DEUTSCHE BANK SECURITIES INC.
EQUITY CAPITAL MARKETS
STRICTLY PRIVATE
AND CONFIDENTIAL
Dated June __, 1998
EARTHLINK NETWORK, INC.
2,400,000 shares
Common Stock
UNDERWRITING AGREEMENT
EARTHLINK NETWORK, INC.
2,400,000 SHARES COMMON STOCK
(PLUS AN OPTION TO PURCHASE UP TO
360,000 ADDITIONAL SHARES TO COVER OVER-ALLOTMENTS)
UNDERWRITING AGREEMENT
June __, 1998
DEUTSCHE BANK SECURITIES INC.
INVEMED ASSOCIATES, INC.
THE ROBINSON-HUMPHREY COMPANY
As Representatives of the several Underwriters
c/o Deutsche Bank Securities Inc.
31 West 52nd Street
New York, New York 10019
Ladies and Gentlemen:
EarthLink Network, Inc., a Delaware corporation (the "COMPANY"), and the
persons named in SCHEDULE 2 hereto (the "SELLING STOCKHOLDERS") hereby confirm
their agreement with the several underwriters named in SCHEDULE 1 hereto (the
"UNDERWRITERS"), for whom you have been duly authorized to act as
representatives (the one or more firms acting in such capacities, the
"REPRESENTATIVES"), as set forth below. If you are the only Underwriters, all
references herein to the Representatives shall be deemed to be references to the
Underwriters.
SECTION 1. UNDERWRITING. Subject to the terms and conditions contained
herein:
(a) The Company proposes to issue and sell 1,520,910 shares of common
stock, par value $0.01 per share (the "COMMON STOCK"), of the Company, and the
Selling Stockholders propose to sell 879,090 shares of Common Stock (said shares
to be issued and sold by the Company and shares to be sold by the Selling
Stockholders collectively, the "FIRM SHARES") to the several Underwriters. The
Company also proposes to issue and sell not more than 360,000 additional shares
of Common Stock (the "OPTION SHARES" and, together with the Firm Shares, the
"SHARES") to the several Underwriters if requested by the Representatives as
provided in Section 2(b) hereof.
(b) Upon your authorization of the release of the Firm Shares, the
Underwriters propose to make a public offering (the "OFFERING") of the Firm
Shares upon the terms set forth in the Prospectus (as defined below) as soon
after the Registration Statement (as defined below) and this Agreement have
become effective as in the Representatives' sole judgment is advisable. As used
in this Agreement, the term "ORIGINAL REGISTRATION STATEMENT" means the
registration statement (File No. 333-53063) initially filed with the Securities
and Exchange Commission (the "COMMISSION") relating to the Shares, as amended at
the time when it was or is declared effective, including all financial schedules
and exhibits thereto and including any information omitted therefrom pursuant to
Rule 430A under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and included in the Prospectus; the term "RULE 462(b) REGISTRATION STATEMENT"
means any registration statement filed with the Commission pursuant to Rule
462(b) under the Securities Act (including the Registration Statement and any
Preliminary Prospectus (as defined below) or Prospectus incorporated therein at
the time such Registration
Statement becomes effective); the term "REGISTRATION STATEMENT" includes both
the Original Registration Statement and any Rule 462(b) Registration Statement;
the term "PRELIMINARY PROSPECTUS" means each prospectus subject to completion
filed with the Original Registration Statement or any amendment thereto
(including the prospectus subject to completion, if any, included in the
Original Registration Statement or any amendment thereto at the time it was or
is declared effective); the term "PROSPECTUS" means:
(i) if the Company relies on Rule 434 under the Securities
Act, the Term Sheet (as defined below) relating to the Shares that is first
filed pursuant to Rule 424(b)(7) under the Securities Act, together with the
Preliminary Prospectus identified therein that such Term Sheet supplements;
(ii) if the Company does not rely on Rule 434 under the
Securities Act, the prospectus first filed with the Commission pursuant to Rule
424(b) under the Securities Act;
(iii) if the Company does not rely on Rule 434 under the
Securities Act and if no prospectus is required to be filed pursuant to Rule
424(b) under the Securities Act, the prospectus included in the Registration
Statement; or
(iv) for purposes of the representations and warranties
contained in Section 5 hereof, if the prospectus is not in existence, the most
recent Preliminary Prospectus; and the term "TERM SHEET" means any term sheet
that satisfies the requirements of Rule 434 under the Securities Act. Any
reference herein to the "DATE" of a Prospectus that includes a Term Sheet shall
mean the date of such Term Sheet.
SECTION 2. PURCHASE AND CLOSING.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell, and the Selling Stockholders
propose to sell, to each of the Underwriters, and each of the Underwriters,
severally and not jointly, agrees to purchase from the Company and the Selling
Stockholders, at a purchase price of $___ per Share (the "PURCHASE PRICE"), the
number of Firm Shares set forth opposite the name of such Underwriter in
SCHEDULE 1 hereto. Firm Shares shall be registered by American Stock Transfer
and Trust Company in the name of the nominee of the Depository Trust Company
("DTC"), Cede & Co. ("CEDE & CO."), and credited to the accounts of such of its
participants as the Representatives shall request, upon notice to the Company
and the Selling Stockholders at least 48 hours prior to the First Closing Date
(as defined below), with any transfer taxes payable in connection with the
transfer of the Firm Shares to the Underwriters duly paid, against payment by or
on behalf of the Underwriters to the account of the Company and the Selling
Stockholders of the aggregate Purchase Price therefor by wire transfer in
immediately available funds. Delivery or registry of and payment for the Firm
Shares shall be made at the offices of [LOCATION OF CLOSING] at 9:30 A.M., New
York City time, on June __, 1998 on the third or fourth full business day
following the date of this Agreement, or at such other place, time or date as
the Representatives, the Company and the Selling Stockholders may agree upon.
Such time and date of delivery against payment are herein referred to as the
"FIRST CLOSING DATE", and the implementation of all the actions described in
this Section 2(a) is herein referred to as the "FIRST CLOSING."
(b) For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Shares as contemplated by the Prospectus, the
Company and the Selling Stockholders hereby grant to the several Underwriters an
option to purchase, severally and not jointly, the Option Shares. The purchase
price to be paid for any Option Shares shall be the same as the Purchase Price
for the Firm Shares set forth above in Section 2(a). The option granted hereby
may be exercised as to all or any part of the Option Shares from time to time
within thirty days after the date of the Prospectus (or, if such 30th day shall
be a Saturday or Sunday or a holiday, on the next business day thereafter when
the New York Stock Exchange and The Nasdaq Stock Market
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Inc's National Market (the "NASDAQ NATIONAL MARKET") is open for trading). The
Underwriters shall not be under any obligation to purchase any of the Option
Shares prior to the exercise of such option. The Representatives may from time
to time exercise the option granted hereby by giving notice in writing or by
telephone (confirmed in writing) to the Company and the Selling Stockholders
setting forth the aggregate number of Option Shares as to which the several
Underwriters are then exercising the option and the date and time for delivery
or registry of and payment for such Option Shares. Any such date of delivery or
registry shall be determined by the Representatives but shall not be earlier
than two business days or later than five business days after such exercise of
the option and, in any event, shall not be earlier than the First Closing Date.
