DIGEX, INCORPORATED
3,750,000 Shares of Common Stock
($.01 par value per share)
PURCHASE AGREEMENT
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[DATE]
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
Potomac Towers
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
DIGEX, Incorporated (the "Company"), a Delaware corporation, confirms
its agreement with you and the other Underwriters named in Schedule A annexed
hereto (the "Underwriters", which term shall also include any Underwriters
substituted as hereinafter in Section 8 provided), for whom you are acting as
Representative, with respect to the sale by the Company, and the purchase by the
Underwriters, of 3,750,000 shares (the "Firm Shares") of the Company's common
stock, $.01 par value per share (the "Common Stock"). In addition, for the sole
purpose of covering over-allotments in connection with the sale of the Common
Stock, the Company proposes to grant to the Underwriters an option to purchase
up to an additional 562,500 Shares (the "Option Shares"). The Firm Shares and
any Option Shares purchased pursuant to this Underwriting Agreement are herein
referred to as the "Common Shares."
Prior to the purchase and public offering of the Common Shares by the
Underwriters (the "Offering"), the Company and the Underwriters shall enter into
an agreement substantially in the form of Exhibit A hereto (the "Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written telecommunication between the Company and the
Underwriters and shall specify such applicable information as is indicated in
Exhibit A hereto. The offering of the Common Shares will be governed by this
Agreement, as supplemented by the Pricing Agreement. From and after the date of
the execution and delivery of the Pricing Agreement, this Agreement shall be
deemed to incorporate the Pricing Agreement.
The Company has prepared and filed with the Securities and Exchange
Commission (the "SEC") a registration statement on Form SB-2 (Commission File
No. 333-5871) and related prospectus for the registration of the
Common Shares pursuant to, and in conformity in all material respects with, the
Securities Act of 1933, as amended (the "Act"), and any other applicable rules
and regulations of the SEC (the "Rules and Regulations"), has prepared and filed
with the SEC such amendments thereto, if any, and such amended preliminary
prospectus as may have been required to the date hereof and will file such
additional amendments thereto and such additional amended prospectus as may
hereafter be required. The Company will promptly prepare and file a prospectus
which includes the information (the "Pricing Information") excluded from the
preliminary prospectus in reliance upon the Rules and Regulations. Each
prospectus used before the time such prospectus is declared effective by the SEC
and prior to the date hereof is herein called a "Preliminary Prospectus." Such
registration statement and the prospectus constituting a part thereof, as
amended at the time the prospectus becomes effective under the Rules and
Regulations (and including the Pricing Information), are hereinafter referred to
as the "Registration Statement" and the "Prospectus", respectively, except that
if any amended or supplemented prospectus shall be provided to the Underwriters
by the Company for use in connection with the offering of the Common Shares
which differs from the Prospectus at the time it becomes effective (whether or
not such revised prospectus is required to be filed by the Company pursuant to
the Rules and Regulations), the term "Prospectus" shall refer to such newly
amended or supplemented prospectus from and after the time it is first provided
to the Underwriters for such use. The Company understands that the Underwriters
propose to make a public offering of the Common Shares on the terms set forth in
the Prospectus as soon as the Underwriters deem such offering advisable after
the Registration Statement becomes effective and the Pricing Agreement has been
executed and delivered.
SECTION 1. Representations and Warranties.
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(a) The Company represents and warrants to, and agrees with, the
Underwriters that as of the date hereof and as of the date of the Pricing
Agreement (such latter date hereinafter referred to as the "Representation
Date"):
(i) No order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus has been issued by the SEC, nor has the
SEC, to the knowledge of the Company, threatened to issue such an
order or instituted proceedings for that purpose. Each Preliminary
Prospectus authorized by the Company for public distribution by the
Underwriters, as of the date thereof (A) complied in all material
respects with the requirements of the Rules and Regulations and (B)
did not contain 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 light of the circumstances under which
they were made, not misleading; provided however, that this
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representation and warranty does not apply to statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of the Underwriters regarding
the Underwriters
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or expressly for inclusion in the Prospectus (such information
referred to herein as "Underwriters' Information").
(ii) The Registration Statement and the Prospectus, at the
time the Registration Statement becomes effective, at the
Representation Date and at all times subsequent thereto up to each
Closing Time referred to in Section 2 hereof, complies and will comply
in all material respects with the requirements of the Rules and
Regulations. The Registration Statement, at the date hereof, at the
time the Registration Statement becomes effective and at the
Representation Date does not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, not
misleading. The Prospectus at the time the Registration Statement
becomes effective, at the Representation Date, at each Closing Time
referred to in Section 2 hereof and at all times subsequent thereto
when a Prospectus is required to be delivered in connection with
offers and sales of the Common Shares, does not and will not include
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided however, that the representations
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and warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with Underwriters' Information.
(iii) At the Closing Time, the Company will have conducted the
Offering in all material respects in accordance with all applicable
laws, regulations, decisions and orders, and all material terms,
conditions, requirements and provisions precedent to the Offering (as
defined in the Prospectus) will have been satisfied.
(iv) There are no contracts, or other documents required to be
filed as exhibits to, or to be described in, the Registration
Statement by the Rules and Regulations which have not been or will not
be so filed or described at the time the Registration Statement
becomes effective. The contracts so described in the Prospectus are
in full force and effect on the date hereof; the descriptions thereof
or references thereto are correct in all material respects; and except
as to defaults that individually or in the aggregate would not have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company,
neither the Company nor, to the knowledge of the Company, any other
party is in breach of or default under any of such contracts.
(v) Ernst & Young LLP, the accountants who have certified the
financial statements included in the Registration Statement and the
Prospectus, are and were at all relevant times, with respect to the
Company,
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independent public accountants within the meaning of Rule 101
of the Code of Professional Conduct of the American Institute of
Certified Public Accountants and as required by the Rules and
Regulations.
(vi) The financial statements and the related notes thereto
included in the Registration Statement, any Preliminary Prospectus and
the Prospectus comply in all material respects with the requirements
of the Rules and Regulations and present fairly the financial position
of the Company as of the dates of such financial statements, and the
results of operations of the Company for the respective periods
covered thereby. Such statements and related notes have been prepared
in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved. The other
financial, statistical and pro forma information and related notes
included in the Registration Statement and Prospectus present fairly
the information purported to be shown thereby at the respective dates
thereof and for the respective periods covered thereby and conform in
all material respects with the Rules and Regulations.
(vii) Since the latest respective dates as of which information
is given in the Registration Statement and Prospectus, except as
otherwise stated in the Registration Statement and Prospectus, (A)
there has been no material adverse change or development in the
condition (financial or otherwise) of the Company, or in the earnings,
business affairs or business prospects of the Company, whether or not
arising in the ordinary course of business, (B) there have been no
transactions entered into by the Company which are material to the
Company, other than those in the ordinary course of business, (C)
there has been no dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock nor has the
Company become delinquent in the payment of principal or interest on
any outstanding borrowing, and (D) there has not been any change in
the capital stock, long-term debt, obligations under capital leases
or, other than in the ordinary course of business, short-term
borrowings of the Company.
