EXHIBIT 1.1
CHEAP TICKETS, INC.
3,500,000 Shares Common Stock/1/
Underwriting Agreement
______________, 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
As Representatives of the Several
Underwriters Named in Schedule A
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Section 1. Introductory. Cheap Tickets, Inc., a Delaware corporation
("Company"), has an authorized capital stock consisting of 10,000,000 shares of
Preferred Stock, par value $0.01 per share, of which 425,000 shares of Preferred
Stock were outstanding as of ___________, 1999 and 70,000,000 shares of Common
Stock, par value $0.001 per share ("Common Stock"), of which 14,473,676 shares
were outstanding as of such date. The Company proposes to issue and sell an
aggregate of 3,500,000 shares of its authorized but unissued Common Stock to the
several underwriters named in Schedule A as it may be amended by the Pricing
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Agreement hereinafter defined ("Underwriters"), who are acting severally and not
jointly. Such total of 3,500,000 shares of Common Stock proposed to be sold by
the Company is hereinafter referred to as the "Firm Shares." In addition, the
Company proposes to grant to the Underwriters an option to purchase up to
525,000 additional shares of Common Stock ("Option Shares") as provided in
Section 4 hereof. The Firm Shares and, to the extent such option is exercised,
the Option Shares, are hereinafter collectively referred to as the "Shares."
You have advised the Company that the Underwriters propose to make a public
offering of their respective portions of the Shares as soon as you deem
advisable after the registration statement hereinafter referred to becomes
effective, if it has not yet become effective, and the Pricing Agreement
hereinafter defined has been executed and delivered.
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company and the Representatives, acting on behalf of the
several Underwriters, shall enter into an agreement substantially in the form of
Exhibit A hereto (the "Pricing Agreement"). The Pricing Agreement may take the
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form of an exchange of any standard form of written telecommunication between
the Company and the Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Shares
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will be governed by this Agreement, as supplemented by the Pricing Agreement.
From and after the date of the execution and delivery of
_____________
/1/ Plus an option to acquire up to 525,000 additional shares from the Company
to cover overallotments.
the Pricing Agreement, this Agreement shall be deemed to incorporate the Pricing
Agreement.
The registration statement referred to in Section 2(a) below (as amended,
if applicable) at the time it becomes effective and the prospectus constituting
a part thereof (including the information, if any, deemed to be part thereof
pursuant to Rule 430A(b) and/or Rule 434), as from time to time amended or
supplemented, are hereinafter referred to as the "Registration Statement," and
the "Prospectus," respectively, except that if any revised prospectus shall be
provided to the Underwriters by the Company for use in connection with the
offering of the Shares which differs from the Prospectus on file at the
Commission at the time the Registration Statement became or becomes effective
(whether or not such revised prospectus is required to be filed by the Company
pursuant to Rule 424(b)), the term Prospectus shall refer to such revised
prospectus from and after the time it was provided to the Underwriters for such
use. If the Company elects to rely on Rule 434 of the 1933 Act, all references
to "Prospectus" shall be deemed to include, without limitation, the form of
prospectus and the term sheet, taken together, provided to the Underwriters by
the Company in accordance with Rule 434 of the 1933 Act ("Rule 434 Prospectus").
Any registration statement (including any amendment or supplement thereto or
information which is deemed part thereof) filed by the Company under Rule 462(b)
("Rule 462(b) Registration Statement") shall be deemed to be part of the
"Registration Statement" as defined herein, and any prospectus (including any
amendment or supplement thereto or information which is deemed part thereof)
included in such registration statement shall be deemed to be part of the
"Prospectus," as defined herein, as appropriate. The Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder
are hereinafter collectively referred to as the "Exchange Act."
The Company hereby confirms its agreements with the Underwriters as
follows:
Section 2. Representations and Warranties of the Company. Except as
disclosed in the Registration Statement or the Prospectus, as the case may be,
the Company represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-70841) and a
related preliminary prospectus with respect to the Shares have been
prepared and filed with the Securities and Exchange Commission
("Commission") by the Company in conformity with the requirements of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "1933 Act;" unless indicated to
the contrary, all references herein to specific rules are rules promulgated
under the ▇▇▇▇ ▇▇▇); and the Company has so prepared and has filed such
amendments thereto, if any, and such amended preliminary prospectuses as
may have been required to the date hereof and will file such additional
amendments thereto and such amended prospectuses as may hereafter be
required. There have been or will promptly be delivered to you three
signed copies of such registration statement and amendments, three copies
of each exhibit filed therewith, and conformed copies of such registration
statement and amendments (but without exhibits) and of the related
preliminary prospectus or prospectuses and final forms of prospectus for
each of the Underwriters.
(b) The Company does not have any subsidiaries as defined in Rule
1.02 of Regulation S-X.
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(c) The Company has not received any order of the Commission
preventing or suspending the use of any preliminary prospectus, and has not
received any notice that proceedings for that purpose are pending or
contemplated by the Commission, and each preliminary prospectus has
conformed in all material respects with the requirements of the 1933 Act
and, as of its date, has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein not misleading; and when the Registration Statement became or
becomes effective, and at all times subsequent thereto, up to the First
Closing Date or the Second Closing Date hereinafter defined, as the case
may be, the Registration Statement, including the information deemed to be
part of the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b), if applicable, and the Prospectus and any amendments or
supplements thereto, contained or will contain all statements that are
required to be stated therein in accordance with the 1933 Act and in all
material respects conformed or will in all material respects conform to the
requirements of the 1933 Act, and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, included or will
include any untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company
makes no representation or warranty as to information contained in or
omitted from any preliminary prospectus, the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of any Underwriter through the Representatives specifically for use
in the preparation thereof.
(d) The Company has been duly incorporated and are validly existing
as corporations in good standing under the laws of its place of
incorporation, with the corporate power and authority to own its properties
and conduct its business as described in the Prospectus; the Company is
duly qualified to do business as a foreign corporation under the
corporation law of, and is in good standing as such in, each jurisdiction
in which it owns or leases properties, has an office, or in which business
is conducted and such qualification is required except in any such case
where the failure to so qualify or be in good standing would not have a
material adverse effect upon the condition (financial or otherwise),
business, assets, results of operations or prospects of the Company or upon
the Company's ability to perform its obligations under this Agreement or
the transactions contemplated hereby (a "Material Adverse Effect"); and no
proceeding of which the Company has knowledge has been instituted in any
such jurisdiction, revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.
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(e) As of the date of this Agreement, the Company has an authorized
and outstanding capitalization as described under the caption
"Capitalization" in the Prospectus. The issued and outstanding shares of
capital stock of the Company as set forth in the Prospectus have been duly
authorized and validly issued, are fully paid and nonassessable, and
conform in all material respects to the description thereof contained in
the Prospectus; and except as described in the Prospectus, there is no
commitment, plan or arrangement to issue, and no outstanding option,
warrant or other right calling for the issuance of, any share of capital
stock of the Company; and except as described in the Prospectus, there is
outstanding no security or other instrument that by its terms is
convertible into or exchangeable for capital stock of the Company, and
there is no commitment, plan or arrangement to issue such a security or
instrument.