The time and date set forth in such notice, or such other time or date as the
Representatives, the Company and the Selling Stockholders may agree upon or as
the Representatives may determine pursuant to Section 2(a) hereof, is herein
called an "OPTION CLOSING DATE" with respect to such Option Shares, and the
implementation of all the actions described in this Section 2(b) is herein
referred to as the "OPTION CLOSING". As used in this Agreement, the term
"CLOSING DATE" means either the First Closing Date or any Option Closing Date,
as applicable, and the term "CLOSING" means either the First Closing or any
Option Closing, as applicable. If the option is exercised as to all or any
portion of the Option Shares, then either one or more certificates in definitive
form for such Option Shares shall be delivered or, if such Option Shares are to
be held through DTC, such Option Shares shall be registered and credited, on the
related Option Closing Date in the same manner, and upon the same terms and
conditions, set forth in Section 2(a), except that reference therein to the Firm
Shares and the First Closing Date shall be deemed, for purposes of this
paragraph (b), to refer to such Option Shares and Option Closing Date,
respectively. Upon exercise of the option as provided herein, the Company and
the Selling Stockholders shall become obligated to sell to each of the several
Underwriters, and, on the basis of the representations, warranties, agreements
and covenants herein contained and subject to the terms and conditions herein
set forth, each of the Underwriters (severally and not jointly) shall become
obligated to purchase from the Company and the Selling Stockholders, the same
percentage of the total number of the Option Shares as to which the several
Underwriters are then exercising the option as such Underwriter is obligated to
purchase of the aggregate number of Firm Shares, as adjusted by the
Representatives in such manner as they deem advisable to avoid fractional
shares. In the event that the option is exercised in part, the number of Option
Shares to be sold by each of the Selling Stockholders shall be, as nearly as
practicable, in the same proportion to each other as are the number of Option
Shares to be sold by each Selling Stockholder listed opposite their names on
SCHEDULE 2 hereto.
(c) The Company and the Selling Stockholders hereby acknowledge that the
payment of monies pursuant to Section 2(a) and Section 2(b) hereof (a "PAYMENT")
by or on behalf of the Underwriters of the aggregate Purchase Price for any
Shares does not constitute closing of a purchase and sale of the Shares. Only
execution and delivery, by facsimile or otherwise, of a receipt for Shares by
the Underwriters indicates completion of the closing of a purchase of the Shares
from the Company and the Selling Stockholders. Furthermore, in the event that
the Underwriters make a Payment to the Company and the Selling Stockholders
prior to the completion of the closing of a purchase of Shares, the Company and
the Selling Stockholders hereby acknowledge that until the Underwriters execute
and deliver such receipt for the Shares, the Company and the Selling
Stockholders will not be entitled to the Payment and shall return the Payment to
the Underwriters as soon as practicable (by wire transfer of same-day funds)
upon demand. In the event that the closing of a purchase of Shares is not
completed and the Payment is not returned by the Company and the Selling
Stockholders to the Underwriters on the same day the Payment was received by the
Company and the Selling Stockholders, the Company and the Selling Stockholders
agree to pay to the Underwriters in respect of each day the Payment is not
returned by them, in same-day funds, interest on the amount of such Payment in
an amount representing the Underwriters' cost of financing as reasonably
determined by the Representatives, pro rata in proportion to the percentage of
such Payment received by each.
It is understood that any of you, individually and not as one of the
Representatives, may (but shall not be obligated to) make Payment on behalf of
any Underwriter or Underwriters for any of the Shares to be
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purchased by such Underwriter or Underwriters. No such Payment shall relieve
such Underwriter or Underwriters from any of its or their obligations hereunder.
SECTION 3. COVENANTS.
(a) The Company covenants and agrees with the several Underwriters that:
(i) The Company will:
(x) use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto to become effective as promptly as possible. If required,
the Company will file the Prospectus or any Term Sheet that constitutes a part
thereof and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Securities Act. During any time when a prospectus relating to the Shares is
required to be delivered under the Securities Act, the Company (I) will comply
with all requirements imposed upon it by the Securities Act and the rules and
regulations of the Commission thereunder to the extent necessary to permit the
continuance of sales of or dealings in the Shares in accordance with the
provisions hereof and of the Prospectus, as then amended or supplemented, and
(II) will not file with the Commission the Prospectus, Term Sheet, any amendment
or supplement to such Prospectus or Term Sheet, any amendment to the
Registration Statement (including the amendment referred to in the second
sentence of Section 5(a)(i) hereof) or any Rule 462(b) Registration Statement
unless the Representatives previously have been advised of, and furnished with a
copy within a reasonable period of time prior to, the proposed filing and the
Representatives shall have given their consent to such filing. The Company will
prepare and file with the Commission, in accordance with the rules and
regulations of the Commission, promptly upon request by the Representatives or
counsel for the Underwriters, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or advisable
in connection with the distribution of the Shares by the several Underwriters.
The Company will advise the Representatives, promptly after receiving notice
thereof, of the time when the Registration Statement or any amendment thereto
has been filed or declared effective or the Prospectus or Term Sheet or any
amendment or supplement thereto has been filed and will provide evidence
satisfactory to the Representatives of each such filing or effectiveness;
(y) without charge, provide (I) to the Representatives
and to counsel for the Underwriters, an executed and a conformed copy of the
Original Registration Statement and each amendment thereto or any Rule 462(b)
Registration Statement (in each case including exhibits thereto), (II) to each
other Underwriter, a conformed copy of the Original Registration Statement and
each amendment thereto or any Rule 462(b) Registration Statement (in each case
without exhibits thereto), and (III) so long as a prospectus relating to the
Shares is required to be delivered under the Securities Act, as many copies of
each Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto as the Representatives may reasonably request. Without limiting the
application of clause (III) of the preceding sentence, the Company, not later
than (A) 9:00 A.M., New York City time, on the business day following the date
of determination of the public offering price, if such determination occurred at
or prior to 12:00 noon, New York City time, on such date or (B) 6:00 P.M., New
York City time, on the business day following the date of determination of the
public offering price, if such determination occurred after 12:00 noon, New York
City time, on such date, will deliver to the Underwriters, without charge, as
many copies of the Prospectus and any amendment or supplement thereto as the
Representatives may reasonably request for purposes of confirming orders that
are expected to settle on the First Closing Date; and
(z) advise the Representatives, promptly after
receiving notice or obtaining knowledge thereof, of (I) the issuance by the
Commission of any stop order suspending the effectiveness of the
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Original Registration Statement or any amendment thereto or any Rule 462(b)
Registration Statement or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
(II) the suspension of the qualification of the Shares for offering or sale in
any jurisdiction, (III) the institution, threatening or contemplation of any
proceeding for any purpose identified in the preceding clause (I) or (II), or
(IV) any request made by the Commission for amending the Original Registration
Statement or any Rule 462(b) Registration Statement, for amending or
supplementing the Prospectus or for additional information. The Company will
use its best efforts to prevent the issuance of any such stop order and, if any
such stop order is issued, to obtain the withdrawal thereof as promptly as
possible.