(viii) The Company has been duly organized and is validly
existing and in good standing as a Delaware corporation, and the
Company has full corporate power and authority to own, lease and
operate its properties and to conduct its businesses as described in
the Prospectus. The Company is duly qualified and in good standing as
a foreign corporation (or has filed an application to qualify to do
business as a foreign corporation and as of each Closing Time will be
so qualified and in good standing) in each jurisdiction in which the
character of its properties or the nature of its businesses makes such
qualification necessary, except where the failure to qualify would not
have a material adverse effect on the business of the Company. The
Company has obtained and is operating in compliance with all licenses,
permits and other governmental authorizations material to the conduct
of is
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businesses, and all such licenses, permits and other governmental
authorizations are in full force and effect and the Company has not
received notice of proceedings relating to the revocation or
modification of any such license, permit or other governmental
authorization.
(ix) The authorized, issued and outstanding capital stock and
any outstanding short-term debt, long-term debt and capital lease
obligations of the Company are as set forth in the Prospectus under
the caption "Capitalization", and any subsequent borrowings and
issuances have been made in the ordinary course of business. All of
the outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, are owned as
indicated in the Prospectus, and, as to the Company, are subject only
to such pledges, liens, security interests, charges, claims, equities
and encumbrances of any kind to the extent set forth in the
Prospectus. Except as disclosed in or contemplated by the Prospectus,
the Company does not have outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The
description of the Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus is accurate.
(x) This Agreement and the Pricing Agreement have each been duly
authorized by the Company and when duly executed and delivered by the
Company will constitute the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance,
receivership, conservatorship or other similar laws, regulations or
procedures of general applicability relating to or affecting
enforcement of the rights of creditors of savings or by general equity
principles and the discretion of the court before which any proceeding
is brought (regardless of whether enforceability is considered in a
proceeding in equity or at law) and except as the obligations of the
Company under the indemnification and contribution provisions hereof
may be limited by public policy under certain circumstances, including
applicable federal or state securities laws.
(xi) The Common Shares have been duly and validly authorized and
reserved for issuance by all necessary corporate action on the part of
the Company and, when issued upon payment of the consideration
therefor, will be duly and validly issued and will be fully paid and
non-assessable and will conform in all material respects with the
description thereof contained in the
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Prospectus. The issuance of the Common Shares will not be subject to
preemptive rights.
(xii) The forms of certificates used to evidence the Common
Shares are each in due and proper form.
(xiii) The Company is not in violation of its certificate of
incorporation or bylaws; nor is the Company in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the
Company is a party or by which it or any of its properties may be
bound, except for such defaults which would not, in the aggregate,
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company; the execution and delivery of this Agreement and the Pricing
Agreement, the incurrence of the obligations therein set forth and the
consummation of the transactions therein contemplated have been duly
authorized by all necessary corporate action of the Company and will
not result in any violation of the certificate of incorporation or by-
laws of the Company, and do not and will not contravene or conflict
with, or constitute a default under, or, except as contemplated
therein, result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company under, (A) any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company is a party or by which it
or any of its properties may be bound, except for breaches or defaults
which would not, in the aggregate, have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company, (B) any existing applicable law,
rule or regulation or (C) any judgment, order or decree of, or
agreement with, any government or governmental instrumentality or
court, domestic or foreign having jurisdiction over the Company or any
of its properties.
(xiv) No approval, authorization, consent or other order,
registration or qualification of or with any government, governmental
instrumentality or court, domestic or foreign, is required to be
obtained at or prior to each Closing Time in connection with the
execution and delivery of this Agreement and the Pricing Agreement, or
the issuance of the Common Shares in accordance with the terms hereof
or thereof, or the use of proceeds thereof, except for (A) the
registration of the Common Shares pursuant to the Act and the Rules
and Regulations, (B) such approvals, authorizations, consents,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Common Shares by the Underwriters, (C) such
approvals, authorizations, consents, registrations or qualifications
as may be required to be obtained by the Underwriters, and (D) the
clearance of the offering of the
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Common Shares with the National Association of Securities Dealers,
Inc. (the "NASD").
(xv) The Company has good and marketable title to all real and
personal properties and assets described in the Prospectus as owned by
it and material to its businesses, free and clear of all liens,
charges, encumbrances, defects or restrictions, except (A) such as do
not materially adversely affect the value of such properties and
assets and do not interfere with the use made or proposed to be made
of such properties and assets by the Company and (B) such as are
described in the Prospectus; and the real and personal property held
by the Company under lease or sublease is held by it under valid,
subsisting and enforceable leases or subleases, and the Company has
the peaceful and undisturbed right to use and possession of the real
or personal property held by it under lease or sublease.
(xvi) The Company is conducting its businesses in compliance in
all material respects with all laws, rules, regulations, decisions,
directives and orders (including, without limitation, all regulations
of the SEC) applicable to it. There is no action, suit, investigation
or proceeding before or by any government, governmental
instrumentality, arbitrator or court, domestic or foreign, now pending
or, to the knowledge of the Company, threatened against or affecting
the Company (A) that is required to be disclosed in the Prospectus and
not disclosed therein, (B) that could result in any material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company, (C) that could
materially and adversely affect the properties, assets or leasehold
interests thereof or (D) that could adversely affect the consummation
of the transactions contemplated in this Agreement. All pending legal
or governmental proceedings to which the Company is a party or of
which any of its property is the subject, which are not described in
the Prospectus, including ordinary routine litigation incidental to
its respective businesses, would not have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company. Except as disclosed in the
Prospectus, neither the Company nor any of its officers, employees or
directors is a party or subject to the provisions of any regulatory
action, injunction, judgment, decree or order of any court, regulatory
body, administrative agency or other governmental body affecting the
business of the Company.
(xvii) All United States federal income tax returns of the
Company and its predecessors required by law to be filed have been
filed and all taxes shown by such returns or otherwise assessed which
are due and payable have been paid, except assessments against which
appeals have been or will be promptly taken. The United States
federal income tax returns of the Company and its predecessors through
the period ended December 31, 1995
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have been closed without audit and all assessments, if any, in
connection therewith have been paid by the Company or its
predecessors. The Company and its predecessors have filed all other
tax returns which are required to be filed by them pursuant to
applicable state, local or other law, except insofar as the failure to
file such returns would not in the aggregate materially adversely
affect the financial condition or the business of the Company, and
have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company or its predecessors except such
taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. The charges, accruals and
reserves on the consolidated books of the Company in respect to any
income and corporate tax liability for any years not finally
determined are adequate to meet any assessments or re-assessments for
additional income tax for any years not finally determined, except to
the extent of any inadequacy which would not have a material adverse
effect on the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company.
(xviii) The Company maintains a system of internal accounting
controls in accordance with the Rules and Regulations that are
sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific
authorization, (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets, (C) access to assets is permitted only in accordance with
management's general or specific authorization and (D) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(xix) Except as described in the Prospectus, there are no
holders of securities of the Company who by reason of the filing or
effectiveness of the Registration Statement with the SEC have the
right to request the Company to register under the Act and the Rules
and Regulations securities held by them. Except as provided herein
there are no claims or agreements for brokerage commissions, finders'
fees or similar compensation in connection with the transactions
contemplated by this Agreement payable by the Company.
