for that purpose, (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Stock for sale in any jurisdiction, or (v) 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.
(c) The Company will (i) 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, (ii) as promptly as practicable 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 (iii) 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.
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(d) 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 reasonable 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 Stock, 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, at any time
during the period in which a prospectus is required by law to be
delivered by an Underwriter or a dealer, the Underwriters shall
propose to vary the terms of offering of the Stock 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
reasonable opinion either of counsel for the Company or of counsel for
the Underwriters such proposed 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 Stock 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 Stock in
accordance with the applicable provisions of the Securities Act and
the applicable rules and regulations thereunder for such period.
(e) 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.
(f) The Company will cooperate, when and as requested by
you, in the qualification of the Stock 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 Stock.
(g) 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 stockholders of the Company and of all
information, documents and reports filed with the Commission .
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(h) 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.
(i) The Company agrees to pay all costs and expenses
incident to the performance of the obligations of the Company and the
Selling Securityholders under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc.
("NASD") of the Registration Statement, any Preliminary Prospectus and
the Prospectus, (ii) the furnishing to the Underwriters of copies of
any Preliminary Prospectus and of the several documents required by
paragraph (c) of this Section 6 to be so furnished, (iii) the printing
of this Agreement and related documents delivered to the Underwriters,
(iv) the preparation, printing and filing of all supplements and
amendments to the Prospectus referred to in paragraph (d) of this
Section 6, (v) the furnishing to you and the Underwriters of the
reports and information referred to in paragraph (g) of this Section 6
and (vi) the printing and issuance of stock certificates, including
the transfer agent's fees. The Selling Securityholders will pay any
transfer taxes incident to the transfer to the Underwriters of the
shares the Stock being sold by the Selling Securityholders.
(j) The Company agrees 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
copying memoranda for the Underwriters) paid by or for the account of
the Underwriters or their counsel in qualifying the Stock under state
securities or blue sky laws and in the review of the offering by the
NASD.
(k) The provisions of paragraphs (i) and (j) of this
Section are intended to relieve the Underwriters from the payment of
the expenses and costs which the Company hereby agrees to pay and
shall not affect any agreement which the Company and the Selling
Securityholders may make, or may have made, for the sharing of any
such expenses and costs.
(l) The Company and each of the Selling Securityholders
hereby agrees that, without the prior written consent of Xxxxxxxxx &
Xxxxx LLC on behalf of the Underwriters, the Company or such Selling
Securityholder, as the case may be, will not, for a period of 90 days
from the effective date of the Registration Statement, directly or
indirectly, sell, offer, contract to sell, transfer the economic risk
of ownership in, make any short sale, pledge or otherwise dispose of
any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or
acquire Common Stock. The foregoing sentence shall not apply to (A)
the Stock to be sold to the Underwriters pursuant to this Agreement,
(B) shares of Common Stock issued by the Company upon the exercise of
options granted under the stock option plans of the Company (the
"Option Plans") or upon the exercise of warrants outstanding as of the
date hereof, all as described in footnote (2) to the table under the
caption
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"Capitalization" in the Preliminary Prospectus, and (C) options to
purchase Common Stock granted under the Option Plans.
(m) The Company agrees to use all reasonable efforts to
cause all directors that are securityholders of the Company, officers,
and beneficial holders of more than 5% of the outstanding Common Stock
to agree 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 90 days from the effective date of the Registration
Statement, directly or indirectly, sell, offer, contract to sell,
transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any
other rights to purchase or acquire Common Stock; provided, that,
individuals may transfer any shares of Common Stock or securities
convertible into or exchangeable or exercisable for the Company's
Common Stock either during his or her lifetime or on death by will or
intestacy to his or her immediate family or to a trust the
beneficiaries of which are exclusively such individual and/or a member
or members of his or her immediate family; provided, however, that
prior to any such transfer each transferee shall execute an agreement,
satisfactory to Xxxxxxxxx & Xxxxx LLC, pursuant to which each
transferee shall agree to receive and hold such shares of Common
Stock, or securities convertible into or exchangeable or exercisable
for the Common Stock, subject to the foregoing restrictions, and there
shall be no further transfer except in accordance with such
restrictions.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section 7,
the Company and each of the Selling Securityholders severally and not jointly
agree 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 Securities Exchange Act of 1934, as amended (herein called the Exchange
Act), or the common law or otherwise, and the Company and the Selling
Securityholders severally and not jointly agree 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
11.