(f) The Shares to be sold by the Company have been duly authorized
and when issued, delivered and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and will conform in all
material respects to the description thereof contained in the Prospectus.
(g) The making and performance by the Company of this Agreement and
the Pricing Agreement have been duly authorized by all necessary corporate
action and will not violate any provision of the Company's charter or
bylaws and will not result in the breach, or be in contravention, of any
provision of any material agreement, franchise, License (as hereinafter
defined), indenture, mortgage, deed of trust, or other instrument to which
the Company is a party or by which the Company or its property may be bound
or affected, or any order, rule or regulation applicable to the Company of
any court (foreign, federal, state, local or otherwise), arbitration or
other alternative dispute forum, foreign, federal, state, local or other
government or governmental department, agency, board, commission, bureau or
instrumentality or other regulatory authority (collectively, "Governmental
Authority") having jurisdiction over the Company or any of its properties,
or any order of any Governmental Authority entered in any proceeding to
which the Company was or is now a party or by which it is bound. No
consent, approval, authorization or other order of any Governmental
Authority is required for the execution and delivery of this Agreement or
the Pricing Agreement or the consummation of the transactions contemplated
herein or therein, except for compliance with the 1933 Act and state or
province securities laws applicable to the public offering of the Shares by
the several Underwriters and clearance of such offering with the National
Association of Securities Dealers, Inc. ("NASD"). This Agreement has been
duly executed and delivered by the Company.
(h) The accountants who have expressed their opinions with respect to
the financial statements and schedules included in the Registration
Statement are independent accountants as required by the 1933 Act.
(i) The financial statements and schedules of the Company included in
the Registration Statement, including the notes thereto, present fairly the
financial position of the Company as of the respective dates of such
financial statements, and the results of operations and cash flows of the
Company for the respective periods covered thereby, all in conformity with
generally accepted accounting principles consistently applied throughout
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the periods involved, except as disclosed in the Prospectus; and the
financial information set forth in the Prospectus under the captions
"Summary Financial Data" and "Selected Financial Data" presents fairly on
the basis stated in the Prospectus, the information set forth therein.
(j) The Company is not in violation of its charter or bylaws or in
default under any consent decree, order, writ, judgment, award or
injunction of any Governmental Authority, or in default with respect to any
material provision of any lease, loan agreement, note, franchise, License
(as hereinafter defined), permit or other contract obligation to which it
is a party; and there does not exist any state of facts which constitutes
an event of default as defined in such documents or which, with notice or
lapse of time or both, would constitute such an event of default, in each
case, except for defaults which neither singly nor in the aggregate are
material to the Company.
(k) There are no material legal or governmental proceedings pending,
or to the Company's knowledge, threatened to which the Company is or may be
a party or of which material property owned or leased by the Company is or
may be the subject, or which are related to environmental or discrimination
matters which are not disclosed in the Prospectus, or which question the
validity of this Agreement or the Pricing Agreement or any action taken or
to be taken pursuant hereto or thereto.
(l) Except as described in the Prospectus, there are no holders of
securities of the Company having rights to registration thereof, preemptive
rights or rights of first refusal to purchase Common Stock from the
Company. All such holders of registration rights have waived such rights
with respect to the offering being made by the Prospectus.
(m) The Company has good and marketable title to all the properties
and assets reflected as owned in the financial statements hereinabove
described (or elsewhere in the Prospectus), subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except those, if any, reflected
in such financial statements (or elsewhere in the Prospectus) or which are
not material to the Company. The Company holds its leased properties which
are material to the Company under valid and binding leases.
(n) The Company has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares.
(o) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
contemplated by the Prospectus, the Company has not incurred any material
liabilities or obligations, direct or contingent, nor entered into any
material transactions not in the ordinary course of business and there has
not been any material adverse change in their condition (financial or
otherwise), business, assets, results of operations or prospects nor any
material change in their capital stock, short-term debt or long-term debt.
Except as disclosed in writing to the Representatives prior to the date
hereof, the Company has not received notice (either formally or informally)
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of the non-renewal or anticipated non-renewal of one or more contracts
currently maintained by the Company with any of its suppliers or customers,
which non-renewal(s) would or could be expected to have a Material Adverse
Effect.
(p) There is no material document of a character required to be
described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required.
(q) The Company owns and possesses all right, title and interest in
and to, or has duly licensed from third parties a valid, enforceable right
to use, all patents, patent rights, trade secrets, inventions, know-how,
trademarks, trade names, copyrights, service marks and other proprietary
rights ("Trade Rights") material to the business of the Company. The
Company has not received any notice of infringement, misappropriation or
conflict from any third party as to such material Trade Rights which has
not been resolved or disposed of and the Company has not infringed,
misappropriated or otherwise conflicted with material Trade Rights of any
third parties, which infringement, misappropriation or conflict would have
a Material Adverse Effect.
(r) The conduct of the business of the Company is in compliance in
all respects with applicable foreign, federal, state, local and other laws
and regulations, except where the failure to be in compliance would not
have a Material Adverse Effect. The Company has no knowledge of, nor has
the Company received notice of, any violation or alleged violation by the
Company of any such laws or regulations.
(s) All offers and sales of the Company's capital stock prior to the
date hereof were at all relevant times exempt from the registration
requirements of the 1933 Act and were duly registered with or the subject
of an available exemption from the registration requirements of the
applicable state or province securities laws.
(t) The Company have filed all necessary foreign, federal and state
income, franchise, value-added, sales and use and similar tax returns and
have paid all taxes shown as due thereon, and there is no tax deficiency
that has been, or to the knowledge of the Company might be, asserted
against the Company or any of its properties or assets that would or could
be expected to have a Material Adverse Effect.
(u) A registration statement relating to the Common Stock has been
declared effective by the Commission pursuant to the Exchange Act and the
Common Stock is duly registered thereunder. The Shares have been approved
for listing on the Nasdaq National Market, subject to notice of issuance or
sale of the Shares, as the case may be.
(v) The Company is not, and does not intend to conduct its businesses
in a manner in which it would become, an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended ("Investment
Company Act").
(w) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, An Act Relating to Disclosure
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of Doing Business with Cuba, and the Company further agrees that if it
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commences engaging in business with the government of Cuba or with any
person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with the
Florida Department of Banking and Finance (the "Department"), whichever
date is later, or if the information reported in the Prospectus, if any,
concerning the Company's business with Cuba or with any person or affiliate
located in Cuba changes in any material way, the Company will provide the
Department notice of such business or change, as appropriate, in a form
acceptable to the Department.