(xx) The Company owns, or possesses rights to use, all patents,
copyrights, trademarks, service marks, trade names and other rights
necessary to conduct the businesses now conducted by it or as
described in the Prospectus, and the Company has not received any
notice of infringement or conflict with asserted rights of others with
respect to any patents, copyrights, trademarks, service marks, trade
names or other rights which, individually or in the aggregate, if the
subject of an unfavorable decision,
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ruling or finding, would have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company, and the Company does not know of
any basis for any such infringement or conflict.
(xxi) No labor dispute involving the Company exists or, to the
knowledge of the Company, is imminent which might be expected to have
a material adverse effect on the condition (financial or otherwise)
earnings, business affairs or business prospects of the Company or
which is required to be disclosed in the Prospectus.
(xxii) Except as described in the Prospectus, there are no
contractual encumbrances or material restrictions on the ability of
the Company (A) to pay dividends or make any other distributions on
its capital stock or to pay any indebtedness owed, (B) to make any
loans or advances to, or investments in, any entity or (C) to transfer
any of its property or assets to any entity.
(xxiii) All the documents purporting to be final, definitive
documents (and not drafts) delivered or to be delivered by the Company
or its representatives in connection with the issuance and sale of the
Common Shares, or in connection with the Underwriter's due diligence,
were on the dates on which they were delivered, true, complete and
correct.
(xxiv) The Company has not distributed and will not distribute
prior to the latest Closing Time any offering material in connection
with the offering, other than a Preliminary Prospectus, the
Prospectus, the Registration Statement and the other materials
permitted by the Rules and Regulations and approved by the
Underwriters.
(xxv) The Company has not taken, directly or indirectly, any
action designed to cause or result in, or which has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the Common Shares to facilitate the sale
or resale of the Common Shares.
(xxvi) The Company is not an "investment company" or a company
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(xxvii) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus: (A) the
Company has not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or
written agreement or other transaction whether or not arising in the
ordinary course of business or which could
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result in a material reduction in the future earnings of the Company;
(B) there has not been any material increase in the long-term debt of
the Company or in the aggregate dollar or principal amount of the
Company's assets which are classified by the Company as substandard,
doubtful or loss or loans which are 90 days or more past due; (C)
there has not been any material adverse change in the aggregate dollar
amount of the Company's assets or its consolidated net worth; (D)
there has been no material adverse change in the Company's
relationship with its insurance carriers, including, without
limitation, cancellation or other termination of any type of insurance
coverage; (E) except as disclosed in the Prospectus there has been no
material change in management of the Company; (F) the Company has not
sustained any material loss or interference with its respective
business or properties from fire, flood, windstorm, earthquake,
accident or other calamity, whether or not covered by insurance; (G)
the Company has not paid or declared any dividends or other
distributions with respect to its capital stock and the Company is not
in default in the payment of principal or interest on any outstanding
debt obligations; (H) there has not been any change in the capital
stock (other than upon the sale of the Common Shares hereunder); and
(I) there has not been any material adverse change in the condition
(financial or otherwise), business, properties, results of operations
or prospects of the Company other than changes resulting from changes
in the economy or the Company's industry generally.
(xxviii) The Company has not been advised, and has no reason to
believe, that the Company is not conducting its business in compliance
with all applicable laws, rules and regulations; except as disclosed
in the Prospectus or where failure to be so in compliance would not
have a material adverse change in the condition (financial or
otherwise), business, properties, results of operations or prospects
of the Company, where it is already in the process of complying.
(xxix) The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business, including, but not
limited to, insurance covering real and personal property owned or
leased by the Company against theft, forgery, damage, destruction,
acts of vandalism and all other risks customarily insured against, all
of which insurance is in full force and effect.
(xxx) The Company has not at any time during the last five
years (i) made any unlawful contribution to any candidate for foreign
office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction
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thereof, the effect of which would have a material adverse effect on
the Company.
(xxxi) All material transactions between the Company, and the
officers and directors of the Company and their affiliates have been
accurately disclosed in the Prospectus. Except as disclosed in the
Prospectus, no relationship, direct or indirect, exists between the
Company or its directors or officers, which is required to be
described in the Prospectus. Except as disclosed in the Prospectus,
no relationship, direct or indirect, exists between or among the
Company, on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company, on the other hand, which is
required to be described in the Registration Statement and the
Prospectus.
(xxxii) Except as disclosed in the Prospectus, the Company has
no subsidiaries.
(xxxiii) Except as disclosed in the Prospectus, the Company has
not: (i) placed any securities within the last 18 months; (ii) had any
material dealings with any member of the NASD or any person related to
or associated with such member, other than discussions and meetings
relating to the proposed Offering and routine purchases and sales of
U.S. Government and agency securities and other assets; (iii) entered
into a financial or management consulting agreement except as
contemplated hereunder and except for the engagement letter with the
Representative, dated __________, 1996 and the engagement letter with
Salomon Brothers Inc dated August 12, 1996; or (iv) engaged any
intermediary between the Representative and the Company in connection
with the Offering, and no person is being compensated in any manner
for such service. The Company has complied or will comply in all
material respects with each and every undertaking or commitment made
by it under the Blue Sky Laws, including, without limitation, each and
every undertaking or commitment made in connection with the Offering.
(xxxiv) The Company has not relied upon the Representative or
legal counsel for the Representative for any legal, tax or accounting
advice in connection with the Offering (except with respect to the
qualification of the Common Stock for offering and sale under the
securities laws of certain states).
(b) Any certificate signed by any officer of the Company and delivered
to you or to your counsel shall be deemed a representation and warranty by the
Company to you as to the matters covered thereby. Any certificate delivered by
the Company to its counsel for purposes of enabling such counsel to render the
opinions referred to in Section 5(c) will also be furnished to the Underwriters
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and its counsel and shall be deemed to be additional representations and
warranties by the Company (as appropriate) to the Underwriters as to the matters
covered thereby and the Underwriters and its counsel are entitled to rely
thereon.
SECTION 2. Sale and Delivery to Underwriters; Closing.
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(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriters, and the Underwriters agree to purchase from
the Company, the Common Shares at the prices set forth in the Pricing Agreement.
If the Underwriters and the Company have elected to enter into the Pricing
Agreement after the Registration Statement is effective, the purchase price to
be paid by the Underwriters for the Common Shares shall be an amount equal to
the initial public offering price, less an amount to be determined by agreement
between the Underwriters and the Company. If such price shall not have been
agreed upon and the Pricing Agreement shall not have been executed and delivered
by all parties thereto by 11:59 p.m. on the fourteenth business day following
the date of this Agreement, this Agreement shall terminate forthwith, without
liability of any party to any other party, unless otherwise agreed to by the
Company and the Underwriters and except as otherwise provided in Sections 4, 6,
and 7 hereof. If the Underwriters and the Company have elected to enter into
the Pricing Agreement prior to the Registration Statement becoming effective,
the initial public offering price and the price to be paid by the Underwriters
for the Common Shares shall have been determined and set forth in the Pricing
Agreement, dated the date hereof, and an amendment to the registration statement
and the prospectus will be filed by the Company before the Registration
Statement becomes effective.
