Predictive Systems, Inc.
Common Stock, $.001 par value
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Underwriting Agreement
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March __, 2000
Goldman, Sachs & Co.,
FleetBoston Robertson Stephens Inc.
Bear, Stearns & Co. Inc.
First Union Securities, Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Predictive Systems, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 1,000,000 shares of Common Stock, $.001 par value per share ("Stock") of the
Company and the stockholders of the Company named in Schedule II-A hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, severally to sell to the Underwriters an aggregate of 2,800,000 shares
and, at the election of the Underwriters, certain of the Selling Stockholders
named in Schedule II-B hereto (the "Optional Selling Stockholders") propose,
subject to the terms and conditions stated herein, to sell to the Underwriters
up to 570,000 additional shares of Stock. The aggregate of 3,800,000 shares to
be sold by the Company and the Selling Stockholders is herein called the "Firm
Shares" and the aggregate of 570,000 additional shares to be sold by the
Optional Selling Stockholders is herein called the "Optional Shares". The Firm
Shares and the Optional Shares that the Underwriters elect to purchase pursuant
to Section 2 hereof are herein collectively called the "Shares".
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-31770)
(together with any pre-effective amendments thereto, the "Initial
Registration Statement") in respect of the Shares has been filed with
the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each
in the form heretofore delivered to you for each of the other
Underwriters, and, excluding exhibits thereto, have been declared
effective by the Commission in such form; other than a registration
statement, if any, increasing the size of the offering (a "Rule 462(b)
Registration Statement"), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and no stop
order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment hereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or threatened by the Commission (any
preliminary prospectus included in the Initial Registration Statement
or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial Registration
Statement, any post-effective amendment and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and
including the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Registration Statement at the
time it was declared effective, each as amended at the time such part
of the Initial Registration Statement became effective or such part of
the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus").
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder. The Preliminary Prospectus and the
Prospectus, as each may be or have been amended or supplemented, as of
its date and at all subsequent times, did 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, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use
therein or by a Selling Stockholder expressly for use in the
preparation of the answers therein to Items 7 and 11(m) of Form S-1.
(iii) The Registration Statement conforms, and any further
amendments or supplements to the Registration Statement will conform,
in all material respects, to the requirements of the Act and the rules
and regulations of the Commission thereunder, and does not and will
not, as of the applicable effective date of the Registration Statement,
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; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein or by a Selling Stockholder
expressly for use in the preparation of the answers therein to Items 7
and 11(m) of Form S-1.
(iv) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the management, financial
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position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole (each such change or resulting
effect, a "Material Adverse Change" or "Material Adverse Effect," as
the context requires), otherwise than as set forth in or contemplated
by the Prospectus;
(v) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially and adversely affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed
to be made of such property and buildings by the Company and its
subsidiaries;
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except where the failure
to do so would not result in a Material Adverse Effect; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(vii) The Company has an authorized capitalization as set forth
in the Prospectus under the caption "Capitalization" (other than
subsequent issuances, if any, pursuant to the Company's employee
benefit plans, or upon the exercise of outstanding options or warrants,
if any), and all of the issued shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and
non-assessable and conform to the description of the Stock contained in
the Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued,
are fully paid and non-assessable and (except for directors' qualifying
shares and except as set forth in the Prospectus) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims;
(viii) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly authorized and, when issued and
delivered against payment therefor as provided herein, will be validly
issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(ix) The issue and sale of the Shares to be sold by the Company
and the compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries
is subject, except, in any such case, for such conflicts, breaches,
violations or defaults which could reasonably be expected to result in
a Material Adverse Effect, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
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of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required (A)
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters, (B) by the National
Association of Securities Dealers, Inc., or (C) by the Nasdaq National
Market;
(x) Neither the Company nor any of its subsidiaries is (A) in
violation of its Certificate of Incorporation or By-laws or (B) in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be
bound, except, with respect to clause (B), as otherwise disclosed in
the Prospectus and except for such violations or defaults which could
not reasonably be expected to result in a Material Adverse Effect;
(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair;
(xii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually
or in the aggregate have a Material Adverse Effect; and, to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(xiii) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company",
as such term is defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act");
(xiv) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(xv) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to