(ii) The Company will arrange for the qualification of the
Shares for offering and sale in each jurisdiction as the Representatives shall
designate including, but not limited to, pursuant to applicable state securities
("BLUE SKY") laws of certain states of the United States of America or other
U.S. jurisdictions, and the Company shall maintain such qualifications in effect
for so long as may be necessary in order to complete the placement of the
Shares; provided, however, that the Company shall not be obliged to file any
general consent to service of process or to qualify as a foreign corporation or
as a securities dealer in any jurisdiction or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject.
(iii) If, at any time prior to the final date when a prospectus
relating to the Shares is required to be delivered under the Securities Act, any
event occurs as a result of which the Prospectus, as then amended or
supplemented, would contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
for any other reason it shall be necessary at any time to amend the Registration
Statement or amend or supplement the Prospectus to comply with the Securities
Act or the rules or regulations of the Commission thereunder or applicable law,
the Company will promptly notify the Representatives thereof and will promptly,
at its own expense, but subject to Section 3(a)(i)(x)(II) hereof: (x) prepare
and file with the Commission an amendment to the Registration Statement or
amendment or supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and (y) supply any amended Registration
Statement or amended or supplemented Prospectus to the Underwriters in such
quantities as the Underwriters may reasonably request.
(iv) The Company will make generally available to the Company's
securityholders and to the Representatives as soon as practicable an earnings
statement that satisfies the provisions of Section 11(a) of the Securities Act,
including Rule 158 thereunder.
(v) The Company will apply the net proceeds from the sale of
the Shares as set forth under "Use of Proceeds" in the Prospectus.
(vi) The Company will not, and will not allow any subsidiary
to, publicly announce any intention to, and will not itself, and will not allow
any subsidiary to, without the prior written consent of Deutsche Bank Securities
Inc., on behalf of the Underwriters, (x) offer, pledge, sell, offer to sell,
contract to sell, sell any option or contract to purchase, purchase any option
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, Common Stock,
or (y) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the shares of Common
Stock or securities convertible into, or exercisable or exchangeable for, shares
of Common Stock (whether any such transaction described in clause (x) or (y)
above is to be settled by delivery of shares of Common Stock or such other
securities, in cash or otherwise), for a period beginning from the date hereof
and continuing to and including the date 90 days after the date hereof, except
pursuant to this Agreement and other than with respect to (A) shares of Common
Stock to be issued upon the exercise of warrants to purchase shares
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of Common Stock, or upon conversion or exchange of securities convertible or
exchangeable into shares of Common Stock, in each case, which are outstanding on
the date hereof and disclosed in the Prospectus, and (B) shares of Common Stock
(or any securities convertible into or exchangeable for shares of Common Stock)
issued pursuant to any employee benefit plans, qualified stock option plans or
other employee compensation plans which are disclosed in the Prospectus.
(vii) Neither the Company nor any of its affiliates, nor any
person acting on behalf of any of them will, directly or indirectly, (x) take
any action designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Shares or (y) either (I) sell, bid for, purchase, or pay anyone any compensation
for soliciting purchases of, the Shares or (II) pay or agree to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
(viii) The Company will (A) obtain the Lock-up Agreements
described in Section 7(h) hereof from the persons indicated in such Section
prior to the First Closing Date, (B) enforce the terms of each Lock-up
Agreement, (C) issue stop-transfer instructions to the transfer agent for the
Common Stock with respect to any transaction or contemplated transaction that
would constitute a breach of or default under the applicable Lock-up Agreement
and (D) upon written request of Deutsche Bank Securities Inc., release from the
Lock-up Agreements those shares of Common Stock held by those holders set forth
in such request. In addition, except with the prior written consent of Deutsche
Bank Securities Inc., the Company agrees (x) not to amend or terminate, or waive
any right under, any Lock-up Agreement, or take any other action that would
directly or indirectly have the same effect as an amendment or termination, or
waiver of any right under, any Lock-up Agreement, that would permit any holder
of shares of Common Stock, or any securities convertible into, or exercisable or
exchangeable for, Common Stock, to (I) offer, pledge, sell, offer to sell,
contract to sell, sell any option or contract to purchase, purchase any option
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, such shares of Common Stock or other
securities, or (II) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of such shares
of Common Stock or other securities, and (y) not to consent to any sale, short
sale, grant of an option for the purchase of, or other disposition or transfer
of shares of Common Stock, or securities convertible into or exercisable or
exchangeable for Common Stock, which are subject to a Lock-up Agreement.
(ix) If at any time during the 25-day period after the
Registration Statement becomes effective or during the period prior to any
Closing Date, any rumor, publication or event relating to or affecting the
Company shall occur as a result of which in the Representatives' sole judgment
the market price of the Shares has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after notice
from the Representatives advising the Company to the effect set forth above,
forthwith prepare, consult with the Representatives concerning the substance of,
and disseminate a press release or other public statement reasonably
satisfactory to the Representatives, responding to or commenting on such rumor,
publication or event.
(x) If the Company elects to rely on Rule 462(b), the Company
shall both file the Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with Rule
111 promulgated under the Securities Act by the earlier of (x) 10:00 P.M. New
York City time on the date of this Agreement and (y) the time confirmations are
sent or given, as specified by Rule 462(b)(2) under the Securities Act.
(xi) The Company will cause the Shares to be duly included for
quotation on the Nasdaq National Market prior to the First Closing Date. The
Company will ensure that the Shares remain included for quotation on the Nasdaq
National Market following the First Closing Date.
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(b) Each Selling Stockholder agrees that:
(i) It will not, and no person acting on behalf of such
Selling Stockholder will, directly or indirectly, (x) take any action designed
to cause or to result in, or that has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares or (y)
(I) sell, bid for, purchase, or pay anyone any compensation for soliciting
purchases of, the Shares or (II) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company (except for the sale of Shares by the Selling Stockholders under this
Agreement).
(ii) It will not, and will not allow any subsidiary to,
publicly announce any intention to, and will not itself, and will not allow any
subsidiary to, without the prior written consent of the Representatives on
behalf of the Underwriters, (x) offer, pledge, sell, offer to sell, contract to
sell, sell any option or contract to purchase, purchase any option to sell,
grant any option, right or warrant to purchase, or otherwise transfer or dispose
of, directly or indirectly, any of the shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock, or (y) enter
into any swap or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of the shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock (whether any such transaction described in clause (x) or (y) above
is to be settled by delivery of shares of Common Stock or such other securities,
in cash or otherwise), in each case, beneficially owned (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT")) or otherwise controlled by such person on the date hereof or hereafter
acquired, for a period beginning from the date hereof and continuing to and
including the date 90 days after the date hereof; provided, however, that such
Selling Stockholder may, without the prior written consent of the
Representatives on behalf of the Underwriters, transfer shares of Common Stock
or such other securities to members of such Selling Stockholder's immediate
family or to trusts for the benefit of members of such Selling Stockholder's
immediate family or in connection with bona fide gifts, provided that any
transferee agrees to the transfer restrictions described in this Section
3(b)(ii) above.