(x) The Company has obtained all material licenses, permits,
certificates, authorizations, approvals or consents (collectively, the
"Licenses") required by any Governmental Authority to properly and legally
operate or conduct the business in which it is engaged on the date hereof
and which are necessary or desirable for the successful conduct of its
business as conducted and as proposed to be conducted. Each License has
been duly obtained, is valid and in full force and effect, is renewable by
its terms or in the ordinary course of business without the need to comply
with any special qualifications or procedures or to pay any amount other
than routine filing fees. The Company (i) is not subject to any pending or
threatened administrative or judicial proceeding to revoke, cancel or
declare any License granted to it invalid in any respect, (ii) is not
acting outside the scope and authority granted to it pursuant to any such
License, and is not otherwise in default or in violation with respect to
any such License, and no event has occurred which constitutes, or with due
notice or lapse of time or both may constitute, a default by it or a
violation of, any License and (iii) has not permitted any License granted
to it to lapse since its original effective date, except where such lapse
did not have a Material Adverse Effect. The Company has completed and
submitted, on a timely basis, all reports and filings associated with its
business as are required by any Governmental Authority.
(y) The Company carries, or is covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of its business and
the value of their properties and as is customary for companies engaged in
similar businesses in similar industries.
Section 3. Representations and Warranties of the Underwriters. The
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company that the information set forth (a) on the cover page of the
Prospectus with respect to price, underwriting discount and terms of the
offering and (b) under "Underwriting" in the Prospectus was furnished to the
Company by and on behalf of the Underwriters for use in connection with the
preparation of the Registration Statement and is correct and complete in all
material respects.
Section 4. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters named in Schedule A hereto, and the Underwriters agree, severally
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and not jointly, to purchase 3,500,000 Firm Shares from the Company at the price
per share set forth in the Pricing Agreement. The obligation of each
Underwriter to the Company shall be to purchase from the Company that number of
Shares set forth opposite the name of such Underwriter in Schedule A hereto.
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The initial public offering price and the purchase price shall be set forth in
the Pricing Agreement.
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Delivery to you of certificates for the Firm Shares through the facilities
of The Depository Trust Company shall be made against receipt of a wire transfer
reference number issued by the Federal Reserve System evidencing payment of the
purchase price therefore by the several Underwriters by wire transfer of
immediately available funds, to an account specified in writing by the Company,
at or before 11:00 A.M., Chicago Time, (a) on the third business day after the
effective date of this Agreement, (b) if this Agreement is executed and
delivered and becomes effective after 3:30 P.M., Chicago Time, the fourth
business day after the effective date of this Agreement, or (c) at such other
time on such other day, not later than ten business days after the effective
date of this Agreement, as shall be agreed upon by the Representatives and the
Company (the "First Closing Date"). Such certificates will be in such
denominations and registered in such names as you request by notice to the
Company prior to 10:00 A.M., Chicago Time, on the second business day preceding
the First Closing Date.
In addition, on the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 525,000 Option Shares, at the
same purchase price per share to be paid for the Firm Shares, for use solely in
covering any overallotments made by the Underwriters in the sale and
distribution of the Firm Shares. The option granted hereunder may be exercised
at any time (but not more than once) within 30 days after the date of the
initial public offering upon notice by you to the Company setting forth the
aggregate number of Option Shares as to which the Underwriters are exercising
the option, the names and denominations in which the certificates for such
shares are to be registered and the time and place at which such certificates
will be delivered. Such time of delivery (which may not be earlier than the
First Closing Date), being herein referred to as the "Second Closing Date,"
shall be determined by you, but if at any time other than the First Closing
Date, shall not be earlier than three nor later than 10 full business days after
delivery of such notice of exercise. The number of Option Shares to be
purchased by each Underwriter shall be determined by multiplying the number of
Option Shares to be sold by the Company pursuant to such notice of exercise by a
fraction, the numerator of which is the number of Firm Shares to be purchased by
such Underwriter as set forth opposite its name in Schedule A and the
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denominator of which is the total number of Firm Shares (subject to such
adjustments to eliminate any fractional share purchases as you in your absolute
discretion may make). The manner of payment for and delivery of the Option
Shares shall be the same as for the Firm Shares as specified in the preceding
paragraph.
You have advised the Company that each Underwriter has authorized you to
accept delivery of its Shares, to make payment and to receipt therefor. You,
individually and not as the Representatives of the Underwriters, may make
payment for any Shares to be purchased by any Underwriter whose funds shall not
have been received by you by the First Closing Date or the Second Closing Date,
as the case may be, for the account of such Underwriter, but any such payment
shall not relieve such Underwriter from any obligation hereunder.
Section 5. Covenants of the Company. The Company covenants and agrees
that:
(a) The Company will advise you promptly of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of the
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institution of any proceedings for that purpose, or of any notification of
the suspension of qualification of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceedings for that purpose, and
will also advise you promptly of any request of the Commission for
amendment or supplement of the Registration Statement, of any preliminary
prospectus or of the Prospectus, or for additional information.
(b) The Company will give you notice of its intention to file or
prepare any amendment to the Registration Statement (including any post-
effective amendment) or any Rule 462(b) Registration Statement or any
amendment or supplement to the Prospectus (including any revised prospectus
which the Company proposes for use by the Underwriters in connection with
the offering of the Shares which differs from the prospectus on file at the
Commission at the time the Registration Statement became or becomes
effective, whether or not such revised prospectus is required to be filed
pursuant to Rule 424(b) and any term sheet as contemplated by Rule 434) and
will furnish you with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file any such amendment or supplement or use any such
prospectus to which you or counsel for the Underwriters shall reasonably
object.
(c) If the Company elects to rely on Rule 434 of the 1933 Act, the
Company will prepare a term sheet that complies with the requirements of
Rule 434. If the Company elects not to rely on Rule 434, the Company will
provide the Underwriters with copies of the form of prospectus, in such
numbers as the Underwriters may reasonably request, and file with the
Commission such prospectus in accordance with Rule 424(b) of the 1933 Act
by the close of business in New York City on the second business day
immediately succeeding the date of the Pricing Agreement. If the Company
elects to rely on Rule 434, the Company will provide the Underwriters with
copies of the form of Rule 434 Prospectus, in such numbers as the
Underwriters may reasonably request, by the close of business in New York
on the business day immediately succeeding the date of the Pricing
Agreement.
(d) If at any time when a prospectus relating to the Shares is
required to be delivered under the 1933 Act any event occurs as a result of
which the Prospectus, including any amendments or supplements, would
include an untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or
supplement the Prospectus, including any amendments or supplements thereto
and including any revised prospectus which the Company proposes for use by
the Underwriters in connection with the offering of the Shares which
differs from the prospectus on file with the Commission at the time of
effectiveness of the Registration Statement, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) to comply with
the 1933 Act, the Company promptly will advise you thereof and will
promptly prepare and file with the Commission an amendment or supplement
(in form and substance satisfactory to counsel for the Underwriters) which
will correct such statement or omission or an amendment which will effect
such compliance; and, in case any Underwriter is required to deliver a
prospectus nine months or more after the effective date of the Registration
Statement, the Company upon request, but at the expense of such
Underwriter, will prepare promptly such prospectus or
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prospectuses as may be necessary to permit compliance with the requirements
of Section 10(a)(3) of the 1933 Act.