12
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 Securityholders 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, (2) the indemnity agreement
contained in this paragraph (a) shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Stock which is the subject of the
Preliminary Prospectus (or to the benefit of any person controlling such
Underwriter) if at or prior to the written confirmation of the sale of such
Stock a copy of the Prospectus (or the Prospectus as amended or supplemented)
was not sent or delivered to such person (excluding the documents incorporated
therein by reference) 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 clauses (ii) or (iii) of paragraph (c) of
Section 6 hereof, and (3) each Selling Securityholder shall only be liable
under this paragraph with respect to (A) information pertaining to such Selling
Securityholder furnished by or on behalf of such Selling Securityholder
expressly for use in any Preliminary Prospectus or the Registration Statement
or the Prospectus or any such amendment thereof or supplement thereto or (B)
facts that would constitute a breach of any representation or warranty of such
Selling Securityholder set forth in Section 2(b) hereof. The indemnity
agreements of the Company and the Selling Securityholders contained in this
paragraph (a) and the representations and warranties of the Company and the
Selling Securityholders 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 Stock.
(b) Each Underwriter severally agrees to indemnify and hold
harmless 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,
each other Underwriter and each person (including each partner or officer
thereof) who controls the Company or any such other Underwriter within the
meaning of Section 15 of the Securities Act, and the Selling Securityholders
and each person, if any, who controls the Selling Securityholder 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
12.
13
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 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, any Preliminary Prospectus 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 Stock.
(c) Each party indemnified under the provision of paragraphs (a)
and (b) 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 (herein called the Notice) of
such service or notification to the party or 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 the indemnification provided for herein. 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
(herein called 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, upon
prior written notice to the indemnifying party or parties, 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
13.
14
indemnified party or parties and (ii) in any event, upon prior written notice
to the indemnifying party or parties, 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 (c) 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.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) 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) or (b) 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 Stock 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 and the Selling Securityholders on the one hand and the Underwriters on
the other shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Stock received by the Company and the
Selling Securityholders 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 Stock. Relative fault 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 (d) 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 (d). 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 (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party
14.
15
in connection with investigation, preparing to defend or defending against any
action or claim which is the subject of this paragraph (d). Notwithstanding the
provisions of this paragraph (d), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to the
Stock 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
(d) 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 (c) of this Section 7).
(e) Neither the Company nor the Selling Securityholders 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.
(f) The liability of each Selling Securityholder under the
indemnity, contribution and reimbursement agreements contained in the
provisions of this Section 7 shall be limited to an amount equal to the net
proceeds of the stock sold by such Selling Securityholder to the Underwriters.
The Company and the Selling Securityholders 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.
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 the
Selling Securityholders 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 Stock impracticable, (iii) suspension of trading in securities generally
or 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
15.
16
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 New York 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. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company or the Selling Securityholders to the Underwriters
(including without limitation any liability for loss of anticipated profit) and
no liability of the Underwriters to the Company or the Selling Securityholders
(including without limitation any liability for loss of anticipated profit);
provided, however, that in the event of any such termination the Company agrees
to indemnify and hold harmless the Underwriters from all costs or expenses
incident to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Stock shall be subject to
the performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing
Date or any later date on which Option Stock is 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 Stock
hereunder and the validity and form of the certificates representing
the Stock, 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
Xxxxxx Godward LLP, counsel for the Underwriters.