SECTION 4. EXPENSES.
(a) The Company shall bear and pay all costs and expenses incurred
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 9 hereof, including: (i) fees and expenses of
preparation, issuance and delivery of this Agreement to the Underwriters;
(ii) the fees and expenses of its counsel, accountants and any other experts or
advisors retained by the Company; (iii) the costs of delivering and distributing
the Powers of Attorney (as defined below) and the Custody Agreements (as defined
below) and the fees and expenses of the Custodian (as defined below) (and any
other Attorney-in-Fact (as defined below)); (iv) fees and expenses incurred in
connection with the registration of the Shares under the Securities Act and the
preparation and filing of the Registration Statement, the Prospectus and all
amendments and supplements thereto; (v) the printing and distribution of the
Prospectus and any Preliminary Prospectus and the printing and production of all
other documents connected with the Offering (including this Agreement and any
other related agreements); (vi) expenses related to the qualification of the
Shares under the state securities or Blue Sky laws, including filing fees and
the fees and disbursements of counsel for the Underwriters in connection
therewith and in connection with the preparation of any Blue Sky memoranda;
(vii) the filing fees and expenses, if any, incurred with respect to any filing
with the National Association of Securities Dealers, Inc., including the fees
and disbursements of counsel for the Underwriters in connection therewith;
(viii) all expenses arising from the quoting of the Shares on the Nasdaq
National Market; (ix) all arrangements relating to the preparation, issuance and
delivery to the Underwriters of any certificates evidencing the Shares,
including transfer agent's and registrar's fees; (x) the costs and expenses of
the "roadshow" and any other meetings with prospective investors in the Shares
(other than
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as shall have been specifically approved by the Representatives to be paid for
by the Underwriters); and (xi) the costs and expenses of advertising relating to
the Offering (other than as shall have been specifically approved by the
Representatives to be paid for by the Underwriters).
(b) The Selling Stockholders shall bear and pay all costs and expenses
incurred incident to the performance of their respective obligations under this
Agreement, whether or not the transactions contemplated herein are consummated
or this Agreement is terminated pursuant to Section 9 hereof, including: (i) any
stamp duties, capital duties and stock transfer taxes, if any, payable upon the
sale of the Shares of such Selling Stockholders to the Underwriters and (ii) the
fees and disbursements of their respective counsel, accountants and other
advisors.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
(a) As a condition of the obligation of the Underwriters to underwrite and
pay for the Shares, the Company and the Selling Stockholders jointly and
severally represent and warrant to, and agree with, each of the several
Underwriters as follows:
REGISTRATION STATEMENT AND PROSPECTUS
(i) The Original Registration Statement, including the
Preliminary Prospectus, has been filed by the Company with the Commission under
the Securities Act, and one or more amendments to such Registration Statement
may also have been so filed. After the execution of this Agreement, the Company
will file with the Commission either (x) if such Registration Statement, as it
may have been amended, has been declared by the Commission to be effective under
the Securities Act, either (I) if the Company relies on Rule 434 under the
Securities Act, a Term Sheet relating to the Shares that shall identify the
Preliminary Prospectus that it supplements containing such information as is
required or permitted by Rules 434, 430A and 424(b) under the Securities Act or
(II) if the Company does not rely on Rule 434 under the Securities Act, a
prospectus in the form most recently included in an amendment to such
Registration Statement (or, if no such amendment shall have been filed, in such
Registration Statement), with such changes or insertions as are required by Rule
430A under the Securities Act or permitted by Rule 424(b) under the Securities
Act, and in the case of either clause (I) or (II) of this sentence, as have been
provided to and approved by the Representatives prior to the execution of this
Agreement, or (y) if such Registration Statement, as it may have been amended,
has not been declared by the Commission to be effective under the Securities
Act, an amendment to such Registration Statement, including a form of
prospectus, a copy of which amendment has been furnished to and approved by the
Representatives prior to the execution of this Agreement. The Company may also
file a Rule 462(b) Registration Statement with the Commission for the purpose of
registering certain additional Shares, which registration shall be effective
upon filing with the Commission.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When any Preliminary
Prospectus was filed with the Commission, it (x) contained all statements
required to be stated therein in accordance with, and complied in all material
respects with the requirements of, the Securities Act and the rules and
regulations of the Commission thereunder and (y) did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. When the Registration Statement or any
amendment thereto was or is declared effective, it (I) contained or will contain
all statements required to be stated therein in accordance with, and complied or
will comply in all material respects with the requirements of, the Securities
Act and the rules and regulations of the Commission thereunder and (II) did not
or will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. When the Prospectus or any Term
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Sheet that is a part thereof or any amendment or supplement to the Prospectus is
filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when the Registration
Statement or the amendment thereto containing the Prospectus or such amendment
or supplement to the Prospectus was or is declared effective) and on the Closing
Date, the Prospectus, as amended or supplemented at any such time, (A) contained
or will contain all statements required to be stated therein in accordance with,
and complied or will comply in all material respects with the requirements of,
the Securities Act and the rules and regulations of the Commission thereunder
and (B) did not or will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The foregoing provisions of this paragraph (ii) do not apply to statements or
omissions made in any Preliminary Prospectus, the Registration Statement or any
amendment thereto or the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives specifically for use
therein.
(iii) If the Company has elected to rely on Rule 462(b) and the
Rule 462(b) Registration Statement is not effective, (x) the Company will file a
Rule 462(b) Registration Statement in compliance with, and that is effective
upon filing pursuant to, Rule 462(b) and (y) the Company has given irrevocable
instructions for transmission of the applicable filing fee in connection with
the filing of the Rule 462(b) Registration Statement, in compliance with Rule
111 under the Securities Act, or the Commission has received payment of such
filing fee.
(iv) If the Company has elected to rely on Rule 434 under the
Securities Act, the Prospectus is not "MATERIALLY DIFFERENT", as such term is
used in Rule 434, from the prospectus included in the Registration Statement at
the time of its effectiveness or an effective post-effective amendment thereto
(including such information that is permitted to be omitted pursuant to Rule
430A under the Securities Act);
(v) The Company and the Selling Stockholders have not
distributed and, prior to the later of (x) any Closing Date and (y) the
completion of the distribution of the Shares, will not distribute any offering
material in connection with the Offering other than the Registration Statement
or any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto.
(vi) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (x) the Company and
its subsidiaries, taken as a whole, have not incurred any material liability or
obligation, direct or contingent, nor entered into any material transaction not
in the ordinary course of business; (y) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock; and (z) there has not been any
material change in the capital stock, short-term or long-term debt of the
Company and its subsidiaries, taken as a whole, except in each case as described
in or contemplated by the Prospectus.