(e) The Company will not, prior to the earlier of the Second Closing
Date or termination or expiration of the option relating to the Option
Shares, enter into any material transaction, other than in the ordinary
course of business, except as contemplated by the Prospectus.
(f) The Company will not acquire any capital stock of the Company
prior to the earlier of the Second Closing Date or termination or
expiration of the option relating to the Option Shares nor will the Company
declare or pay any dividend or make any other distribution upon the Common
Stock payable to stockholders of record on a date prior to the earlier of
the Second Closing Date or termination or expiration of the option relating
to the Option Shares, except in either case as contemplated by the
Prospectus.
(g) As soon as practicable, but in any event not later than 15 months
after the effective date of the Registration Statement, the Company will
make generally available to its security holders an earnings statement
(which need not be audited) covering a period of at least 12 months
beginning after the effective date of the Registration Statement, which
will satisfy the provisions of the last paragraph of Section 11(a) of the
1933 Act.
(h) During such period as a prospectus is required by law to be
delivered in connection with offers and sales of the Shares by an
Underwriter or dealer, the Company will furnish to you at its expense,
subject to the provisions of subsection (d) hereof, copies of the
Registration Statement, the Prospectus, each preliminary prospectus and
all amendments and supplements to any such documents in each case as soon
as available and in such quantities as you may reasonably request, for the
purposes contemplated by the 1933 Act.
(i) The Company will cooperate with the Underwriters in qualifying or
registering the Shares for sale under the securities laws of such
jurisdictions as you designate, and will continue such qualifications in
effect so long as reasonably required for the distribution of the Shares.
In connection with such qualification or registration of the Shares, the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any such jurisdiction where
it is not currently qualified or where it would be subject to taxation as a
foreign corporation.
(j) During the period of five years hereafter, the Company will
furnish you and each of the other Underwriters with a copy (i) as soon as
practicable after the filing thereof, of each report filed by the Company
with the Commission, any securities exchange or the NASD, (ii) as soon as
practicable after the release thereof, of each material press release in
respect of the Company, (iii) as soon as available, of each report of the
Company mailed to stockholders and (iv) any additional information of a
public nature concerning the Company or its business that you may
reasonably request.
(k) The Company will use the net proceeds received by it from the
sale of the
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Shares being sold by it in the manner specified in the Prospectus.
(l) If, at the time of effectiveness of the Registration Statement,
any information shall have been omitted therefrom in reliance upon Rule
430A and/or Rule 434, then immediately following the execution of the
Pricing Agreement, the Company will prepare, and file or transmit for
filing with the Commission in accordance with such Rule 430A, Rule 424(b)
and/or Rule 434, copies of an amended Prospectus, or, if required by such
Rule 430A and/or Rule 434, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted. If required, the Company will prepare and file, or transmit for
filing, a Rule 462(b) Registration Statement not later than the date of the
execution of the Pricing Agreement. If a Rule 462(b) Registration
Statement is filed, the Company shall make payment of, or arrange for
payment of, the additional registration fee owing to the Commission
required by Rule 111.
(m) The Company will comply with all registration, filing and
reporting requirements of the Exchange Act and the Nasdaq National Market
which may from time to time be applicable to the Company.
(n) The Company agrees not to sell, contract to sell or otherwise
dispose of any Common Stock or securities convertible into Common Stock
(except Common Stock issued pursuant to currently outstanding options,
warrants or convertible securities) for a period of 180 days after this
Agreement becomes effective without the prior written consent of ▇▇▇▇▇▇▇
▇▇▇▇▇ & Company, L.L.C. The Company has obtained similar agreements from
each of its officers and directors. At or before the time the Pricing
Agreement is executed, the Company shall have delivered to you a lock-up
agreement substantially in the form of Exhibit B hereto from each of the
---------
Company's officers, directors and stockholders in which each such person
agrees not to offer, sell, contract to sell or otherwise dispose of any
Common Stock or any securities exercisable for or convertible into Common
Stock for a period of 180 days after the date of such lock-up agreement
without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C.
(o) The Company will promptly deliver to the Representatives copies
of all correspondence to and from, and all documents issued to and by, the
Commission in connection with the registration of the Shares under the 1933
Act.
(p) Prior to the First Closing Date, the Company will issue no press
release or other communication to the public, directly or indirectly, with
respect to the Company or any of its subsidiaries or with respect to the
financial condition, results of operations, business, properties, assets or
liabilities of any of them, or the offering of the Shares, without your
prior consent, which consent shall not be unreasonably withheld.
Section 6. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective as to
all of its provisions or is terminated, the Company agrees to pay (i) all costs,
fees and expenses (other than legal fees and disbursements of counsel for the
Underwriters and the expenses incurred by the Underwriters) incurred in
connection with the performance of the Company's obligations hereunder,
including
11
without limiting the generality of the foregoing, all fees and expenses of legal
counsel for the Company and of the Company's independent accountants, all costs
and expenses incurred in connection with the preparation, printing, filing and
distribution of the Registration Statement, each preliminary prospectus and the
Prospectus (including all exhibits and financial statements) and all amendments
and supplements provided for herein, this Agreement, the Pricing Agreement and
the blue sky memorandum, (ii) all costs, fees and expenses (including reasonable
legal fees and disbursements of counsel for the Underwriters) incurred by the
Underwriters in connection with qualifying or registering all or any part of the
Shares for offer and sale under applicable state or province securities laws,
including the preparation of a blue sky memorandum relating to the Shares and
clearance of such offering with the NASD; and (iii) all fees and expenses of the
Company's transfer agent, printing of the certificates for the Shares and all
transfer taxes, if any, with respect to the sale and delivery of the Shares to
the several Underwriters.
Section 7. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Shares
on the First Closing Date and the Option Shares on the Second Closing Date shall
be subject to the accuracy of the representations and warranties on the part of
the Company herein set forth as of the date hereof and as of the First Closing
Date or the Second Closing Date, as the case may be, to the accuracy of the
statements of officers of the Company made pursuant to the provisions hereof, to
the performance by the Company of its obligations hereunder, and to the
following additional conditions:
(a) The Registration Statement shall have become effective either
prior to the execution of this Agreement or not later than 1:00 P.M.,
Chicago Time, on the first full business day after the date of this
Agreement, or such later time as shall have been consented to by you but in
no event later than 1:00 P.M., Chicago Time, on the third full business day
following the date hereof; and prior to the First Closing Date or the
Second Closing Date, as the case may be, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending
or, to the knowledge of the Company or you, shall be contemplated by the
Commission. If the Company has elected to rely upon Rule 430A and/or Rule
434, the information concerning the initial public offering price of the
Shares and price-related information shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) within the prescribed period
and the Company will provide evidence satisfactory to the Representatives
of such timely filing (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with
the requirements of Rules 430A and 424(b)). If a Rule 462(b) Registration
Statement is required, such Registration Statement shall have been
transmitted to the Commission for filing and become effective within the
prescribed time period and, prior to the First Closing Date, the Company
shall have provided evidence of such filing and effectiveness in accordance
with Rule 462(b).