(c) You shall have received from Xxxxx Xxxxxxx Rain
Xxxxxxx (A Professional Corporation) and other counsel for the Company
and the Selling Securityholders satisfactory to you, one or more
opinions, addressed to the Underwriters and dated the Closing Date,
covering the matters set forth in Annex A hereto, and if Option Stock
is 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
16.
17
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 Stock is to be
purchased, as the case may be, and (viii) 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 Stock, 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 Stock is 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 Price Waterhouse LLP, a
letter or letters, addressed to the Underwriters and dated the Closing
Date and any later date on which Option Stock is 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 (herein
17.
18
called 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 Stock 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, 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 reasonable judgment, makes it impractical or
inadvisable to proceed with the public offering of the Stock or the
purchase of the Option Stock as contemplated by the Prospectus.
(g) You shall have received from Price Waterhouse LLP 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 December 31, 1996, 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, if required, referred to in paragraph (f) of Section 6
hereof.
(i) Prior to the Closing Date, the Stock to be issued and
sold by the Company shall have been duly authorized for listing by the
Nasdaq National Market.
(j) On or prior to the Closing Date, you shall have
received from all directors that are securityholders of the Company,
officers, and beneficial holders of more than 5% of the outstanding
Common Stock 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 90 days from the effective date of
the Registration Statement, directly or indirectly, offer, contract to
sell, transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any
other rights to purchase or acquire Common Stock, subject to the
applicable exceptions set forth in Section 6(l) and (m) hereof.
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 Xxxxxx Godward LLP, counsel for the Underwriters,
shall be reasonably satisfied that they comply in form and scope.
18.
19
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving written notice to
the Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters (including without limitation loss of anticipated profits) and
without liability of the Underwriters to the Company or the Selling
Securityholders (including without limitation loss of anticipated profits);
provided, however, that (i) in the event of such termination, the Company
agrees to indemnify and hold harmless the Underwriters from all costs or
expenses incident to the performance of the obligations of the Company and the
Selling Securityholders under this Agreement, including all costs and expenses
referred to in paragraphs (i) and (j) 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 Securityholders to perform any agreement
herein, to fulfill any of the conditions herein (other than Section
9(d)(viii)), or to comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company 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 OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to deliver the Stock 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 and the
Selling Securityholders by giving notice to you. Any such termination shall be
without liability of the Company and the Selling Securityholders to the
Underwriters (including without limitation any liability for loss of
anticipated profits) and without liability of the Underwriters to the Company
or the Selling Securityholders (including without limitation any liability for
loss of anticipated profits); provided, however, that in the event of any such
termination the Company agrees to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of
the Company and the Selling Securityholders under this Agreement, including all
costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement, the Company hereby agrees 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 shall provide to the
Company, upon request, reasonable assurances of their ability to effect any
refund, when and if due.
19.
20
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of the Company, the Selling Securityholders and the
several Underwriters and, with respect to the provisions of Section 7 hereof,
the several parties (in addition to the Company, the Selling Securityholders
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 Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all
communications hereunder shall be in writing or by facsimile (with written
confirmation of receipt) or telegraph and, if to the Underwriters, shall be
mailed, faxed (with written confirmation of receipt), telegraphed or delivered
to Xxxxxxxxx & Xxxxx LLC, Xxx Xxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000; and
if to the Company, shall be mailed, faxed (with written confirmation of
receipt), telegraphed or delivered to it at its office, 0000 Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, Attention: Xxxx X. Xxxxx, III,
Fax: (000) 000-0000; and if to the Selling Securityholders, shall be mailed,
telegraphed or delivered to the Selling Securityholders in care of Xxxx X.
Xxxxx, III at Pegasus Systems, Inc., 0000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxx 00000, Fax: (000) 000-0000. 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 the Selling Securityholders or
their respective directors or officers, and (c) delivery and payment for the
Stock under this Agreement; provided, however, that if this Agreement is
terminated prior to the Closing Date, the provisions of paragraphs (l), (m) and
(n) 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.