THE SHARES
(vii) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus. All of the issued shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
applicable federal and state securities laws and were not issued in violation of
or subject to any preemptive rights or other rights to subscribe for or purchase
such securities. The Shares have been duly authorized by all necessary
corporate action of the Company and, after payment therefor in accordance
herewith, will be validly issued, fully paid and nonassessable at the Closing
Date. No holders of outstanding shares of capital stock of the Company are
entitled as such to any preemptive or other rights to subscribe for any of the
Shares, and no holder of securities of the Company has any
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right which has not been fully exercised or waived to require the Company to
register the offer or sale of any securities owned by such holder under the
Securities Act in the Offering contemplated by this Agreement.
(viii) Except as disclosed in the Prospectus, there are no
outstanding (x) securities or obligations of the Company or any of its
subsidiaries convertible into or exchangeable for any capital stock of the
Company or any such subsidiary, (y) warrants, rights or options to subscribe for
or purchase from the Company or any such subsidiary any such capital stock or
any such convertible or exchangeable securities or obligations, or (z)
obligations of the Company or any such subsidiary to issue any shares of capital
stock, any such convertible or exchangeable securities or obligations, or any
such warrants, rights or options.
(ix) Except for the shares of capital stock of each of the
subsidiaries owned by the Company and such subsidiaries, neither the Company nor
any such subsidiary owns any shares of stock or any other equity securities of
any corporation or has any equity interest in any firm, partnership, association
or other entity, except as described in or contemplated by the Prospectus.
LISTING
(x) All of the Shares have been duly authorized and accepted
for quotation on the Nasdaq National Market, subject to official notice of
issuance.
MARKET MANIPULATION
(xi) Neither the Company nor any of its affiliates, nor any
person acting on behalf of any of them has, directly or indirectly, (x) taken
any action designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Shares, or (y) since the filing of the Original Registration Statement (I) sold,
bid for, purchased, or paid anyone any compensation for soliciting purchases of,
the Shares or (II) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
CORPORATE POWER AND AUTHORITY
(xii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the law of its jurisdiction of
incorporation with full power and authority to own, lease and operate its
properties and assets and conduct its business as described in the Prospectus,
is duly qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which its ownership, leasing or operation of
its properties or assets or the conduct of its business requires such
qualification, except where the failure to be so qualified does not amount to a
material liability or disability to the Company and its subsidiaries, taken as a
whole, and has full power and authority to execute and perform its obligations
under this Agreement; each subsidiary of the Company is a corporation duly
incorporated and validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and is duly qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which its ownership, leasing or operation of its properties or assets or the
conduct of its business requires such qualification, except where the failure to
be so qualified does not amount to a material liability or disability to the
Company and its subsidiaries, taken as a whole, and each has full power and
authority to own, lease and operate its properties and assets and conduct its
business as described in the Registration Statement and the Prospectus; all of
the issued and outstanding shares of capital stock of each of the Company's
subsidiaries have been duly authorized, validly issued and are fully paid and
nonassessable and are owned beneficially by the Company free and clear of any
security interests, liens, encumbrances, equities or claims.
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(xiii) The execution and delivery of this Agreement and the
issuance and sale of the Shares have been duly authorized by all necessary
corporate action of the Company, and this Agreement has been duly executed and
delivered by the Company and is the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(xiv) The issuance, offering and sale of the Shares to the
Underwriters by the Company pursuant to this Agreement, the compliance by the
Company with the other provisions of this Agreement and the consummation of the
other transactions herein contemplated do not (x) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained or made or such as may be required
by the securities or Blue Sky laws of the various states of the United States of
America or other U.S. jurisdictions in connection with the offer and sale of the
Shares by the Underwriters, or (y) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, lease 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 or any of their respective properties are
bound, or the charter documents or by-laws of the Company or any of its
subsidiaries, or any statute or any judgment, decree, order, rule or regulation
of any court or other governmental authority or any arbitrator applicable to the
Company or any of its subsidiaries.
(xv) The Company is not, and will conduct its operations in a
manner so that it continues not to be, an "INVESTMENT COMPANY" and, after giving
effect to the Offering and the application of the proceeds therefrom, will not
be an "INVESTMENT COMPANY", as such term is defined in the Investment Company
Act of 1940, as amended (the "1940 ACT").
TITLE, LICENSES AND CONSENTS
(xvi) The Company and each of its subsidiaries have good and
marketable title in fee simple to all items of real property and marketable
title to all personal property owned by each of them, in each case free and
clear of any security interests, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value of such
property and do not interfere with the use made or proposed to be made of such
property by the Company or such subsidiary, and any real property and buildings
held under lease by the Company or any such subsidiary are held under valid,
subsisting and enforceable leases, with such exceptions as are not material and
do not interfere with the use made or proposed to be made of such property and
buildings by the Company or such subsidiary, in each case except as described in
or contemplated by the Prospectus.
(xvii) The Company and each of its subsidiaries own or
possesses adequate licenses or other rights to use any and all patents,
patent rights inventions, trade secrets, copyrights, trademarks, service
marks, trade names, technology and know-how currently employed or proposed to
be employed by them in connection with their business as described in the
Prospectus; the Company is not obligated to pay a royalty, grant a license,
or provide other consideration to any third party in connection with its
patents, copyrights, trademarks, service marks, trade names, or technology
other than as disclosed in the Prospectus; and, except as disclosed in the
Prospectus, neither the Company nor any of its subsidiaries has received any
notice of infringement or conflict with (and neither the Company nor any of
its subsidiaries knows of any infringement or conflict with) asserted rights
of others with respect to any patents, patent rights, inventions, trade
secrets, copyrights, trademarks, service marks, trade names, technology or
know-how which could result in any material adverse effect upon the Company
and its subsidiaries, taken as a whole. Except as disclosed in the
Prospectus, the discoveries, inventions, products or processes of the Company
and its subsidiaries referred to in the Prospectus do not, to the best
knowledge of the Company or any of its subsidiaries, 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
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any third party, known to the Company or any of its subsidiaries which could
have a material adverse effect on the Company and its subsidiaries, taken as a
whole. No third party, including any academic or governmental organization,
possesses rights to the Company's patents, copyrights, trademarks, service
marks, trade names, or technology which, if exercised, could enable such third
party to develop products competitive to those of the Company or could have a
material adverse effect on the ability of the Company to conduct its business in
the manner described in the Prospectus.
(xviii) The Company and its subsidiaries possess all consents,
licenses, certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have a
materially adverse effect on or constitute a materially adverse change in, or
constitute a development involving a prospective materially adverse effect on or
change in, the condition (financial or otherwise), earnings, properties,
business affairs or business prospects, net worth or results of operations of
the Company or any of its subsidiaries, taken as a whole, except as described in
or contemplated by the Prospectus.
FINANCIAL STATEMENTS
(xix) Price Waterhouse LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries and delivered their
report with respect to the audited consolidated financial statements and
schedules included in the Registration Statement and the Prospectus, are
independent public accountants as required by the Securities Act and the
applicable rules and regulations thereunder.