(b) The Shares shall have been qualified for sale under the state or
province securities laws of such jurisdictions as shall have been specified
by the Representatives.
(c) The legality and sufficiency of the authorization, issuance and
sale or transfer and sale of the Shares hereunder, the validity and form of
the certificates representing the
12
Shares, the execution and delivery of this Agreement and the Pricing
Agreement, and all corporate proceedings and other legal matters incident
thereto, and the form of the Registration Statement and the Prospectus
(except financial statements) shall have been approved by counsel for the
Underwriters.
(d) You shall not have advised the Company that the Registration
Statement or the Prospectus or any amendment or supplement thereto,
contains an untrue statement of fact, which, in the opinion of counsel for
the Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein
or necessary to make the statements therein not misleading.
(e) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred any change, or any development involving a
prospective change, in or affecting particularly the business or properties
of the Company or its subsidiaries, whether or not arising in the ordinary
course of business, which, in the judgment of the Representatives, makes it
impractical or inadvisable to proceed with the public offering or purchase
of the Shares as contemplated hereby.
(f) There shall have been furnished to you, as Representatives of the
Underwriters, on the First Closing Date or the Second Closing Date, as the
case may be, except as otherwise expressly provided below:
(i) An opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the
Company, addressed to the Underwriters and dated the First Closing
Date or the Second Closing Date, as the case may be, to the effect
that:
13
(1) the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to own its
properties and conduct its business as described in the
Prospectus. The Company is duly qualified to transact business
as a foreign corporation, and is in good standing in the States of
Hawaii, California, Colorado and New York. There are no other
jurisdictions other than the above where the failure to qualify to
do business as a foreign corporation would have a Material Adverse
Effect;
(2) this Agreement and the Pricing Agreement have been duly
authorized, executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company;
(3) the Shares have been duly authorized and, upon delivery to
the Underwriters against payment therefor in accordance with the
terms of this Agreement and the Pricing Agreement, will be validly
issued, fully paid and nonassessable and will be free of any
pledge, lien, encumbrance, claim, or rights of first refusal in
favor of, stockholders with respect to any of the Shares or the
issuance or sale thereof (other than any pledge, lien,
encumbrance, claim or right of first refusal of a purchaser of
Shares), and the issuance of the Shares is not subject to
preemptive rights. The Shares to be sold hereunder have been duly
and validly authorized and qualified for inclusion on the Nasdaq
National Market, subject to notice of issuance;
(4) all outstanding shares of the Company's Common Stock have
been duly authorized, validly issued and are fully paid and
nonassessable and free of preemptive rights;
(5) the execution and delivery of this Agreement and the
Pricing Agreement and the performance by the Company of its terms
will not violate any federal or applicable state securities law or
will not materially violate any statute, order, rule or regulation
of any Governmental Authority having jurisdiction over the
Company;
(6) the execution and delivery of this Agreement and the
Pricing Agreement and the performance by the Company of their
terms do not violate or result in a violation of the Company's
certificate of incorporation or bylaws or any judgment, order or
decree, known to such counsel, of any court or arbiter, to which
the Company is a party, and, to such counsel's knowledge, will not
constitute a material breach of the terms, conditions or
provisions of or constitute a default under any contract,
undertaking, indenture, License or other agreement or instrument
by which the Company or its property is now bound or to which the
Company is now a party;
(7) the authorized capital stock of the Company, of which
there is outstanding the amount set forth in the Registration
Statement and the
14
Prospectus, conforms in all material respects to the description
thereof contained under the heading "Description of Capital Stock"
in the Prospectus;
(8) the Registration Statement has become effective under the
1933 Act, and such counsel is not aware after reasonable inquiry
and investigation that any stop order suspending the effectiveness
thereof has been issued or any proceedings for that purpose have
been instituted or are pending or threatened under the 1933 Act;
(9) the Registration Statement and Prospectus, as of the
effective date thereof, complied as to form in all material
respects with the requirements of the 1933 Act (except as to the
financial statements, supporting schedules, footnotes and other
financial and statistical information included therein, as to
which such counsel expresses no opinion). Such counsel does not
know of any statutes, rules and regulations required to be
described or referred to in the Registration Statement or the
Prospectus that are not described;
(10) the statements under the captions "Management -- Stock
Option Plan" and "-- 401(k) Plan," "Description of Capital Stock"
and "Risk Factors -- Shares Eligible for Future Sale" in the
Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, are accurate
summaries and fairly and correctly present, in all material
respects, the information required to be disclosed with respect to
such documents and matters by the 1933 Act and the rules and
regulations thereunder;
(11) there are no legal or governmental proceedings pending or
threatened, and no contract or other document, known to such
counsel of a character required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit
to the Registration Statement that is not described or filed, as
required;
(12) no authorization, approval or consent of any court or
governmental authority or agency is required in connection with
the transactions contemplated by this Agreement and the Pricing
Agreement, except such as have been obtained under the 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
several Underwriters;
(13) to such counsel's knowledge after reasonable inquiry and
investigation, the Company is not in violation of its charter or
is in breach of, or in default under (nor has any event occurred
which, with notice, lapse of time or both would constitute a
breach of, or default under) any indenture, lease, credit
agreement or other agreement or instrument to which the Company is
a party or by which the Company's properties may be bound are
affected, where such violation or breach or default could have a
Material
15
Adverse Effect;
(14) except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue, or
register pursuant to the 1933 Act, any shares of capital stock of
the Company, in connection with the issuance and sale of the
Shares to be sold by the Company to the Underwriters pursuant to
this Agreement;
(15) the Company is not an "investment company" or a person
"controlled by" an "investment company" within the meaning of the
Investment Company Act; and
(16) to such counsel's knowledge after reasonable inquiry and
investigation, the Company has obtained all material Licenses
required by any Governmental Authority to properly and legally
operate or conduct the business in which it is engaged on the
Closing Date and which are necessary or desirable for the
successful conduct of its business as it is conducted and proposed
to be conducted, and each such material License has been duly
obtained, is valid and in full force and effect, and is renewable
by its terms or in the ordinary course of business without the
need to comply with any special qualification procedures or to pay
any amount other than routine filing fees. To such counsel's
knowledge after reasonable inquiry and investigation, the Company
(a) is not subject to any pending or threatened administrative or
judicial proceeding to revoke, cancel or declare any material
License granted to it invalid in any respect, (b) is not acting
outside the scope and authority granted to it pursuant to any such
License, or otherwise in default or in violation with respect to
any such material License, and no event has occurred which
constitutes, or with due notice or lapse of time or both may
constitute, a default by it or a violation of, any material
License and (c) has not permitted any material License granted to
it to lapse since its original effective date.