which the business or operations of the Company or any of its
subsidiaries will be affected by the Year 2000 Problem. As a result of
such review, the Company has no reason to believe, and does not
believe, that the Year 2000 Problem will have a Material Adverse
Effect. The "Year 2000 Problem" as used herein means any significant
risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000;
(xvi) There are no persons with registration or other similar
rights to have any equity or debt securities registered for sale under
the Registration Statement or included in the offering contemplated by
this Agreement, except for such rights as have been duly waived;
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(xvii) The Company and each of its subsidiaries maintain a system
of accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with
generally accepted accounting principles as applied in the United
States and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences;
(xviii)The financial statements filed with the Commission as a
part of the Registration Statement and included in the Prospectus
present fairly the consolidated financial position of the Company and
its subsidiaries as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. The
supporting schedules included in the Registration Statement, if any,
present fairly the information required to be stated therein. Such
financial statements and supporting schedules have been prepared in
conformity with generally accepted accounting principles as applied in
the United States on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes
thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial
data set forth in the Prospectus under the captions "Prospectus
Summary--Summary Selected Financial Data", "Selected Financial Data"
and "Capitalization" fairly present the information set forth therein
on a basis consistent with that of the audited financial statements
contained in the Registration Statement;
(xix) The Company and its consolidated subsidiaries have filed
all necessary federal, state and foreign income and franchise tax
returns or have properly requested extensions thereof and have paid all
taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of
them, except where such failure could not reasonably result in a
Material Adverse Effect. The Company has made adequate charges,
accruals and reserves in the applicable financial statements referred
to in Section 1(xviii) above in respect of all federal, state and
foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its consolidated subsidiaries has
not been finally determined. The Company is not aware of any tax
deficiency that has been or might be asserted or threatened against the
Company that could result in a Material Adverse Effect;
(xx) Except as disclosed in the Prospectus, each of the Company
and its subsidiaries owns or possesses adequate rights to use all
patents, patent rights or licenses, inventions, collaborative research
agreements, trade secrets, know-how, trademarks, service marks, trade
names and copyrights and other intellectual property rights which are
necessary to conduct its businesses as described in the Registration
Statement and Prospectus; except as disclosed in the Prospectus, the
expiration of any patents, patent rights, trade secrets, trademarks,
service marks, trade names or copyrights would not result in a Material
Adverse Effect that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by
others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or
copyrights; and the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of
others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable
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decision, ruling or finding, might have a Material Adverse Effect. To
the Company's knowledge, there is no claim being made against the
Company regarding patents, patent rights or licenses, inventions,
collaborative research, trade secrets, know-how, trademarks, service
marks, trade names or copyrights. The Company and its subsidiaries do
not in the conduct of their business as now or proposed to be conducted
as described in the Prospectus infringe or conflict with any right or
patent of any third party, or any discovery, invention, product or
process which is the subject of a patent application filed by any third
party, known to the Company or any of its subsidiaries, which such
infringement or conflict is reasonably likely to result in a Material
Adverse Effect;
(xxi) Each of the Company and its subsidiaries is insured by
recognized, financially sound and reputable institutions with policies
in such amounts and with such deductibles and covering such risks as
are generally deemed adequate and customary for their businesses
including, but not limited to, policies covering real and personal
property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and earthquakes, general
liability and Directors and Officers liability. The Company has no
reason to believe that it or any subsidiary will not be able (i) to
renew its existing insurance coverage as and when such policies expire
or (ii) to obtain comparable coverage from similar institutions as may
be necessary or appropriate to conduct its business as now conducted
and at a cost that would not result in a Material Adverse Effect.
Neither of the Company nor any subsidiary has been denied any insurance
coverage which it has sought or for which it has applied; and
(xxii) The Company and its subsidiaries and any "employee benefit
plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations
thereunder (collectively, "ERISA")) established or maintained by the
Company, its subsidiaries or their "ERISA Affiliates" (as defined
below) are in compliance in all material respects with ERISA, except
where the failure to comply would not reasonably be expected to result
in a Material Adverse Effect. "ERISA Affiliates" means, with respect to
the Company or a subsidiary, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue
Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company or such
subsidiary is a member. No "reportable event" (as defined under ERISA)
has occurred or is reasonably expected to occur with respect to any
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its subsidiaries or any
of their ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfounded benefit liabilities"
(as defined under ERISA). Neither the Company, its subsidiaries nor any
of their ERISA Affiliates has incurred or reasonably expects to incur
any liability under (i) Title IV of ERISA with respect to termination
of, or withdrawal from, any "employee benefit plan" or (ii) Sections
412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of
their ERISA Affiliates that is intended to be qualified under Section
401(a) of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such
qualification.