(b) The Company hereby grants to the Underwriters an option to
purchase from the Company, solely for the purpose of covering over-allotments in
connection with the distribution and sale of the Firm Shares, all or any portion
of the Option Shares for a period of thirty (30) days from the date hereof at
the purchase price per share of Common Stock set forth in the Pricing Agreement.
No Option Shares shall be sold and delivered unless the Firm Shares previously
have been, or simultaneously are, sold and delivered.
(c) Payment of the purchase price for the Firm Shares shall be made at
the office of Friedman, Billings, Xxxxxx & Co., Inc., or at such other place as
shall be agreed upon by the Underwriters and the Company, at 10:00 a.m. on the
third business day after the date of the Pricing Agreement or, if the Purchase
Agreement is executed after 4:30 p.m. Washington, D.C. time, the fourth business
day after the date of the Pricing Agreement (such time and date of payment and
delivery being herein called the "First Closing Time"). Payment shall be made
to the Company by certified or official Company check or checks in New York
Clearing House or similar next day funds payable to the account of the Company
against delivery to the Underwriters of the Common Shares to be purchased by
them,
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provided, however, that if the Prospectus is at any time prior to the First
Closing Time recirculated to the public, the First Closing Time shall occur upon
the later of the third full business day following the first date that any of
the Common Shares are released by you for sale to the public or the date that is
48 hours after the date that the Prospectus has been so recirculated.
(d) The option to purchase Option Shares granted in this Section 2 may
be exercised during the term thereof by written notice to the Company from the
Underwriters. Such notice shall set forth the aggregate number of Option Shares
as to which the option is being exercised and the time and date, not earlier
than either the First Closing Time or the third business day after the date on
which the option shall have been exercised nor later than the fifth business day
after the date of such exercise, as determined by the Underwriters, when the
Option Shares are to be delivered and the payment of the purchase price therefor
paid (the "Option Closing Time") as set forth above for delivery and payment of
the Firm Shares. (The First Closing Time and the Option Closing Time are herein
individually referred to as the "Closing Time" and collectively referred to as
the "Closing Times.")
(e) Certificates for the Firm Shares and certificates for the Option
Shares, if the option to purchase the same is exercised on or before the third
business day prior to the First Closing Time, shall be in fully registered form
in such authorized denominations and registered in the name of Cede & Co., as
nominee of The Depository Trust Company, and/or such other names as the
Underwriters may request in writing at least two full business days before the
applicable Closing Time. The certificates for the Common Shares will be made
available for examination by the Underwriters not later than 10:00 A.M., two
business days prior to the applicable Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with the
------------------------
Underwriters as follows:
(a) The Company shall cause the Registration Statement and any
amendments thereto, if not effective at the time of execution of this Agreement,
to become effective under the Rules and Regulations as promptly as possible.
(b) The Company will notify the Underwriters immediately, and confirm
the notice in writing, (i) of the effectiveness of the Registration Statement
and any amendment thereto, (ii) of the receipt by the Company or its counsel of
any comments from the SEC with respect to the offering of the Common Shares,
(iii) of any request to the Company or its counsel by the SEC for any amendment
or supplement to the Prospectus or for additional information and (iv) of the
issuance or initiation by the SEC or by any other state securities regulatory
authority of any stop order or cease-and-desist proceeding to suspend the
effectiveness of the Registration Statement or interfering with the offering of
the Common Shares, or of
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the suspension of the qualification of the Common Shares for offering or sale in
any jurisdiction, or the initiation or threat of any other orders or proceedings
for any of such purposes. The Company will make every reasonable effort to
prevent the issuance or initiation of any such stop orders or cease-and-desist
proceedings and, if any such stop orders or cease-and-desist proceedings are
issued or initiated, to obtain the lifting or dismissal thereof at the earliest
possible moment.
(c) The Company will advise the Underwriters promptly of any proposal
to amend or supplement the Prospectus through the filing of a post-effective
amendment to the Registration Statement and will not file any amendment or
supplement to the Prospectus (or to any preliminary prospectus, as the case may
be) which shall not have been previously submitted to the Underwriters and their
counsel a reasonable time prior to the proposed filing thereof and to which the
Underwriters or their counsel shall object.
(d) The Company will deliver to the Underwriters two signed and as
many conformed copies of the Registration Statement as originally filed and of
each amendment or supplement thereto (including exhibits filed therewith), as
the Underwriters may reasonably request.
(e) The Company will furnish to the Underwriters, without charge, from
time to time during the period when the Prospectus is required to be delivered
under the Rules and Regulations, such number of copies of the Prospectus (as
amended or supplemented) as such Underwriters may reasonably request for the
purposes contemplated by the Rules and Regulations.
(f) If any event shall occur as a result of which it is necessary, in
the reasonable judgment of the Underwriters, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, the Company
will forthwith amend or supplement the Prospectus by preparing and furnishing to
the Underwriters a reasonable number of copies of an amendment or amendments of,
or a supplement or supplements to, the Prospectus (in form and substance
reasonably satisfactory to such counsel) so that, as so amended or supplemented,
the Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading, and the Company will furnish to the Underwriters
such number of copies of such amendment or supplement as the Underwriters shall
reasonably request. For the purposes of this subsection, the Company shall
furnish such information with respect to itself to the Underwriters, counsel for
the Underwriters and counsel for the Company, as may be necessary for counsel
for the Underwriters and counsel for the Company to be aware of and to consult
with the Underwriters and the Company with respect to the need to amend or
supplement the Prospectus
-14-
and shall furnish such further information as may from time to time be
reasonably requested.
(g) The Company will endeavor, in cooperation with the Underwriters,
to qualify the Common Shares for offering and sale under the applicable
securities laws of such states and other jurisdictions of the United States as
the Underwriters may reasonably designate and will maintain such qualifications
in effect for a period of not less than one year from the effective date of the
Prospectus. The Company shall not, however, be obligated to file any general
consent to service or process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified. The
Company will file such statements and reports as may be required by the laws of
each jurisdiction in which the Common Shares have been qualified as above
provided.
(h) The Company will obtain all approvals, authorizations, consents or
other orders, registrations or qualifications of or with, and shall make all
filings with, any government, governmental instrumentality or court, domestic or
foreign, required to be obtained or to be made in connection with the execution
and delivery of this Agreement, or the issuance of the Common Shares in
accordance with the terms hereof or thereof, or the use of proceeds thereof,
except for such consents, approvals, authorizations, registrations,
qualifications or filings as have been obtained or made at or prior to the
Closing Time.
(i) The Company will make generally available to its security holders
as soon as practicable, but no later than 45 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
the Rules and Regulations, and which may, but which need not be certified by
independent public accountants) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Prospectus.