In addition, such counsel shall state that they have
participated in conferences with the Representatives and with
representatives of the Company and its accountants concerning the
Registration Statement and the Prospectus and have considered the
matters required to be stated therein and the statements contained
therein, although such counsel has not independently verified the
accuracy, completeness or fairness of such statements. Based upon and
subject to the foregoing, such counsel has no reason to believe that
either the Registration Statement (including the information deemed to
be part of the Registration Statement at the time of effectiveness
pursuant to Rule 430A(b) and/or Rule 434, if applicable) or the
Prospectus, or the Registration Statement or the Prospectus as amended
or supplemented (except for the financial statements and other
statistical or financial data included therein as to which such
counsel need express no opinion), as of their respective effective or
issue dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
16
necessary to make the statements therein not misleading or that the
Prospectus as amended or supplemented, if applicable, as of the First
Closing Date or the Second Closing Date, as the case may be, contained
any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein not misleading
in light of the circumstances under which they were made.
In rendering such opinion, such counsel may state that they
are relying upon the certificate of the Company's Chief Executive
Officer, and the transfer agent for the Common Stock, as to the number
of shares of Common Stock at any time or times outstanding. Such
counsel may also rely upon the opinions of competent local counsel
satisfactory to counsel to the Underwriters as to legal matters in
jurisdictions other than those in which they are domiciled and, as to
factual matters, on certificates of officers of the Company and of
state or province officials, in which case their opinion is to state
that they are so doing and copies of such opinions or certificates are
to be attached to the opinion unless such opinions or certificates
(or, in the case of certificates, the information therein) have been
furnished to the Representatives in other form.
(ii) Such opinion or opinions of ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
counsel for the Underwriters, dated the First Closing Date or the
Second Closing Date, as the case may be, with respect to the
incorporation of the Company, the validity of the Shares to be sold by
the Company, the Registration Statement and the Prospectus and other
related matters as you may reasonably require, and the Company shall
have furnished to such counsel such documents and shall have exhibited
to them such papers and records as they request for the purpose of
enabling them to pass upon such matters.
(iii) A certificate of the chief executive officer and the
principal financial officer of the Company, dated the First Closing
Date or the Second Closing Date, as the case may be, to the effect
that:
(1) the representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of
the date of this Agreement and as of the First Closing Date or the
Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to such
Closing Date; and
(2) the Commission has not issued an order preventing or
suspending the use of the Prospectus or any preliminary prospectus
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and to the knowledge of
the respective signers after reasonable inquiry and investigation,
no proceedings for that purpose have been instituted or are
pending or contemplated under the 1933 Act.
17
The delivery of the certificate provided for in this
subparagraph shall be and constitute a representation and warranty of
the Company as to the facts required in the immediately foregoing
clauses (1) and (2) of this subparagraph to be set forth in such
certificate.
(iv) At the time the Pricing Agreement is executed and also on
the First Closing Date or the Second Closing Date, as the case may be,
there shall be delivered to you a letter addressed to you, as
Representatives of the Underwriters, from PricewaterhouseCoopers LLP,
independent auditors, the first one to be dated the date of the
Pricing Agreement, the second one to be dated the First Closing Date
and the third one (in the event of a second closing) to be dated the
Second Closing Date, to the effect set forth in Schedule B. There
----------
shall not have been any change or decrease specified in the letters
referred to in this subparagraph which makes it impractical or
inadvisable in the judgment of the Representatives to proceed with the
public offering or purchase of the Shares as contemplated hereby.
(v) At or before the time the Pricing Agreement is executed,
there shall be delivered to you a lock-up agreement substantially in
the form of Exhibit B hereto from each of the Company's officers,
---------
directors and stockholders, in which each such person agrees not to
offer, sell, contract to sell or otherwise dispose of any Common Stock
or any securities exercisable for or convertible into Common Stock for
a period of 180 days after the date of such lock-up agreement without
the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C.
(vii) Such further certificates and documents as you may
reasonably request.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for the Underwriters, which approval
shall not be unreasonably withheld. The Company shall furnish you with such
manually signed or conformed copies of such opinions, certificates, letters and
documents as you request.
If any condition to the Underwriters' obligations hereunder to be satisfied
prior to or at the First Closing Date is not so satisfied, this Agreement at
your election will terminate upon notification to the Company without liability
on the part of any Underwriter or the Company, except for the expenses to be
paid or reimbursed by the Company pursuant to Sections 6 and 8 hereof and except
to the extent provided in Section 10 hereof.
Section 8. Reimbursement of Underwriters' Expenses. If the sale to the
Underwriters of the Shares on the First Closing Date is not consummated because
any condition of the Underwriters' obligations hereunder is not satisfied or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or to comply with any provision hereof, unless such
failure to satisfy such condition or to comply with any provision hereof is due
to the default or omission of any Underwriter, the Company agrees to reimburse
you and the other Underwriters upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
reasonably incurred by you and them in connection
18
with the proposed purchase and sale of the Shares. Any such termination shall be
without liability of any party to any other party except that the provisions of
this Section, Section 6 and Section 10 shall at all times be effective and shall
apply.
Section 9. Effectiveness of Registration Statement. You and the Company
will use your and its best efforts to cause the Registration Statement to become
effective, if it has not yet become effective, and to prevent the issuance of
any stop order suspending the effectiveness of the Registration Statement and,
if such stop order be issued, to obtain as soon as possible the lifting thereof.