(b) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
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(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement and the Power of Attorney (as defined) and the Custody
Agreement hereinafter referred to, and for the sale and delivery of the
Shares to be sold by such Selling Stockholder hereunder, have been
obtained or waived; and such Selling Stockholder has full right, power
and authority to enter into this Agreement, the Power-of-Attorney and
the Custody Agreement (as defined) and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling Stockholder
with all of the provisions of this Agreement, the Power of Attorney and
the Custody Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound or
to which any of the Shares to be sold by the Selling Stockholder is
subject, nor will such action result in any violation of the provisions
of the Certificate of Incorporation or By-laws of such Selling
Stockholder if such Selling Stockholder is a corporation, the
partnership agreement of such Selling Stockholder if such Selling
Stockholder is a partnership or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(iii) Such Selling Stockholder has, and immediately prior to each
Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, good and valid title to the Shares to be sold by
such Selling Stockholder hereunder, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such Shares and
payment therefor pursuant hereto, good and valid title to such Shares,
free and clear of all liens, encumbrances, equities or claims, will
pass to the several Underwriters;
(iv) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, such Selling Stockholder shall not offer, sell, contract to
sell, pledge, grant any option to purchase, make any short sale or
otherwise dispose of, except as provided hereunder, any securities of
the Company that are substantially similar to the Shares, including but
not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, Stock or any such
substantially similar securities (other than (A) pursuant to employee
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of
this Agreement, (B) to any trust for the direct or indirect benefit of
such Selling Stockholder or the immediate family of such Selling
Stockholder (provided that the trustee agrees to be bound in writing by
these restrictions and that the transfer is not for value), and (C)
securities acquired in the public market after the date of the
Prospectus), without your prior written consent;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information relating to such Selling
Stockholder furnished to the Company by such Selling Stockholder
expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further
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amendments or supplements to the Registration Statement and the
Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any 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 not misleading;
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(viii) Certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder have been
placed in custody under a Custody Agreement, in the form heretofore
furnished to you (the "Custody Agreement"), duly executed and delivered
by such Selling Stockholder to the Company, as custodian (the
"Custodian"), and such Selling Stockholder has duly executed and
delivered a Power of Attorney, in the form heretofore furnished to you
(the "Power of Attorney"), appointing the persons indicated in Schedule
II hereto, and each of them, as such Selling Stockholder's
attorneys-in-fact (the "Attorneys-in-Fact") with authority to execute
and deliver this Agreement on behalf of such Selling Stockholder, to
determine the purchase price to be paid by the Underwriters to the
Selling Stockholders as provided in Section 2 hereof, to authorize the
delivery of the Shares to be sold by such Selling Stockholder hereunder
and otherwise to act on behalf of such Selling Stockholder in
connection with the transactions contemplated by this Agreement, the
Power of Attorney and the Custody Agreement; and
(ix) The Shares represented by the certificates held in custody
for such Selling Stockholder under the Custody Agreement are subject to
the interests of the Underwriters hereunder; the arrangements made by
such Selling Stockholder for such custody, and the appointment by such
Selling Stockholder of the Attorneys-in-Fact by the Power of Attorney,
are to that extent irrevocable; the obligations of the Selling
Stockholders hereunder shall not be terminated by operation of law,
whether by the death or incapacity of any individual Selling
Stockholder or, in the case of an estate or trust, by the death or
incapacity of any executor or trustee or the termination of such estate
or trust, or in the case of a partnership or corporation, by the
dissolution of such partnership or corporation, or by the occurrence of
any other event; if any individual Selling Stockholder or any such
executor or trustee should die or become incapacitated, or if any such
estate or trust should be terminated, or if any such partnership or
corporation should be dissolved, or if any other such event should
occur, before the delivery of the Shares hereunder, certificates
representing the Shares shall be delivered by or on behalf of the
Selling Stockholders in accordance with the terms and conditions of
this Agreement and of the Custody Agreements; and actions taken by the
Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid
as if such death, incapacity, termination, dissolution or other event
had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the
Company and each of the Selling Stockholders agree, severally and not jointly,
to sell to each of the Underwriters, and each of the Underwriters agrees,
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severally and not jointly, to purchase from the Company and each of the Selling
Stockholders, at a purchase price per share of $.............., the number of
Firm Shares (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying the aggregate number of Shares to be sold by the
Company and each of the Selling Stockholders as set forth opposite their
respective names in Schedule II-A hereto by a fraction, the numerator of which
is the aggregate number of Firm Shares to be purchased by such Underwriter as
set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from the Company and all of the Selling Stockholders
hereunder and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided below, each of the
Selling Stockholders listed on Schedule II-B agrees, severally and not jointly,
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from each of such Selling Stockholders,
at the purchase price per share set forth in clause (a) of this Section 2, that
portion of the number of Optional Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Selling Stockholders listed on Schedule II-B, as and to the extent
indicated in Schedule II-B hereto, hereby grant, severally and not jointly, to
the Underwriters the right to purchase at their election up to an aggregate of
570,000 Optional Shares, at the purchase price per share set forth in the