(j) During the period of five years hereafter, (A) the Company will
furnish to holders of Common Shares and to the Underwriters as soon as
practicable after the end of each fiscal year, copies of the Annual Report to
Stockholders of the Company containing the balance sheet of the Company as of
the close of such fiscal year and statements of income, stockholder's equity and
cash flows for the year then ended and the report thereon of the Company's
independent public accountants and as soon as practicable after the end of each
fiscal quarter a statement (which need not be audited) of the results of
operations of the Company for such period and (B) the Company will furnish to
the Underwriters as soon as practicable after the filing thereof, paper copies
of each definitive proxy or information statement, Annual Report on Form 10-K,
Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by the Company
with the SEC, the NASD or any securities exchange and following any public
offering of its Common Stock, as
-15-
soon as available, copies of any report or communication of the Company mailed
generally to holders of such Common Stock.
(k) The Company will apply the proceeds received from the offering of
the Common Shares in the manner set forth in the Prospectus under the caption
"Use of Proceeds" and will file such reports with the SEC with respect to the
sale of the Common Shares and the application of proceeds therefrom as may be
required under the Rules and Regulations.
(l) During the period of 180 days after the first date that any of the
Common Shares are released by the Underwriters for sale to the public, without
the prior written consent of the Underwriters (which consent may be withheld at
the sole discretion of the Underwriters), the Company will not issue, offer,
sell, grant options to purchase or otherwise dispose of any shares of the Common
Stock or any other securities convertible into or exchangeable with the Common
Stock (provided that the Company may issue or grant options to purchase shares
of Common Stock pursuant to any option plan existing on the date hereof and will
cause each officer and director of the Company, and each of Grotech IV, Grotech
Partners, Grotech Companion, Grotech Pennsylvania, Venrock, Venrock II,
Southern, Blue Chip and Xxxxxxx (as each of those terms is defined in the
Prospectus), on or prior to the date of this Agreement, to furnish to the
Underwriters a letter or letters in form and substance satisfactory to counsel
to the Underwriters, pursuant to which each such person shall agree not to
offer, sell, grant options to purchase or otherwise dispose of any shares of the
Common Stock or any other securities convertible into or exchangeable with the
Common Stock.
SECTION 4. Payment of Expenses. The Company will pay and bear all costs
-------------------
and expenses incident to the performance of its obligations under this
Agreement, including (a) the preparation, printing and filing of the
Registration Statement (including the exhibits thereto), any Prospectus
(including the financial statements thereto) and any amendments and supplements
thereto, and the cost of furnishing copies thereof to the Underwriters, (b) the
preparation, printing or duplication and distribution of this Agreement, the
Common Shares and the Blue Sky survey, (c) the issuance and delivery of the
Common Shares to the Underwriters and to any depository therefor, (d) the fees
and disbursements of the Company's counsel and accountants, (e) the
qualification of the Common Shares under the applicable securities laws in
accordance with Section 3(f) hereof and any filing for review of the offering
with the NASD, including filing fees and fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with such
qualification and the Blue Sky survey and may supplement thereto, (f) reasonable
out-of-pocket expenses of the Underwriters including fees and disbursements of
its counsel and (g) all other fees, costs and expenses referred to in Item 25 of
Registration Statement.
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If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 11 hereof or does not become effective in accordance
with Section 5 hereof, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the fees and disbursements of counsel
for the Underwriters.
SECTION 5. Conditions of Underwriter's Obligations. The obligation of the
---------------------------------------
Underwriters to purchase and pay for the Common Shares that they have agreed to
purchase hereunder is subject to the accuracy of the representations and
warranties of the Company contained herein at and as of the date hereof, at and
as of the time of effectiveness of the Registration Statement and at and as of
each Closing Time or contained in certificates of any authorized officer of the
Company pursuant to the provisions hereof, to the performance by the Company of
its obligations hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 p.m. on the date of this Agreement, or at such later time as shall
have been consented to in writing by the Underwriters. No stop order or cease-
and-desist proceeding suspending the effectiveness of the Prospectus or
interfering with the offering of the Common Shares shall have been issued and no
proceedings for purposes of issuing a stop order or cease-and-desist proceedings
shall have been instituted or shall be pending or, to the knowledge of the
Company or you, shall be contemplated by the SEC or by any other state
securities regulatory authority. Any request of the SEC for additional
information or for inclusion of additional information in the Registration
Statement shall have been complied with to your satisfaction and the
satisfaction of counsel for the Underwriters.
(b) At each Closing Time, the Underwriters shall have received the
favorable opinion of Xxxxxx & Xxxxxxx, counsel for the Company dated as of such
Closing Time in form and substance satisfactory to counsel for the Underwriters
to the effect that:
(i) The Company has been duly organized and is and, after
giving effect to the Offering, will be validly existing as a
corporation in good standing under the laws of the State of Delaware.
The Company is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character and location
of its properties (owned, leased or licensed) or the nature of its
businesses makes such qualification necessary, except where the
failure to qualify would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company. The Company has obtained and is
operating in compliance with all licenses, permits and other
governmental authorizations material to the conduct of its businesses,
and all such licenses, permits and other governmental authorizations
are in full force and effect and the Company has not received notice
of proceedings relating to the revocation or
-17-
modification of any such license, permit or other governmental
authorization The Company has all requisite corporate authority to
own, lease and license its properties and conduct its business as not
being conducted and as described in the Registration Statement and
Prospectus;
(ii) All of the outstanding shares of capital stock of the
Company have been duly issued and are fully paid and non-assessable
and, to such counsel's knowledge, free and clear of all liens, claims
or encumbrances. No action has been taken, or to the best of such
counsel's knowledge, pending or threatened to revoke the distribution
of such shares by the Company to its stockholders or sale or exchange
of such shares of capital stock;
(iii) As of the date hereof, the authorized capital stock of the
Company consists of _________ shares of Common Stock, $.01 par value
per share and _______ shares of preferred stock, _______ par value per
share. Immediately prior to consummation of the sale of Common Shares
contemplated by this Agreement, there were _________ shares of Common
Stock issued and outstanding, ______ shares of Class A Convertible
Preferred Stock, and _______ shares of Class B Convertible Preferred
Stock. The capital stock of the Company conforms in all material
respects to the description thereof contained under the caption
"Capital Stock of the Company" in the Prospectus. The Company has the
corporate power and corporate authority to issue, sell and deliver the
Common Shares in accordance with and upon the terms and conditions set
forth in this Agreement and in the Registration Statement and
Prospectus and the Company has duly authorized the issuance, sale and
delivery of the Common Shares. All of the issued and outstanding
shares of Common Stock, Class A Convertible Preferred Stock and Class
B Convertible Preferred Stock of the Company are (and the Common
Shares, upon issuance, delivery and receipt of payment therefor as
described herein, will be) duly authorized, and assuming receipt of
the consideration therefor as described in the resolutions of the
board of directors of the Company authorizing issuance thereof,
validly issued, fully paid and non-assessable and there are no
preemptive or, to such counsel's knowledge, other rights to subscribe
for or purchase any shares of Common Stock. Upon payment by the
Underwriters, the Underwriters will acquire all rights with respect to
the Common Shares free and clear of any pledge, lien, security
interest, encumbrance, claim or equity and any restrictions on
transfer imposed by the Company;
(iv) The Company owns, or possesses rights to use, all patents,
copyrights, trademarks, service marks, trade names and other rights
necessary to conduct the businesses now conducted by it or as
described in the Prospectus, and to such counsel's knowledge the
Company has not received any notice of infringement or conflict with