Please sign and return to the Company and to the Selling
Securityholders in care of the Company the enclosed duplicates of this letter,
whereupon this letter will become a binding agreement among the Company, the
Selling Securityholders and the several Underwriters in accordance with its
terms.
20.
21
Very truly yours,
PEGASUS SYSTEMS, INC.
By
------------------------------------
Xxxx X. Xxxxx, III
President and Chief Executive
Officer
SELLING SECURITYHOLDERS:
By
------------------------------------
Xxxx X. Xxxxx, III
Attorney-In-Fact
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
XXXXXXXXX & XXXXX LLC
NATIONSBANC XXXXXXXXXX SECURITIES LLC
XXXXX XXXXX XXXXXX & COMPANY, LLC
By: XXXXXXXXX & XXXXX LLC
By
--------------------------------
Xxxxxxx X. Xxxxxx
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
21.
22
SCHEDULE I
UNDERWRITERS
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
------------ ---------
Xxxxxxxxx & Xxxxx LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NationsBanc Xxxxxxxxxx Securities LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Xxxxx Xxxxx Xxxxxx & Company, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
--------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
==============
23
SCHEDULE II
SELLING SECURITYHOLDERS
NUMBER OF
NAME AND ADDRESS SHARES
OF SELLING SECURITYHOLDERS TO BE SOLD
-------------------------- ----------
------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
===================
24
ANNEX A
MATTERS TO BE COVERED IN THE OPINIONS OF
COUNSEL FOR THE COMPANY AND THE SELLING SECURITYHOLDERS
(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 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 two million (2,000,000) shares of Preferred Stock, none of
which are outstanding, and one hundred million (100,000,000) shares of
Common Stock, $.01 par value, of which _______________________________
_______________ (____________________) shares are outstanding
(including the Underwritten Stock plus the number of shares of Option
Stock 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
Underwritten Stock and the shares of Option Stock issued, if any) have
been duly and validly issued and are fully paid and nonassessable; any
Option Stock 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, stockholders exist with respect to the Stock,
or the issue and sale thereof, pursuant to the Certificate 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 Stock being sold by the Selling Securityholders or the
issue and sale of the Stock;
(iii) the Registration Statement has become effective
under the Securities Act and, to 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
25
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 have 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 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 Stock 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 such counsel's
knowledge accurately and adequately set forth therein in all material
respects or no response is required with respect to such Items, and
the description of the Company's stock option plans and stock purchase
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 plans 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 or documents 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 each of the Selling
Securityholders. The Custody Agreement between the Selling
Securityholders and Pegasus Systems, Inc., a Delaware corporation, as
Custodian, and the Power of Attorney referred to in such Custody
Agreement have been duly executed and delivered by such Selling
Securityholder. The Custody Agreement
2.
26
entered into by, and the Power of Attorney given by, such Selling
Securityholder is valid and binding on such Selling Securityholder and
each Selling Securityholder has full legal right and authority to
enter into the Underwriting Agreement and to sell, transfer and
deliver in the manner provided in the Underwriting Agreement the
shares of Stock sold by such Selling Securityholder hereunder;
(x) the issue and sale by the Company of the
shares of Stock sold by the Company as contemplated by the
Underwriting Agreement will not conflict with, or result in a breach
of, the Certificate of Incorporation or Bylaws of the Company or any
of its subsidiaries or, to such counsel's knowledge any agreement or
instrument 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) good and valid title to the shares of Stock
sold by the Selling Securityholders 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 of Stock 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;
(xiii) 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 Stock by the
Underwriters or as may be required by the NASD; and
(xiv) the Stock sold by the Selling Securityholders
is listed and duly admitted to trading on the Nasdaq National Market
and the Stock issued and sold by the Company is listed on the Nasdaq
National Market.
3.