paragraph above, for the sole purpose of covering sales of shares in excess of
the number of Firm Shares. Any such election to purchase Optional Shares shall
be made in proportion to the maximum number of Optional Shares to be sold by
each Selling Stockholder as set forth in Schedule II-B hereto. Any such election
to purchase Optional Shares may be exercised only by written notice from you to
the Attorneys-in-Fact, given within a period of 30 calendar days after the date
of this Agreement and setting forth the aggregate number of Optional Shares to
be purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Attorneys-in-Fact otherwise
agree in writing, earlier than two or later than ten business days after the
date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co.,
through the facilities of the Depository Trust Company ("DTC"), for the account
of such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company and the Custodian to Goldman, Sachs & Co. at
least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian Goldman, Sachs & Co.,
85 Broad Street, New York, New York 10004 (the "Designated Office"). The time
and date of such delivery and payment shall be, with respect to the Firm Shares,
9
9:30 a.m., New York time, on ............., 2000 or such other time and date as
Goldman, Sachs & Co., the Company and the Selling Stockholders may agree upon in
writing, and, with respect to the Optional Shares, 9:30 a.m., New York time, on
the date specified by Goldman, Sachs & Co. in the written notice given by
Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional
Shares, or such other time and date as Goldman, Sachs & Co. the Selling
Stockholders may agree upon in writing. Such time and date for delivery of the
Firm Shares is herein called the "First Time of Delivery", such time and date
for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the cross
receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(k) hereof, will be delivered at the offices
of Brobeck, Phleger & Harrison LLP, 1633 Broadway, New York, New York 10019 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing Location at
.......p.m., New York City time, on the New York Business Day next preceding
such Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus which
shall be disapproved by you promptly after reasonable notice thereof; to advise
you, promptly after it receives notice thereof, of the time when any amendment
to the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and to
furnish you with copies thereof; to advise you, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to obtain
the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to furnish
the Underwriters with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a prospectus
10
is required at any time prior to the expiration of nine months after the time of
issue of the Prospectus in connection with the offering or sale of the Shares
and if at such time any events shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and upon your request
to prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the Shares
at any time nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and deliver to
such Underwriter as many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including, at the option of the Company, Rule
158);
(e) During the period beginning from the date hereof and continuing to
and including the date 90 days after the date of the Prospectus, not to offer,
sell, contract to sell or otherwise dispose of, except as provided hereunder,
any securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock option
plans existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement), without
your prior written consent, except that (i) the Company may issue such
securities in exchange for all of the equity or substantially all of the assets
of a company in connection with a merger or acquisition and (ii) the Company may
issue shares of its common stock in connection with one or more strategic
investments, provided that, in all such cases, prior to any such issuance the
recipient of such securities shall have agreed with Goldman, Sachs & Co. in
writing to be bound by the provisions of the lock-up restrictions set forth in
Annex II hereto throughout the remainder of the 90-day period;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and statements
of income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and, as
soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), to make available to its stockholders
consolidated summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish or make available in electronic format to you
copies of all reports or other communications (financial or other) furnished to
stockholders, and to deliver or make available in electronic format to you (i)
as soon as they are available, copies of any reports and financial statements
furnished to or filed with the Commission or any national securities exchange on
which any class of securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the Company as
you may from time to time reasonably request (such financial statements to be on
a consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders generally
or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds";
11
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National Market
System ("NASDAQ"); and
(j) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement,
and the Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company and each of the Selling Stockholders covenant and agree
with one another and with the several Underwriters that the Company will pay or
cause to be paid all of the following: (i) the fees, disbursements and expenses
of the Company's counsel and accountants in connection with the registration of
the Shares under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriters and dealers; (ii)
the cost of printing or producing any Agreement among Underwriters, this
Agreement, the Blue Sky Memorandum, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) all expenses in connection with
the qualification of the Shares for offering and sale under state securities
laws as provided in Section 5(b) hereof, including the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey, (iv) all fees and
expenses in connection with listing the Shares on NASDAQ, (v) the filing fees
incident to, and the reasonable fees and disbursements of counsel for the
Underwriters in connection with, securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the Shares,
(vi) the cost of preparing stock certificates; (vii) the cost and charges of any
transfer agent or registrar; (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section, and (ix) all costs and expenses incident to the
performance of each Selling Stockholder's obligations hereunder which are not
otherwise specifically provided for in this Section, including (x) any fees and
expenses of counsel for such Selling Stockholder, (y) such Selling Stockholder's
pro rata share of the fees and expenses of the Attorneys-in-Fact and the
Custodian, and (z) all expenses and taxes incident to the sale and delivery of
the Shares to be sold by such Selling Stockholder to the Underwriters hereunder.