asserted rights of others with respect to any patents, copyrights,
trademarks, service marks, trade
-18-
names or other rights which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company, and
such counsel does not know of any basis for any such infringement or
conflict;
(v) To such counsel's knowledge, the Company is not in
default in the observance of any provision of its certificate of
incorporation or bylaws, or to such counsel's knowledge in default in
the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument known to such counsel to
which it is a party or by which it or any of its properties may be
bound, the effect of which could be materially adverse on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company;
(vi) The Company has the power and authority to enter into this
Agreement and the Pricing Agreement. Each of this Agreement and the
Pricing Agreement has been duly authorized, executed and delivered by
the Company and constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as may be limited by bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditor's rights, and except as
may be limited by the exercise of judicial discretion and general
principles of equity it being understood, however, that the foregoing
shall mean only that if there is a default in performance of an
obligation (i) if a failure to pay or other damage can be shown and
(ii) if the defaulting party can be brought into a court which will
hear the case and apply the governing law, then, subject to the
availability of defenses and the aforesaid exceptions, the court will
provide a money damage (or perhaps injunctive relief or specific
performance) remedy;
(vii) Except for the consents, approvals, authorizations,
registrations, or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Common Shares by the Underwriters, no further
consent, approval, authorizations, registrations or qualifications of
or with any court or any federal or state governmental or regulatory
authority having jurisdiction over the Company or any of its
properties or assets is required in connection with the execution or
delivery by the Company of this Agreement, the Pricing Agreement, the
consummation of the transactions contemplated hereby or thereby, and
the issuance, sale and delivery of the Common Shares. The execution
and delivery of this Agreement, the Pricing Agreement and the sale of
the Common Shares to the Underwriters as therein contemplated and the
consummation of the transactions contemplated thereby do not and will
not (A) conflict with or result in a breach of any of the terms and
provisions of, or
-19-
constitute a default (or an event which with notice or lapse of time,
or both, would constitute a default) under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to, any agreement, instrument,
franchise, license or permit known to such counsel to which the
Company is a party or by which it or its properties or assets may be
bound or (B) violate or conflict with any provision of the certificate
of incorporation or by-laws of the Company, or, to the best knowledge
of such counsel, any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its
properties or assets;
(viii) There are no material contracts, agreements or other
documents of a character required to be described or referred to in
the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement other than those described or
referred to therein or filed as exhibits thereto, and the description
in the Prospectus of all contracts, agreements and other documents
therein described fairly present in all material respects the
information required to be shown;
(ix) Such counsel does not know of any statutes or regulations
required to be described in the Prospectus which are not so described.
Except as disclosed in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party or of
which any property of the Company is the subject which, if determined
adversely to the Company, would individually or in the aggregate have
a material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company; and,
except as disclosed in the Prospectus no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
(x) The information in the Prospectus, to the extent that such
information constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is correct in all material respects;
(xi) The Registration Statement has become effective under the
Act and the Rules and Regulations and the Prospectus has been filed as
required under the Rules and Regulations; and, to such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement or preventing the use of the Prospectus has
been issued and no proceedings for purposes of issuing a stop order or
cease-and-desist proceedings have been instituted by, or are pending
before, the SEC or any other state securities regulatory authority;
(xii) The Registration Statement, the Prospectus and each
amendment or supplement thereto, if any (except for the financial
statements
-20-
and supporting schedules included therein, as to which such counsel
need express no opinion), comply as to form in all material respects
with the requirements of the Act and of the Rules and Regulations;
(xiii) Except as described in the Prospectus, there are no
outstanding options, warrants or other rights under which the Company
is or may become obligated to issue any shares of its capital stock or
any security convertible into or exchangeable for shares of its
capital stock;
(xiv) The Company's Common Stock, including the Common Shares,
have been approved for quotation on the National Association of
Securities Dealers National Market System upon notice of issuance;
(xv) The form of share certificate evidencing the Common Shares,
is in due and proper form under the laws of the State of Delaware;
(xvi) The Company is not an "investment company" as such term is
defined in the Investment Company Act; and
(xvii) No transfer taxes are required to be paid by the
Underwriters in connection with the sale and delivery of the Common
Shares by the Company to the Underwriters pursuant to the Underwriting
Agreement.
In rendering such opinions, such counsel may set forth the scope of
the factual investigation conducted (which may be reasonably limited to the
extent acceptable to counsel to the Underwriters) and may state as to matters of
fact that such counsel is relying exclusively, without independent investigation
or review, on one or more certificates of public officials, governmental
agencies or departments or officers of the Company provided that counsel shall
state that it knows of no reason why such reliance is not reasonable. In
addition, as to matters of law, counsel for the Company may limit such opinion
to the laws of the District of Columbia, the State of Delaware, the federal laws
of the United States, and related regulations (but not including any laws,
statutes, ordinances, administrative decisions, rules or regulations or any
political subdivision thereof).
In giving the opinion required by this Section 5(b), Xxxxxx & Xxxxxxx
shall additionally state they have participated in the preparation of the
Registration Statement and the Prospectus, and in conferences with officers and
other representatives of the Company, and representatives of the independent
public accountants for the Company, and that, while they have not undertaken to
determine independently, and do not assume any responsibility for, the accuracy,
completeness, or fairness of the statements in the Registration Statement or
Prospectus, on the basis of the foregoing no facts have come to their attention
which causes them to believe that (i) the Registration Statement (except for the
financial statements and schedules thereto and other financial and statistical
information
-21-
and data included therein or omitted therefrom, as to which such counsel need
express no opinion), at the time the Registration Statement became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances under which they were made, not misleading, or
that the Prospectus, as of the date of such opinion (except as aforesaid),
contained an untrue statement of a material fact or omits to state a material
fact necessary in order to make, not misleading, (ii) there are any legal or
governmental proceedings pending or threatened against the Company that are
required to be disclosed in the Registration Statement or the Prospectus (except
for the financial statements and schedules thereto, as to which such counsel
need express no opinion), other than those disclosed therein or (iii) there are
any contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or referred to therein or so
filled.
In basing their opinion and other matters set forth therein on
"knowledge" or other words to that effect, such phrase shall mean the actual
knowledge (i.e., the conscious awareness of facts or other information) of
lawyers in the firm who have given substantive legal attention to representing
the Company or its affiliates in connection with this Agreement and the
transactions contemplated thereunder.
(c) Xxxxx & Xxxxxxx L.L.P., counsel for the Underwriters, shall have
furnished to the Underwriters its favorable opinion dated as of each Closing
Time, to the effect that each of the opinions and the letter delivered pursuant
to Section 5(b) appears on its face to be appropriately responsive to the
requirements of this Agreement except, specifying the same, to the extent waived
by the Underwriters, and with respect to the legal existence of the Company, the
validity of the Common Shares and this Agreement, the Registration Statement,
the Prospectus and such other related matters as the Underwriters may require.
In giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the District of Columbia and the
federal law of the United States, upon the opinions of counsel satisfactory to
the Underwriters.
(d) At each Closing Time, (i) no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the Company's
knowledge, threatened, (ii) the Registration Statement and the Prospectus, as
they may then be amended or supplemented, shall contain all statements that are
required to be stated therein under the Rules and Regulations and applicable law
in all material respects shall conform to the requirements of the Rules and
Regulations and neither the Registration Statement nor the Prospectus, as they
may then be amended or supplemented, shall contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
-22-
necessary to make the statements therein in the light of the circumstances under
which they were made, not misleading, (iii) there shall not have been since the
latest respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or development
involving a prospective material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company,
whether or not arising in the ordinary course of business, (iv) no action suit
or proceeding shall be pending or, to the knowledge of the Company, threatened
against the Company that would be required to be set forth in the Prospectus
other than as set forth therein and no proceedings shall be pending or, to the
knowledge of the Company, threatened against the Company before or by any
government, governmental instrumentality or court, domestic or foreign, that
could result in any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company,
other than as set forth in the Prospectus, (v) the Company shall have complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied, in each case in connection with the sale of the Common Shares
hereunder, at or prior to each Closing Time, (vi) no event of default shall
exist under any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument of indebtedness of the Company, and (vii) the
other representations and warranties of the Company set forth in Section 1(a)
shall be accurate as though expressly made at and as of each Closing Time. At
each Closing Time, the Underwriters shall have received a certificate of the
Chairman or the President of the Company, and the Chief Financial Officer of the
Company, dated as of such Closing Time, to such effect.
(e) At the time of the execution of this Agreement, the Underwriters
shall have received from Ernst & Young LLP a letter, dated the date of this
Agreement, in form and substance satisfactory to the Underwriters, to the effect
that (i) they are independent public accountants with respect to the Company
within the meaning of the Rules and Regulations; (ii) in their opinion the
financial statements and supporting schedules included in the Registration
Statement and the Prospectus and covered by their opinion therein comply as to
form in all material respects with the applicable accounting requirements of the
Act and the Rules and Regulations; (iii) based upon procedures set forth in
detail in such letter, nothing has come to their attention which causes them to
believe that (A) any unaudited financial statements of the Company included in
the Registration Statement and the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Rules and
Regulations, or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis consistent in all material respects
with the audited financial statements included in the Registration Statement and
the Prospectus, (B) at a specified date not more than five days prior to the
date of this Agreement, there has been any change in the capital stock of the
Company or any increase in the long term debt of the Company or any decrease in
net assets as compared with the amounts shown in the June 30, 1996 balance sheet
included in the Registration Statement and the
-23-
Prospectus, or during the period from June 30, 1996 to October __, 1996, or (C)
there were any decreases, as compared with the corresponding period in the
preceding year, in income and net income of the Company, except in all instances
for changes, increases or decreases which the Registration Statement and the
Prospectus discloses have occurred or may occur; and (iv) in addition to the
examination referred to in their opinion and the procedures referred to in
clause (iii) above, they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information which are included in the Registration Statement and the
Prospectus and which are specified by the Underwriters, and have found such
amounts, percentages and financial information to be in agreement with the
relevant accounting, financial and other records of the Company identified in
such letter.
(f) At each Closing Time, the Underwriters shall have received from
Ernst & Young LLP a letter, dated as of such Closing Time, to the effect that
they reaffirm the statements made in the letter furnished pursuant to subsection
(e) of this Section 5, except that the specified date referred to shall be a
date not more than five days prior to such Closing Time.
(g) At each Closing Time, counsel for the Underwriters shall have been
furnished with all such documents, certificates and opinions as they may
reasonably request for the purpose of enabling them to pass upon the issuance
and sale of the Common Shares as herein contemplated and the matters referred to
in Section 5(c) and in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company, the performance of
any of the covenants of the Company or the fulfillment of any of the conditions
herein contained; and all actions taken by the Company at or prior to each
Closing Time in connection with the authorization, issuance and sale of the
Common Shares as herein contemplated shall be satisfactory in form and substance
to the Underwriters and counsel for the Underwriters.
If any condition to the Underwriters' obligations specified in this
Section 5 shall not have been fulfilled when and as required to be fulfilled by
this Agreement, this Agreement may be terminated by the Underwriters by notice
to the Company at any time at or prior to the First Closing Time, and such
termination shall be without liability of any part to any other party except as
provided in Section 4 hereof. Notwithstanding any such termination, the
provisions of Sections 6, 7 and 9 hereof shall remain in effect.
SECTION 6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Underwriters
and each person if any, who controls the Underwriters within the meaning of
Section 15 of the Act or Section 20 of the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"), as follows:
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(i) against-any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of (A) any untrue
statement or alleged untrue statement made by the Company in Section 1
hereof, or (B) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any
amendment thereto) or in any blue sky application or other document
executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all of the Common Shares
under the securities laws thereof (any such application, document or
information filing hereinafter called a "Blue Sky Application"), or
the omission or alleged omission therefrom of a 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 arising out of an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus
or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a 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;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred,
(including, subject to Section 6(c) below, fees and disbursements of
counsel chosen by the Underwriters) reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
Provided however, that the indemnification provided hereunder does not apply to
----------------
any loss, liability, claim, damage or expense to the extent arising out of (i)
any untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with Underwriters' Information, or (ii) any
untrue statement or omission or alleged untrue statement or omission contained
in any Preliminary Prospectus and corrected in the Prospectus and (A) such loss,
liability, claim, damage or expense suffered by the Underwriters (or person
controlling the Underwriters) resulted from an action, claim or suit by a person
who purchased the
-25-
Common Shares from the Underwriters in the Offering and (B) the Underwriters
failed to deliver a copy of the Prospectus (as then amended, if the Company
shall have amended the Prospectus) to such person at or prior to the
confirmation of the sale of such Common Shares in any case where such delivery
is required by the Act or by the Rules and Regulations, unless such failure was
due to failure by the Company to provide copies of the Prospectus (as so
amended) to the Underwriters as required by this Agreement. The indemnification
obligations of the Company hereunder shall be in addition to any liability which
the Company may otherwise have.
(b) The Underwriters agree to indemnify and hold harmless the Company,
its directors, each of its officers who signed the Registration Statement and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
Section 6(a) hereof but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in any Preliminary Prospectus or
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with Underwriters' Information.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced or threatened
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have otherwise than on account of this indemnity
agreement. An indemnifying party may participate at its own expense in the
defense of any such action. If it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying party or parties be liable for fees and
expenses of more than one counsel (in addition to local counsel) separate from
counsel for the indemnifying party or parties for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
SECTION 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity provided for in Section
6 hereof is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and the
-26-
Underwriters shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity incurred by
the Company and the Underwriters, as incurred, in such proportions that (a) the
Underwriters is responsible for that portion represented by the percentage that
the underwriting discount appearing on the cover page of the Prospectus bears to
the initial public offering price appearing thereon and (b) the Company is
responsible for the balance; provided however, that no person guilty of
----------------
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section, each person if any,
who controls the Underwriters within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Underwriters, and each director of the Company, each officer of the Company who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Company.