Section 10. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of the 1933 Act or the Exchange Act against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the 1933 Act,
the Exchange Act or other foreign, federal or state statutory law or regulation,
at common law or otherwise (including in settlement of any litigation if such
settlement is effected with the written consent of the Company), insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, including the information
deemed to be part of the Registration Statement at the time of effectiveness
pursuant to Rule 430A and/or Rule 434, if applicable, any preliminary
prospectus, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that (i) any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
the Representatives, specifically for use therein; or (ii) if such statement or
omission was contained or made in any preliminary prospectus and corrected in
the Prospectus and (1) any such loss, claim, damage or liability suffered or
incurred by any Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who purchased Shares which
are the subject thereof from such Underwriter in the offering and (2) such
Underwriter failed to deliver or provide a copy of the Prospectus to such person
at or prior to the confirmation of the sale of such Shares in any case where
such delivery is required by the 1933 Act. In addition to their other
obligations under this Section 10(a), the Company agrees that, as an interim
measure during the pendency of 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 this Section 10(a), it will
reimburse the Underwriters on a monthly basis for all reasonable legal and other
expenses incurred for one separate firm of attorneys (in addition to any local
counsel) at any time for all such Underwriters which shall be designated in
writing by ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C. in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
19
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. This indemnity agreement
will be in addition to any liability which the Company may otherwise have. The
Company shall not be liable for any settlement of such action, suit or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the 1933 Act or the Exchange Act, against any losses, claims, damages or
liabilities to which the Company, or any such director, officer or controlling
person may become subject under the 1933 Act, the Exchange Act or other foreign,
federal or state statutory law or regulation, at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Underwriter), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, any preliminary prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus, or any amendment or
supplement thereto in reliance upon and in conformity with Section 3 of this
Agreement or any other written information furnished to the Company by such
Underwriter through the Representatives specifically for use in the preparation
thereof; and will reimburse any legal or other expenses reasonably incurred by
the Company, or any such director, officer or controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action. In addition to their other obligations under this Section 10(b), the
Underwriters agree that, as an interim measure during the pendency of 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
this Section 10(b), they will reimburse the Company on a monthly basis for all
reasonable legal and other expenses incurred for one separate firm of attorneys
(in addition to any local counsel) at any time for the Company which shall be
designated in writing by the Company in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. This indemnity agreement will be
in addition to any liability which such Underwriter may otherwise have. No
Underwriter shall be liable for any settlement of such action, suit or
proceeding effected without the written consent of all of the Underwriters,
which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party except to the extent that
the indemnifying party was prejudiced by such failure to notify. In case any
such action is brought
20
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with all other indemnifying parties
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, or the
indemnified and indemnifying parties may have conflicting interests which would
make it inappropriate for the same counsel to represent both of them, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defense and otherwise to participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defense in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved by the
Representatives in the case of paragraph (a) representing all indemnified
parties not having different or additional defenses or potential conflicting
interest among themselves who are parties to such action), (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability arising out of such proceeding.
(d) If the indemnification provided for in this Section is unavailable to
an indemnified party under paragraphs (a) or (b) hereof in respect of any
losses, claims, damages or liabilities referred to therein, then each applicable
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 such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Underwriters 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 the Company and the
21
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company and the Underwriters shall be deemed to be in the same proportion in the
case of the Company as the total price paid to the Company for the Shares by the
Underwriters (net of underwriting discount but before deducting expenses), and
in the case of the Underwriters as the underwriting discount received by them
bears to the total of such amounts paid to the Company and received by the
Underwriters as underwriting discount in each case as contemplated by the
Prospectus. The relative fault of the Company and the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section, no Underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were offered
to the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section are several in proportion to their respective underwriting commitments
and not joint.
(e) The provisions of this Section shall survive any termination of this
Agreement.
Section 11. Default of Underwriters. It shall be a condition to the
agreement and obligation of the Company to sell and deliver the Shares
hereunder, and of each Underwriter to purchase the Shares hereunder, that,
except as hereinafter in this paragraph provided, each of the Underwriters shall
purchase and pay for all Shares agreed to be purchased by such Underwriter
hereunder upon tender to the Representatives of all such Shares in accordance
with the terms hereof. If any Underwriter or Underwriters default in their
obligations to purchase Shares hereunder on the First Closing Date and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase does not exceed 10 percent of the total number of
Shares which the Underwriters are obligated to purchase on the First Closing
Date, the Representatives may make arrangements satisfactory to the Company for
the purchase of such Shares by other persons, including any of the Underwriters,
but if no such arrangements are made by such date the nondefaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Shares which such defaulting Underwriters agreed but
failed to purchase on such date. If any Underwriter or Underwriters so default
and the aggregate number of Shares with respect to which such default or
defaults occur is more than the above percentage and arrangements satisfactory
to the Representatives and the Company for the purchase of such Shares by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any nondefaulting Underwriter or the
Company, except for the expenses to be paid by the Company pursuant to Section 6
hereof and except to the extent provided in Section 10 hereof.
In the event that Shares to which a default relates are to be purchased by
the nondefaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right
22
to postpone the First Closing Date for not more than seven business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected. As used
in this Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
Section 12. Effective Date. This Agreement shall become effective upon
execution and delivery of this Agreement and the Pricing Agreement.
Section 13. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you
or by you by notice to the Company at any time prior to the time this
Agreement shall become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company to any
Underwriter (except for the expenses to be paid or reimbursed pursuant to
Section 6 hereof and except to the extent provided in Section 10 hereof) or
of any Underwriter to the Company.
(b) This Agreement may also be terminated by you prior to the First
Closing Date, and the option referred to in Section 4, if exercised, may be
cancelled at any time prior to the Second Closing Date, if (i) trading in
securities on the New York Stock Exchange shall have been suspended or
minimum prices shall have been established on such exchange, or (ii) a
banking moratorium shall have been declared by Illinois, New York, or
United States authorities, or (iii) there shall have been any change in
financial markets or in political, economic or financial conditions which,
in the opinion of the Representatives, either renders it impracticable or
inadvisable to proceed with the offering and sale of the Shares on the
terms set forth in the Prospectus or materially and adversely affects the
market for the Shares, or (iv) there shall have been an outbreak of major
armed hostilities between the United States and any foreign power which in
the opinion of the Representatives makes it impractical or inadvisable to
offer or sell the Shares. Any termination pursuant to this paragraph (b)
shall be without liability on the part of any Underwriter to the Company or
on the part of the Company to any Underwriter (except for expenses to be
paid or reimbursed pursuant to Section 6 hereof and except to the extent
provided in Section 10 hereof).
Section 14. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, principals, members, officers or
directors or any controlling person, as the case may be, and will survive
delivery of and payment for the Shares sold hereunder.
Section 15. Notices. All communications hereunder will be in writing and,
if sent to the Underwriters will be mailed, delivered, telecopied or telegraphed
and confirmed to you c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇.
23
▇▇▇▇▇▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇; and
if sent to the Company will be mailed, delivered or telegraphed and confirmed to
the Company at its corporate headquarters with a copy to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇.
Section 16. Successors. This Agreement and the Pricing Agreement will
inure to the benefit of and be binding upon the parties hereto and their
respective successors, personal representatives and assigns, and to the benefit
of the officers and directors and controlling persons referred to in Section 10,
and no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Shares as such from any of
the Underwriters merely by reason of such purchase.
Section 17. Representation of Underwriters. You will act as
Representatives for the several Underwriters in connection with this financing,
and any action under or in respect of this Agreement taken by you will be
binding upon all the Underwriters.
Section 18. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
Section 19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
Section 20. Applicable Law. This Agreement and the Pricing Agreement
shall be governed by and construed in accordance with the laws of the State of
New York.
[Remainder of page intentionally left blank]
24
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company and the several Underwriters
including you, all in accordance with its terms.
Very truly yours,
CHEAP TICKETS, INC.
By: ___________________________________
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Acting as Representatives of the
several Underwriters named in
Schedule A.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY, L.L.C.
By: _____________________________
A Principal
25
Schedule A
====================================================================================
Underwriter Number of Firm
----------- Shares to be
Purchased
---------------------
------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C............................
------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.....................................