In connection with clause (z) of the preceding sentence, Goldman, Sachs & Co.
agrees to pay New York State stock transfer tax, and the Company agrees to
reimburse Goldman, Sachs & Co. for associated carrying costs if such tax payment
is not rebated on the day of payment and/or any portion of such tax payment not
rebated. It is understood that the Company shall bear, and the Selling
Stockholders shall not be required to pay or to reimburse the Company for, the
cost of any other matters not directly relating to the sale and purchase of the
Shares pursuant to this Agreement, and that, except as provided in this Section,
and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
12
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Hale and Dorr LLP, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions (a draft of each such
opinion is attached as Annex II(a) hereto), dated as of such Time of
Delivery, with respect to the matters covered in paragraphs (i), (ii),
(iii), (vii) and (xii) of subsection (c) below as well as such other
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Brobeck, Phleger & Harrison LLP, counsel for the Company,
shall have furnished to you their written opinion (a draft of such
opinion is attached as Annex II(b) hereto), dated such Time of
Delivery, in form and substance satisfactory to you and subject to such
assumptions, qualifications and limitations as is customary in such
opinions, to the effect that:
(i) The Company is duly incorporated and is validly
existing and in good standing under the laws of the State of
Delaware; the Company has the corporate power and authority to
own, lease and operate its properties and conduct its business as
described in the Prospectus; the Company has the status set forth
opposite the jurisdictions listed on Schedule A to such opinion;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus;
(iii) All of the shares of capital stock of the Company
outstanding prior to the Time of Delivery (including the Shares
to be sold by the Selling Stockholders) have been duly authorized
and validly issued, are fully paid and nonassessable and, to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale, registration right,
right of first refusal or other similar right; and the Shares
conform to the description of the Stock contained in the
Prospectus;
(iv) The Shares to be sold by the Company have been duly
authorized and, when issued and delivered to the Underwriters
against payment therefor in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid and
nonassessable and free of (A) any preemptive rights arising under
the Company's certificate of incorporation or the Delaware
General Corporation Law or (B) to such counsel's knowledge,
similar rights that entitle or will entitle any person to acquire
any shares of capital stock of the Company upon the issuance and
sale of the Shares by the Company;
(v) Each of the subsidiaries has been duly incorporated
and is validly existing and in good standing under the laws of
their respective jurisdiction of incorporation; each of the
subsidiaries has the corporate power and authority to own, lease
and operate its properties and to conduct the business in which
it is engaged; to such counsel's knowledge, the Company does not
own or control, directly or indirectly, any corporation,
association or other entity other than Predictive Limited and
Network Resource Consultants and Company B.V.;
13
(vi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the
Company or any of its subsidiaries, or to which the Company, any
of its subsidiaries or any of its properties is subject, which
are required to be described in the Registration Statement or
Prospectus (or any amendment or supplement thereto) by the Act or
the rules and regulations promulgated thereunder that are not so
described;
(vii) This Agreement has been duly authorized, executed
and delivered by the Company;
(viii) Neither the offer, sale or delivery of the Shares,
the compliance by the Company with the provisions of this
Agreement nor consummation by the Company of the transactions
contemplated by this Agreement (A) violates the Company's
certificate of incorporation or bylaws or (B) constitutes a
breach of, or a default under, any agreement, indenture, lease or
other instrument to which the Company is a party or by which the
Company or any of its properties is bound or that is known to
such counsel, which breach or default would reasonably be
expected to have a Material Adverse Effect or (C) will result in
any material violation of any existing law or regulation (other
than applicable state securities and Blue Sky laws, as to which
such counsel need not express an opinion), or any ruling,
judgment, injunction, order or decree known to such counsel and
applicable to the Company or any of its properties;
(ix) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or
official is required on the part of the Company (except (A) as
have been obtained (I) under the Act and the Exchange Act and
(II) from the NASDAQ National Market, Inc., (B) such as may be
required (I) under state securities or Blue Sky laws governing
the purchase and distribution of the Shares, or (II) by the
National Association of Securities Dealers, Inc., as to each of
which such counsel need express no such opinion) for the valid
issuance and sale of the Shares to the Underwriters as
contemplated by this Agreement;
(x) To such counsel's knowledge, the Company is not
presently (a) in violation of its certificate of incorporation or
bylaws or (b) in breach of any applicable statute, rule or