(xx) The consolidated financial statements and schedules of the
Company and its consolidated subsidiaries included in the Registration Statement
and the Prospectus were prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
involved (except as otherwise noted therein) and they present fairly the
financial condition of the Company as at the dates at which they were prepared
and the results of operations of the Company in respect of the periods for which
they were prepared.
INTERNAL ACCOUNTING CONTROLS
(xxi) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(w) transactions are executed in accordance with management's general or
specific authorizations; (x) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (y) access to assets is permitted only in accordance with
management's general or specific authorization; and (z) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
LITIGATION
(xxii) No legal or governmental proceedings are pending or
threatened to which the Company or any of its subsidiaries is a party or to
which the property of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the Prospectus and are
not described therein; and no statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
described therein or filed as required.
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DIVIDENDS AND DISTRIBUTIONS
(xxiii) No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, making any
other distribution on such subsidiary's capital stock, repaying to the Company
any loans or advances to such subsidiary from the Company or transferring any of
such subsidiary's property or assets to the Company or any other subsidiary of
the Company, and the Company is not currently prohibited, directly or
indirectly, from paying any dividends or making any other distribution on its
capital stock, in each case except as described in or contemplated by the
Prospectus.
TAXES
(xxiv) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested extensions
thereof (except in any case in which the failure so to file would not have a
materially adverse effect on the Company and its subsidiaries, taken as a whole)
and has paid all taxes required to be paid by it and any other assessment, fine
or penalty levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is currently being
contested in good faith or as described in or contemplated by the Prospectus.
INSURANCE
(xxv) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or otherwise), earnings, properties, business affairs or business
prospects, net worth or results of operations of the Company or any of its
subsidiaries, taken as a whole, except as described in or contemplated by the
Prospectus.
PENSION AND LABOR
(xxvi) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "REPORTABLE EVENT" (as defined in
ERISA) has occurred with respect to any "PENSION PLAN" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (x) Title IV of ERISA with respect to
termination of, or withdrawal from, any "PENSION PLAN" or (y) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "CODE"); and each "PENSION PLAN"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(xxvii) No labor dispute with the employees of the Company or
any of its subsidiaries or subcontractors exists or is threatened or imminent
that could have a materially adverse effect on or constitute a materially
adverse change in, or constitute a development involving a prospective
materially adverse effect on or change in, the condition (financial or
otherwise), properties, management, earnings, business affairs or business
prospects, net worth or results of operations of the Company or any of its
subsidiaries, taken as a whole, except as described in or contemplated by the
Prospectus.
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ENVIRONMENTAL
(xxviii) Neither the Company nor any of its subsidiaries is in
violation of any federal or state law or regulation relating to occupational
safety and health or to the storage, handling or transportation of hazardous or
toxic materials and the Company and its subsidiaries have received all permits,
licenses or other approvals required of them under applicable federal and state
occupational safety and health and environmental laws and regulations to conduct
their respective businesses, and the Company and each such subsidiary is in
compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, have a materially adverse effect on or constitute a
materially adverse change in, or constitute a development involving a
prospective materially adverse effect on or change in, the condition (financial
or otherwise), earnings, properties, business affairs or business prospects, net
worth or results of operations of the Company or any of its subsidiaries, taken
as a whole, except as described in or contemplated by the Prospectus.
OTHER AGREEMENTS
(xxix) No default exists, and no event has occurred which,
with notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, lease 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 or any of their respective properties is bound.
LOCK-UP AGREEMENTS
(xxx) Except for the Shares, all outstanding shares of Common
Stock, and all securities convertible into or exercisable or exchangeable for
Common Stock, held by each of the Company's officers, directors and holders of
five percent or more of such securities in the aggregate, are subject to valid
and binding Lock-up Agreements that restrict the holders thereof from selling,
making any short sale of, granting any option for the purchase of, or otherwise
transferring or disposing of, any of such shares of Common Stock, or any such
securities convertible into or exercisable or exchangeable for Common Stock, for
a period of 90 days after the date of the Prospectus without the prior written
consent of the Company or Deutsche Bank Securities Inc.
ABSENCE OF MATERIALLY ADVERSE CHANGE
(xxxi) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, neither
the Company nor any of its subsidiaries has sustained any material loss or
interference with their respective businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding, and there has
been no materially adverse change (including, without limitation, a change in
management or control), or development involving a prospective materially
adverse change, in the condition (financial or otherwise), management, earnings,
property, business affairs or business prospects, stockholders' equity, net
worth or results of operations of the Company or any of its subsidiaries, taken
as a whole, other than as described in or contemplated by the Prospectus
(exclusive of any amendments or supplements thereto).
(xxxii) No receiver or liquidator (or similar person) has been
appointed in respect of the Company or any subsidiary of the Company or in
respect of any part of the assets of the Company or any subsidiary of the
Company; no resolution, order of any court, regulatory body, governmental body
or otherwise, or petition or application for an order, has been passed, made or
presented for the winding up of the Company
-14-
or any subsidiary of the Company or for the protection of the Company or any
such subsidiary from its creditors; and the Company has not, and no subsidiary
of the Company has, stopped or suspended payments of its debts, become unable to
pay its debts or otherwise become insolvent.
SPRINT TRANSACTION
(xxxiii) The execution and delivery of the various agreements
together effecting the series of transactions collectively referred to in the
Prospectus as the "Sprint Transaction," including without limitation the
Investment Agreement, Governance Agreement, Agreement to Vote Stock, Agreement
to Vote and Tender Stock, Stockholders' Agreement, Registration Rights
Agreement, Credit Agreement, Marketing and Distribution Agreement and Network
Services Agreement (collectively, the "SPRINT TRANSACTION AGREEMENTS"), were
duly authorized by all necessary corporate action on the part of the Company.
The Company had all corporate power and authority to execute and deliver the
Sprint Transaction Agreements and to consummate the transactions contemplated by
the Sprint Transaction Agreements, and the Sprint Transaction Agreements
constitute a valid and binding obligation of the Company. The issuance of the
Series A Convertible Preferred Stock and other actions contemplated by the
Sprint Transaction Agreements to occur at the Closing (as such term is defined
in the Investment Agreement) have occurred.
(b) As a further condition of the obligation of the Underwriters to
underwrite and pay for the Shares, each Selling Stockholder represents and
warrants to, and agrees with, each of the several Underwriters that:
(i) Such Selling Stockholder has full power (including, if
such Selling Stockholder is a corporation or similar entity, corporate power) to
enter into this Agreement and to sell, assign, transfer and deliver to the
Underwriters the Shares to be sold by such Selling Stockholder hereunder in
accordance with the terms of this Agreement; if such Selling Stockholder is a
corporation or similar entity, the execution and delivery of this Agreement have
been duly authorized by all necessary corporate action of such Selling
Stockholder; and this Agreement has been duly executed and delivered by such
Selling Stockholder.