SECTION 8. Default of Underwriters. It shall be a condition to this
-----------------------
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and a condition of your obligations or the obligation of each
Underwriter, as the case may be, to purchase the Common Shares in the manner as
described herein, that, except as hereinafter in this paragraph provided, each
of you or the Underwriters, as the case may be, shall purchase and pay for all
the Common Shares agreed to be purchased by you or such Underwriter hereunder
upon tender to you individually or as the Representative of the Underwriters, of
all such shares in accordance with the terms hereof. If any Underwriter or
Underwriters default in their obligations to purchase Common Shares hereunder on
either the First or Option Closing Time and the aggregate number of Common
Shares which such defaulting Underwriter or Underwriters agreed but failed to
purchase at such Closing Time does not exceed 10% of the total number of Common
Shares which the Underwriters are obligated to purchase at such Closing Time,
the non-defaulting Underwriters shall be obligated severally, in proportion to
their respective commitments hereunder, to purchase the Common Shares which such
defaulting Underwriters agreed but failed to purchase at such Closing Time. If
any Underwriter or Underwriters so default and the aggregate number of Common
Shares with respect to which such default occurs is more than the above
percentage and arrangements satisfactory to the Representative and the Company
for the purchase of such Common Shares by other persons are not made within 48
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter or the Company except for the expenses to
be paid by the Company pursuant to Section 4 hereof and except to the extent
provided in Sections 6 and 7 hereof.
If applicable, in the event that Common Shares to which a default
relates are to be purchased by the nondefaulting entities or by another party or
-27-
parties, you or the Company shall have the right to postpone the First or Option
Closing Time, as the case may be, for not more than five 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 9. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties, indemnities, agreements and other statements of
the Company or its officers and the Underwriters set forth in or made pursuant
to this Agreement shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of the Company or the Underwriters or
controlling person of the Underwriters and shall survive delivery of the Common
Shares to the Underwriters and payment therefor.
SECTION 10. Effective Date. This Agreement shall become effective upon
--------------
the later of (a) the execution of the Pricing Agreement and (b) release by the
SEC of the notification of effectiveness of the Registration Statement. Should
this Agreement not become effective at or prior to 11:59 p.m. on the fourth
business day following the date hereof, such Agreement shall be of no further
effect between the parties thereto, without liability of any party to any other
party, except to the extent provided in Sections 4, 6 and 7 hereof.
SECTION 11. Termination of Agreement.
------------------------
(a) The Underwriters may terminate this Agreement, by notice to the
Company, at any time at or prior to the Closing Time (i) if there shall have
been, since the date of this Agreement or since the latest respective dates as
of which information is given in the Prospectus, any material adverse change in
the condition (financial or otherwise), earnings, business affairs or business
prospects of the Company, whether or not arising in the ordinary course of
business or (ii) if there shall have occurred any material adverse change in the
financial markets in the United States or any outbreak of hostilities or
escalation thereof or other calamity or crisis or material adverse change in
financial or economic conditions, in each case the effect of which on the
financial markets of the United States is such as to make it, in the
Underwriters' judgment, impracticable to market the Common Shares or to enforce
contracts for the sale of the Common Shares or (iii) if trading in any Common
Shares of the Company has been suspended by the Securities and Exchange
Commission (the "Commission"), SEC or the NASD, or if trading generally on the
New York Stock Exchange or the American Stock Exchange or in the over-the-
counter market has been suspended, or minimum or maximum prices for trading
shall have been filed, or maximum ranges for prices for Common Shares have been
required, by any such exchange or by order of the SEC, the NASD or any
-28-
other governmental authority or (iv) if a banking moratorium has been declared
by any one of authorized federal banking authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4 hereof. Notwithstanding any such
termination, the provisions of Sections 6, 7 and 8 hereof shall remain in
effect.
SECTION 12. Notices. All notices and other communications under this
-------
Agreement and the Pricing Agreement shall be in writing and shall be deemed to
have been duly given if delivered, mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to Friedman,
Billings, Xxxxxx & Co., Inc., Potomac Towers, 0000 Xxxxxxxxxx Xxxxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxx 00000, attention of Xxxxxxx Xxxxxxxxxx, Managing Director
(with a copy to J. Xxxxxx Xxxxxxx, Xx., Xxxxx & Xxxxxxx L.L.P., 000 Xxxxxxxxxx
Xxxxxx, XX, Xxxxxxxxxx, XX 00000); and notices to the Company shall be directed
to it at 0000 Xxxxxxxx Xxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000, attention of
________________.
SECTION 13. Successors. This Agreement will inure to the benefit of and
----------
be binding upon the parties hereto, and to the benefit of the officers and
directors and controlling persons referred to in Section 6, and in each case
their respective successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder. Notwithstanding the
foregoing, this Agreement shall not be assignable by the parties. The term
"successors" shall not include any purchaser of the Common Shares as such from
the Underwriters merely by reason of such purchase.
SECTION 14. Partial Unenforceability. The invalidity or unenforceability
------------------------
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 15. Governing Law and Time. This Agreement and the Pricing
----------------------
Agreement shall be governed by and construed in accordance with the law of the
Commonwealth of Virginia without regard to principles of conflicts of laws.
Except as otherwise set forth herein, specified times of day refer to
Washington, D.C. time.
SECTION 16. General. This Agreement constitutes the entire agreement of
-------
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
-29-
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and Friedman, Billings, Xxxxxx & Co.,
Inc.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the several Underwriters and the Company in accordance with its terms.
Very truly yours,
DIGEX, INCORPORATED
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CONFIRMED AND ACCEPTED,
as of the date first above written:
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
By:
-----------------------------------
Name:
---------------------------------
Authorized Signatory
-30-
EXHIBIT A
DIGEX, INCORPORATED
3,750,000 Shares of Common Stock
($.01 par value per share)
PRICING AGREEMENT
-----------------
, 1996
-------------------
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
Potomac Towers
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Reference is made to the Purchase Agreement, dated ___________, 1996
(the "Purchase Agreement"), relating to the purchase by the Underwriters, with
Friedman, Billings, Xxxxxx & Co., Inc., as their representative (the
"Underwriters") of the above Shares of DIGEX, Incorporated (the "Company").
Pursuant to Section 2 of the Purchase Agreement, the Company agrees
with the Underwriters as follows:
1. The initial public offering prices for the Shares, determined as
provided in said Section 2, shall be $_________ per Share.
2. The purchase prices for the Shares to be paid by the Underwriters
shall be $___________ per Share (the "Purchase Price"), 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, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
DIGEX, INCORPORATED
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CONFIRMED AND ACCEPTED,
as of the date first above written:
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
By:
-----------------------------------
Name:
---------------------------------
Xxxxxxx Xxxxxxxxxx
Title: Managing Director
-2-
SCHEDULE A
==============================================================================
Number of Firm
Common Shares
Name of Underwriter To Be Purchased
--------------------- ---------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
--------------------- ---------------------
---------
Total................ 3,750,000
---------
==============================================================================