regulation or any order, writ or decree of any court or
governmental agency or body having jurisdiction over the Company
or any of its subsidiaries, or over any of their properties or
operations, which would result in a Material Adverse Effect;
(xi) To such counsel's knowledge, there are no agreements,
contracts, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement that are not
so described or filed, as the case may be;
(xii) That statements set forth in the Prospectus under
the caption "Description of Capital Stock," insofar as they
purport to constitute a summary of the terms of the Stock, and
under the caption "Underwriting," insofar as they purport to
describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair; and
14
(xiii) The Company is not an "investment company," as such
term is defined in the Investment Company Act.
Such opinion letter shall also state that, although such
counsel is not passing upon, and does not assume any
responsibility for, and has not independently checked or
verified, the accuracy, completeness or fairness of the
information and statements contained in the Registration
Statement and the Prospectus, such counsel has participated in
conferences with certain officers and other representatives of
the Company, its independent public accountants, the Underwriters
and the Underwriters' counsel at which the contents of the
Registration Statement, the Prospectus and related matters were
discussed, and based upon such participation (i) such counsel is
of the opinion that the Registration Statement and the Prospectus
(other than the financial statements, including the notes and
schedules thereto and the other financial data, included in the
Registration Statement and the Prospectus, as to which they need
express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the
requirements of the Act and the applicable rules and regulations
thereunder; (ii) such counsel confirms that they have no reason
to believe that the Registration Statement (other than the
financial statements, including the notes and schedules thereto
and the other financial data, included in the Registration
Statement, as to which they need express no belief), at the time
the Registration Statement became effective, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and (iii) such counsel confirms that they
have no reason to believe that the Prospectus (other than the
financial statements, including the notes and schedules thereto
and the other financial data, included in the Prospectus, as to
which they need express no belief), as of its date and on the
date of such opinion, contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(d) The respective counsel for each of the Selling Stockholders,
as indicated in Schedule II hereto, each shall have furnished to you
their written opinion with respect to each of the Selling Stockholders
for whom they are acting as counsel (a draft of each such opinion is
attached as Annex II(c) hereto), dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) A Power-of-Attorney and a Custody Agreement have been
duly executed and delivered by such Selling Stockholder and
constitute valid and binding agreements of such Selling
Stockholder in accordance with their terms;
(ii) This Agreement has been duly executed and delivered
by or on behalf of such Selling Stockholder; and the sale of the
Shares to be sold by such Selling Stockholder hereunder and the
compliance by such Selling Stockholder with all of the provisions
of this Agreement, the Power-of-Attorney and the Custody
Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach
or violation of any terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such
counsel which is filed as an exhibit to the Registration
Statement to which such Selling Stockholder is a party or by
which such Selling Stockholder is bound or to which any of the
Shares to be sold by the Selling Stockholder is subject, nor will
15
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling
Stockholder if such Selling Stockholder is a corporation, the
Partnership Agreement of such Selling Stockholder if such Selling
Stockholder is a partnership or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over such Selling Stockholder or the property
of such Selling Stockholder;
(iii) No consent, approval, authorization or order of any
New York State or federal court or governmental agency or body is
required for the consummation of the transactions contemplated by
this Agreement in connection with the Shares to be sold by such
Selling Stockholder hereunder, except as may have been obtained
(I) under the Act and the Exchange Act and from the NASDAQ
National Market, Inc. and (II) as may be required (A) under state
securities or Blue Sky laws in connection with the purchase and
distribution of such Shares by the Underwriters, or (B) by the
National Association of Securities Dealers, Inc., as to which
such counsel need express no opinion;
(iv) Immediately prior to such Time of Delivery, such
Selling Stockholder was the sole registered owner of the Shares
to be sold at such Time of Delivery by such Selling Stockholder
under this Agreement, and had full right, power and authority to
sell, assign, transfer and deliver the Shares to be sold by such
Selling Stockholder hereunder; and
(v) Good and valid title to such Shares, free and clear of
all liens, encumbrances, equities or claims, has been transferred
to each of the several Underwriters who have purchased such
Shares in good faith and without notice of any adverse claim
within the meaning of the Uniform Commercial Code.