(ii) Such Selling Stockholder has duly executed and delivered a
power of attorney and custody agreement (with respect to such Selling
Stockholder, the "POWER-OF-ATTORNEY" and the "CUSTODY AGREEMENT", respectively),
each in the form heretofore delivered to the Representatives, appointing as such
Selling Stockholder's attorney-in-fact (the "ATTORNEY-IN-FACT") with authority
to execute, deliver and perform this Agreement on behalf of such Selling
Stockholder and appointing ________________, as custodian thereunder (the
"CUSTODIAN"). Certificates in negotiable form, endorsed in blank or accompanied
by blank stock powers duly executed, with signatures appropriately guaranteed,
representing the Shares to be sold by such Selling Stockholder hereunder have
been deposited with the Custodian pursuant to the Custody Agreement for the
purpose of delivery pursuant to this Agreement. Such Selling Stockholder has
full power (including, if such Selling Stockholder is a corporation or similar
entity, corporate power) to enter into the Custody Agreement and the
Power-of-Attorney and to perform its obligations under the Custody Agreement.
If such Selling Stockholder is a corporation or similar entity, the execution
and delivery of the Custody Agreement and the Power-of-Attorney have been duly
authorized by all necessary corporate action of such Selling Stockholder; and
the Custody Agreement and the Power-of-Attorney have been duly executed and
delivered by such Selling Stockholder and, assuming due authorization, execution
and delivery by the Custodian, are the legal, valid, binding and enforceable
instruments of such Selling Stockholder. Such Selling Stockholder agrees that
each of the Shares represented by the certificates on deposit with the Custodian
is subject to the interests of the Underwriters hereunder, that the arrangements
made for such custody, the appointment of the Attorney-in-Fact and the right,
power and authority of the Attorney-in-Fact to execute and deliver this
Agreement, to agree on the
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price at which the Shares (including such Selling Stockholder's Shares) are to
be sold to the Underwriters, and to carry out the terms of this Agreement, are
to that extent irrevocable and that the obligations of such Selling Stockholder
hereunder shall not be terminated, except as provided in this Agreement or the
Custody Agreement, by any act of such Selling Stockholder, by operation of law
or otherwise, whether in the case of any individual Selling Stockholder by the
death or incapacity of such Selling Stockholder, in the case of a trust or
estate by the death of the trustee or trustees or the executor or executors or
the termination of such trust or estate, or in the case of a corporate or
partnership Selling Stockholder by its liquidation or dissolution or by the
occurrence of any other event. If any individual Selling Stockholder, trustee
or executor should die or become incapacitated or any such trust should be
terminated, or if any corporate or partnership Selling Stockholder shall
liquidate or dissolve, or if any other event should occur, before the delivery
of such Shares hereunder, the certificates for such Shares deposited with the
Custodian shall be delivered by the Custodian in accordance with the respective
terms and conditions of this Agreement as if such death, incapacity,
termination, liquidation or dissolution or other event had not occurred,
regardless of whether or not the Custodian or the Attorney-in-Fact shall have
received notice thereof.
(iii) Such Selling Stockholder is the lawful owner of the Shares
to be sold by such Selling Stockholder hereunder and upon sale and delivery of,
and payment for, such Shares, as provided herein, such Selling Stockholder will
convey good and marketable title to such Shares, free and clear of any security
interests, liens, encumbrances, equities, claims or other defects.
(iv) Neither such Selling Stockholder nor any person acting on
behalf of it has, directly or indirectly, (x) taken any action designed to cause
or to result in, or that has constituted or which might reasonably be expected
to constitute, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares or (y) since the
filing of the Original Registration Statement (I) sold, bid for, purchased, or
paid anyone any compensation for soliciting purchases of, the Shares or (II)
paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of Shares by
the Selling Stockholders under this Agreement).
(v) Such Selling Stockholder has reviewed the Prospectus and
the Registration Statement, and the information regarding such Selling
Stockholder set forth therein under the caption "SELLING STOCKHOLDERS" is
complete and accurate.
(vi) The sale by such Selling Stockholder of Shares pursuant
hereto is not prompted by any adverse information concerning the Company or its
subsidiaries that is not set forth in the Registration Statement or the
Prospectus.
(vii) The sale of the Shares to the Underwriters by such Selling
Stockholder pursuant to this Agreement, the compliance by such Selling
Stockholder with the other provisions of this Agreement, the Custody Agreement
and the consummation of the other transactions herein contemplated do not
(i) require the consent, approval, authorization, registration or qualification
of or with any governmental authority, except such as have been obtained, such
as may be required under state securities or blue sky laws and, if the
registration statement filed with respect to the Shares (as amended) is not
effective under the Securities Act as of the time of execution hereof, such as
may be required (and shall be obtained as provided in this Agreement) under the
Securities Act, or (ii) conflict with or result in a breach or violation of any
of the terms and provisions of, or constitute a default under any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which such
Selling Stockholder or (if such Selling Stockholder is a corporation or similar
entity) any of its subsidiaries is a party or by which such Selling Stockholder
or (if such Selling Stockholder is a corporation or similar entity) any of its
subsidiaries or any of such Selling Stockholder's respective properties are
bound, or (if such Selling Stockholder is a corporation or similar entity) the
charter documents or by-laws of such Selling Stockholder or
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any of its subsidiaries or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any arbitrator
applicable to such Selling Stockholder or any of its subsidiaries.
(viii) The above representations and warranties shall be
deemed to be repeated at each Closing, and all references therein to the Shares
and the Closing Date shall be deemed to refer to the Firm Shares or the Option
Shares and the First Closing Date or the applicable Option Closing Date, each as
applicable.
SECTION 6 INDEMNITY.
(a) The Company and each Selling Stockholder jointly and severally agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, against any and all losses, claims, damages
or liabilities, joint or several, to which such Underwriter or such controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement made by
the Company or such Selling Stockholder in Section 5 hereof,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other costs or expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
however, that the Company and such Selling Stockholder will 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 any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement
or any amendment thereto, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through the
Representatives specifically for use therein. The indemnity provided for in
this Section 6 shall be in addition to any liability which the Company and
such Selling Stockholder may otherwise have. Neither the Company nor any
Selling Stockholder will, without the prior written consent of the
Representatives, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not any such
Representatives or any person who controls any such Representatives is a
party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of all of the
Underwriters and such controlling persons from all liability arising out of
such claim, action, suit or proceeding.
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement, each Selling Stockholder and each person, if any, who
controls the Company or such Selling Stockholder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to which the Company or any such director
or officer of the Company, such Selling Stockholder or any such controlling
person of the Company or such Selling Stockholder may become subject under the
Securities Act or otherwise,
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insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement or
any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or (ii) the omission or the alleged omission to
state in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto 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 reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and, subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person or
such Selling Stockholder or controlling person of such Selling Stockholder in
connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or any action
in respect thereof. The remedies provided for in this Section 6 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) of this Section 6, such person (for
purposes of this paragraph (c), the "INDEMNIFIED PARTY") shall, promptly after
receipt by such party of notice of the commencement of such action, notify the
person against whom such indemnity may be sought (for purposes of this paragraph
(c), the "INDEMNIFYING PARTY"), but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 6. In case any such action
is brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense of any such action and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 6 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated in writing by the Representatives in
the case of paragraph (a) of this Section 6, representing the indemnified
parties under such paragraph (a) who are parties to such action or actions), or
(ii) the indemnifying party does not promptly retain counsel satisfactory to the
indemnified party, or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
All fees and expenses reimbursed pursuant to this paragraph (c) shall be
reimbursed as they are incurred. After such notice from the indemnifying party
to such indemnified party, the indemnifying party will not be liable for the
costs and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party.