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
----------
------------------------------------------------------------------------------------
TOTAL..................................................... ==========
====================================================================================
26
Schedule B
Comfort Letter for Cheap Tickets, Inc.
To Be Delivered by PricewaterhouseCoopers LLP
(1) They are independent public accountants with respect to the Company and
its subsidiaries within the meaning of the 1933 Act.
(2) In their opinion the financial statements and schedules of the Company
and its subsidiaries included in the Registration Statement and the financial
statements of the Company from which the information presented under the
captions "Summary Financial Data" and "Selected Financial Data" has been derived
which are stated therein to have been examined by them comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act.
(3) On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company responsible for financial and accounting matters
as to transactions and events subsequent to December 31, 1998, a reading of
minutes of meetings of the stockholders and directors of the Company since
December 31, 1998, a reading of the latest available interim unaudited financial
statements of the Company (with an indication of the date thereof) and other
procedures as specified in such letter, nothing came to their attention which
caused them to believe that (i) the unaudited financial statements of the
Company included in the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act or
that such unaudited financial statements are not fairly presented in accordance
with generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement, (ii) the amounts in "Summary Financial Data" and
"Selected Financial Data" included in the Prospectus do not agree with or are
not derivable from the corresponding amounts in the audited financial statements
or unaudited financial statements (as applicable) from which such amounts were
derived, and (iii) at a specified date not more than five days prior to the date
thereof in the case of the first letter and not more than two business days
prior to the date thereof in the case of the second and third letters, there was
any change in the capital stock or long-term debt or short-term debt (other than
normal payments) of the Company on a basis or any decrease in net current assets
or stockholders' equity as compared with amounts shown on the latest unaudited
balance sheet of the Company included in the Registration Statement or for the
period from the date of such balance sheet to a date not more than five days
prior to the date thereof in the case of the first letter and not more than two
business days prior to the date thereof in the case of the second and third
letters, there were any decreases, as compared with the corresponding period of
the prior year, in net sales, income before income taxes or in the total or per
share amounts of net income except, in all instances, for changes or decreases
which the Prospectus discloses have occurred or may occur or which are set forth
in such letter.
(4) They have carried out specified procedures, which have been agreed to by
the Representatives, with respect to certain information in the Prospectus
specified by the Representatives, and on the basis of such procedures, they have
found such information to be in agreement with the general accounting records of
the Company.
EXHIBIT A
CHEAP TICKETS, INC.
___________ Shares Common Stock/2/
PRICING AGREEMENT
-----------------
__________, 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
As Representatives of the Several
Underwriters
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated ____________, 1999
(the "Underwriting Agreement") relating to the sale by the Company and the
purchase by the several Underwriters for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company and ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ are acting as representatives (the "Representatives"), of the
above Shares. All terms herein shall have the definitions contained in the
Underwriting Agreement except as otherwise defined herein.
Pursuant to Section 4 of the Underwriting Agreement, the Company agrees
with the Representatives as follows:
1. The initial public offering price per share for the Shares shall be
$__________.
2. The purchase price per share for the Shares to be paid by the several
Underwriters shall be $_________, being an amount equal to the initial public
offering price set forth above less $________ per share.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company and the several Underwriters,
including you, all in accordance with its terms. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original and all
of which together shall be considered one and the same agreement.
______________
/2/ Plus an option to acquire up to ____________ additional shares to cover
overallotments.
Very truly yours,
CHEAP TICKETS, INC.
By: ______________________________
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Acting as Representatives of the
several Underwriters named in
Schedule A.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY, L.L.C.
By: _____________________________
A Principal
EXHIBIT B
CHEAP TICKETS, INC.
LOCK-UP AGREEMENT
-----------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company & ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
as Representatives
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Cheap Tickets, Inc.
-------------------
Ladies and Gentlemen:
In order to induce ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the
"Representatives") to enter in to a certain underwriting agreement with Cheap
Tickets, Inc., a Delaware corporation (the "Company"), with respect to the
public offering of shares of the Company's Common Stock, par value $ 0.001 per
share ("Common Stock"), the undersigned hereby agrees that for a period of 180
days following the date of the final prospectus filed by the Company with the
Securities and Exchange Commission in connection with such public offering, the
undersigned will not, without the prior written consent of the Representatives,
directly or indirectly, (i) offer, sell, assign, transfer, encumber, pledge,
contract to sell, grant an option to purchase or otherwise dispose of, other
than by operation of law, any shares of Common Stock (including, without
limitation, Common Stock which may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations promulgated under the
Securities Act of 1933, as the same may be amended or supplemented from time to
time (such shares, the "Beneficially Owned Shares") or (ii) enter into any swap
or similar agreement that transfers, in whole or in part, the economic risk of
ownership of the 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. Notwithstanding the foregoing, this Lock-Up
Agreement (the "Agreement") shall not apply to shares of the Company's Common
Stock (i) acquired through the Company's directed shares program or (ii)
acquired on the open market and that shares so acquired may be sold or otherwise
disposed of without regard to this Agreement.
Notwithstanding the foregoing, if the undersigned is an individual, he or
she may transfer any Shares 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 the undersigned and/or a member or of his or her
immediate family or to a charitable organization; provided, however, that in any
such case it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding the Shares
transferred subject to the provisions of this Agreement, and there shall be no
further transfer of such Shares except in accordance with this Agreement. For
purposes of this Agreement, "immediate family" shall
mean spouse, lineal descendant, father, mother, brother or sister of the
transferor and "charitable organization" shall mean an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
Notwithstanding the foregoing, if the undersigned is a partnership, the
partnership may transfer any Shares to a partner of such partnership or a
retired partner of such partnership who retires after the date hereof, or to the
estate of any such partner or retired partner, and any partner who is an
individual may transfer such Shares by gift, will or intestate succession to his
or her spouse or lineal descendants or ancestors; and if the undersigned is a
corporation, the corporation may transfer such Shares to any shareholder or
subsidiary of such corporation and any shareholder who is an individual may
transfer Shares by gift, will, or intestate succession to his or her immediate
family or to a charitable organization; provided, however, that in any such
case, it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding the Shares
subject to the provisions of this Agreement, and there shall be no further
transfer of such Shares except in accordance with this Agreement.
The undersigned agrees that the provisions of this agreement shall be
binding also upon the successors, assigns, heirs and personal representatives of
the undersigned. The undersigned agrees and consents to the placing of legends
and/or the entry of stop transfer instructions with the Company's transfer agent
against the transfer of any shares of Common Stock or Beneficially Owned Shares
held by the undersigned except in compliance with this Agreement.
It is understood that, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the Shares, you will release us from our obligations under this
Agreement.
This Agreement shall terminate and be of no further force or effect in the
event that the offering contemplated by the Underwriting Agreement is not
completed on or before October 31, 1999.
Very truly yours,
__________________________
(Signature)
__________________________
(Title)
__________________________
(Date)