In rendering the opinion in paragraph (iv), such counsel may rely upon
a certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on, the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate;
(e) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
such Time of Delivery, Arthur Andersen LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in
Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a
draft of the form of letter to be delivered on the effective date of
any post-effective amendment to the Registration Statement and as of
each Time of Delivery is attached as Annex I(b) hereto);
(f)(i)Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in
the Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
16
described in clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(g) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ; (ii)
a suspension or material limitation in trading in the Company's
securities on NASDAQ; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency
or war, if the effect of any such event specified in this clause (iv)
in the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(h) The Shares at such Time of Delivery shall have been duly
listed for quotation on NASDAQ;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each Selling Stockholders in
substantially the form attached hereto as Annex II;
(j) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
and
(k) The Company and the Selling Stockholders shall have furnished
or caused to be furnished to you at such Time of Delivery certificates
of officers of the Company and of the Selling Stockholders,
respectively, satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Selling
Stockholders, respectively, herein at and as of such Time of Delivery,
as to the performance by the Company and the Selling Stockholders of
all of their respective obligations hereunder to be performed at or
prior to such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to
be furnished certificates as to the matters set forth in subsections
(a) and (f) of this Section.
8. (a) The Company and each of Ronald G. Pettengill, Jr. and Robert L.
Belau, jointly and severally, will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or 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 for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and Ronald G. Pettengill, Jr. and
Robert L. Belau shall not be liable in any such case to the extent that 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
any Preliminary Prospectus, the Registration Statement or the
17
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein; provided, further, that
the liability of Ronald G. Pettengill, Jr. and Robert L. Belau pursuant to this
subsection 8(a) shall not exceed the product of the number of Shares sold by
such individuals, including Optional Shares, and the public offering price of
the Shares as set forth in the Prospectus.
(b) Each of the Selling Stockholders, other than Ronald G. Pettengill,
Jr. and Robert L. Belau, severally and not jointly, will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or 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 any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished relating to such Selling
Stockholder to the Company by such Selling Stockholder (other than Ronald G.
Pettengill, Jr. and Robert L. Belau) expressly for use therein; and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that such
Selling Stockholder (other than Ronald G. Pettengill, Jr. and Robert L. Belau)
shall not be liable in any such case to the extent that 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 any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein; provided, further, that the liability of a Selling
Stockholder (other than Ronald G. Pettengill, Jr. and Robert L. Belau) pursuant
to this subsection 8(b) shall not exceed the product of the number of Shares
sold by such Selling Stockholder, including Optional Shares, and the public
offering price of the Shares as set forth in the Prospectus;
(c) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities to
which the Company or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or 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 any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
18
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Stockholders on the one hand
and the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Selling Stockholders on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, each of the
Selling Stockholders and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (e) were determined by
19
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), 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. Notwithstanding anything to the contrary set forth in this Section
8(e), no Selling Stockholder shall be required to contribute any amounts in
excess of the product of the number of Shares sold by such Selling Stockholder,
including Optional Shares, and the public offering price of the Shares as set
forth in the Prospectus. 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. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under
this Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company or any Selling Stockholder within the meaning of
the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone a Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
20
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Optional Selling Stockholders to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company or the Selling Stockholders, except
for the expenses to be borne by the Company and the Selling Stockholders and the
Underwriters as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them
severally, respectively, pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, or any of the Selling Stockholders, or any
officer or director or controlling person of the Company, or any controlling
person of any Selling Stockholder, and shall survive delivery of and payment for
the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company and each of
the Selling Stockholders severally pro rata (based on the number of Shares to be
sold by the Company and such Selling Stockholder hereunder) will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including reasonable fees and disbursements of counsel, reasonably incurred
by the Underwriters in making preparations for the purchase, sale and delivery
of the Shares not so delivered, but the Company and the Selling Stockholders
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
21
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(d) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied to the Company
or the Selling Stockholders by you on request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and each of the Representatives plus one
for each counsel and the Custodian, if any, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company and the Selling Stockholders for
examination, upon request, but without warranty on your part as to the authority
of the signers thereof.
22
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power-of-Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
Predictive Systems, Inc.
By: ..............................
Name:
Title:
Ronald G. Pettengill, Jr.
Robert L. Belau
Carl D. Humes
Thomas R. Joseph
Gregory D. Nicastro
Neeraj Sethi
John Wright
Peter L. Bloom
Donald J. Duffy
Eric Meyer
General Atlantic Partners, LLC
Meyer, Duffy & Associates, L.P.
Jos Bourgonje
Nelson Hung
MD Strategic, L.P.
Jamin Patel
Gregory T. Barry
Frank L. Rosalia
Gregory Eng Yee
Katherine Rocci
Charles Young
Doris P. Tillman
Nelson K. Tai
Augusto Ray Guillermo
Wilfried Van Haeren
Timothy R. Letki
Harold S. Schultz
Adam C. Steckelman
Joel Ercolani
Hope Meyer
PVII, L.P.
Barry Belau
Pamela Kapsimalis
Stanton F. Weissenborn
Dr. Peter Kapsimalis
Andrew R. Cherna
Brobeck, Phleger & Harrison LLP
Michael Green
Louis T. Alesi
Arden L. Boren
Judith Margolis
George J. Donohue
Leigh Welles
By: ..............................
Name: Gary N. Papilsky
Title: Vice President and
General Counsel
As Attorney-in-Fact acting on
behalf of each of the Selling
Stockholders named in Schedule
II to this Agreement.
Accepted as of the date hereof:
Goldman, Sachs & Co.
FleetBoston Robertson Stephens Inc.
Bear, Stearns & Co. Inc.
First Union Securities Inc.:
By:.......................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
23
SCHEDULE I
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ------------------
Goldman, Sachs & Co.................................................
FleetBoston Robertson Stephens Inc..................................
Bear, Stearns & Co. Inc.............................................
First Union Securities Inc..........................................
---------- --------
Total...................................................... 3,800,000 570,000
========== ========
24
SCHEDULE II-A
Firm Shares
Total Number of
Firm Shares
to be Sold
---------------
The Company........................................................ 1,000,000
The Selling Stockholders(a):..................................
---------------
Total..................................................... 3,800,000
===============
- -------------
(a) This Selling Stockholder is represented by Brobeck, Phleger & Harrison LLP
and has appointed Gary N. Papilsky and Gerard E. Dorsey, and each of them, as
the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by Salans Hertzfeld Heilbronn
Christy & Viener and has appointed Gary N. Papilsky and Gerard E. Dorsey, and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by Paul, Weiss, Rifkind, Wharton &
Garrison and has appointed Gary N. Papilsky and Gerard E. Dorsey, and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
SCHEDULE II-B
Optional Shares
Number of Optional
Shares to be sold
if Maximum Option
Exercised
-------------------
The Optional Selling Stockholders(a):.........................
Total..................................................... -----------------
570,000
=================
- -------------
(a) This Selling Stockholder is represented by Brobeck, Phleger & Harrison LLP
and has appointed Gary N. Papilsky and Gerard E. Dorsey, and each of them, as
the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by Salans Hertzfeld Heilbronn
Christy & Viener and has appointed Gary N. Papilsky and Gerard E. Dorsey, and
each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by Paul, Weiss, Rifkind, Wharton &
Garrison and has appointed Gary N. Papilsky and Gerard E. Dorsey, and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as indicated in their reports thereon copies
of which have been separately furnished to the Representatives and on
the basis of specified procedures including inquiries of officials of
the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated
financial statements referred to in paragraph (vi)(A)(i) below comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years which were included or incorporated by reference
in the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform in all
material respects with the disclosure requirements of Items 301, 302,
402 and 503(d), respectively, of Regulation S-K;
F-1
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of
the Act and the related published rules and regulations, or (ii)
any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in clause (B)
were not determined on a basis substantially consistent with the
basis for the audited consolidated financial statements included
in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations
thereunder or the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest financial statements included in the
Prospectus) or any increase in the consolidated long-term debt of
the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other
items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared
with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
F-2
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date
referred to in clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified
by the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period
of corresponding length specified by the Representatives, except
in each case for decreases or increases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (vi) above, they have carried out certain
specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Prospectus, or
in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement
F-3