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(d) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this Section 6 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying party,
in order to provide for just and equitable contribution, 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 (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the Offering or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total 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. The relative fault of the parties 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, the Selling Stockholders or the
Underwriters, the parties' relative intents, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company, the
Selling Stockholders and the Underwriters agree that it would not be equitable
if the amount of such contribution were determined by pro rata or per capita
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to above in this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no Underwriter shall
be obligated to make contributions hereunder that in the aggregate exceed the
total public offering price of the Shares purchased by such Underwriter under
this Agreement, less the aggregate amount of any damages that such Underwriter
has otherwise been required to pay in respect of the same or any substantially
similar claim, and no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute hereunder are
several in proportion to their respective underwriting obligations and not
joint, and contributions among Underwriters shall be governed by the provisions
of the Deutsche Bank Securities Inc. Master Agreement Among Underwriters. For
purposes of this paragraph (d), each person, if any, who controls an Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company or any
Selling Stockholder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, shall have the same rights to contribution as
the Company or such Selling Stockholder, as the case may be.
SECTION 7. CONDITIONS PRECEDENT.
The obligations of the several Underwriters to purchase and pay for the
Shares shall be subject, in the Representatives' sole discretion, to the
accuracy of the representations and warranties of the Company and the Selling
Stockholders contained herein as of the date hereof and as of each Closing Date,
as if made on and as of each Closing Date, to the accuracy of the statements of
the Company's officers and the Selling Stockholders made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective covenants and agreements hereunder and to the
following additional conditions:
(a) (i) If the Original Registration Statement or any amendment thereto
filed prior to the First Closing Date has not been declared effective as of the
time of execution hereof, the Original Registration
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Statement or such amendment shall have been declared effective not later than
6:00 P.M. New York City time on the date of determination of the public offering
price, if such determination occurred at or prior to 4:30 P.M. New York City
time on such date, or 12:00 Noon New York City time on the business day
following the day on which the public offering price was determined, if such
determination occurred after 4:30 P.M. New York City time on such date, and
(ii) if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have been declared effective not later than the
time confirmations are sent or given as specified by Rule 462(b)(2), or such
later time and date as shall have been consented to by the Representatives; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under the
Securities Act; no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no proceedings
for that purpose shall have been instituted or threatened or, to the knowledge
of the Company or the Representatives, shall be contemplated by the Commission;
and the Company shall have complied with any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise).
(b) The Representatives shall have received a legal opinion from Hunton &
Williams, counsel for the Company, dated the Closing Date, to the effect that:
(i) the Registration Statement is effective under the
Securities Act; any required filing of the Prospectus, or any Term Sheet that
constitutes a part thereof, pursuant to Rules 434 and 424(b) has been made in
the manner and within the time period required by Rules 434 and 424(b); and no
stop order suspending the effectiveness of the Registration Statement or any
amendment thereto has been issued and, to the best knowledge of such counsel, no
proceedings for that purpose are pending or threatened by the Commission;
(ii) the Original Registration Statement and each amendment
thereto, any Rule 462(b) Registration Statement and the Prospectus (in each
case, other than the financial statements and other financial information
contained therein, as to which such counsel need express no opinion) comply as
to form in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission thereunder;
(iii) such counsel has no reason to believe that (in each case,
other than the financial statements and other financial information contained
therein, as to which such counsel need express no opinion) (x) the Registration
Statement, as of its effective date, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or (y) the
Prospectus, as of its date or the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(iv) if the Company elects to rely on Rule 434 under the
Securities Act, the Prospectus is not "materially different", as such term is
used in Rule 434, from the prospectus included in the Registration Statement at
the time of its effectiveness or an effective post-effective amendment thereto
(including such information that is permitted to be omitted pursuant to Rule
430A under the Securities Act);
(v) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable, and except as set forth in the Prospectus, the
Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations; and all outstanding shares of capital stock
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and options and other rights to acquire capital stock have been issued in
compliance with all applicable federal and state securities laws and were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities; the Shares have been duly authorized by
all necessary corporate action of the Company and, when issued and delivered to
and paid for by the Underwriters pursuant to this Agreement, will be validly
issued, fully paid and nonassessable;
(vi) all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company, free and
clear of any perfected security interests or any other security interests,
liens, encumbrances, equities or claims;
(vii) no holders of outstanding shares of capital stock of the
Company are entitled as such to any preemptive or other rights to subscribe for
any of the Shares; and no holder of securities of the Company has any right
which has not been fully exercised or waived to require the Company to register
the offer or sale of any securities owned by such holder under the Securities
Act in the Offering contemplated by this Agreement;
(viii) all of the Shares have been duly authorized and
accepted for quotation on the Nasdaq National Market, subject to official notice
of issuance;
(ix) the Company and each of its subsidiaries listed in
Exhibit 22 to the Registration Statement have been duly organized and are
validly existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation and are duly qualified to transact
business as foreign corporations and are in good standing under the laws of all
other jurisdictions where the ownership, leasing or operation of their
respective properties or assets or the conduct of their respective businesses
requires such qualification, except where the failure to be so qualified does
not amount to a material liability or disability to the Company and its
subsidiaries, taken as a whole; the Company and each of its subsidiaries have
full power and authority to own, lease and operate their respective properties
and assets and conduct their respective businesses as described in the
Registration Statement and the Prospectus, and the Company has full power and
authority to enter into this Agreement and to carry out all the terms and
provisions hereof to be carried out by it; and all of the issued and outstanding
shares of capital stock of each of the Company's subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and are owned
beneficially by the Company free and clear of any perfected security interests
or, to the best knowledge of such counsel, any other security interests, liens,
encumbrances, equities or claims;
(x) the statements set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company, provide a fair
summary of such provisions; and the statements set forth under the headings
"Risk Factors --Significant Ownership by Sprint; Commercial Relationship with
Sprint," "Risk Factors--Government Regulation," "Risk Factors--Proprietary
Rights; Infringement Claims," "Risk Factors--Control by Directors, Executive
Officers, Five Percent Stockholders and Affiliated Entities," "Risk
Factors--Effect of Certain Charter Provisions," "Risk Factors--Shares Eligible
for Future Sale," "Strategic Alliance with Sprint," "Dividend Policy,"
"Management--Employment Contracts and Change in Control Arrangements,"
"Management--1995 Stock Option Plan and Other Warrant and Option Issuances,"
"Management--Directors Stock Option Plan and Other Director Issuances,"
"Management--Certain Transactions" and "Shares Eligible for Future Sale" in the
Prospectus, insofar as such statements constitute a summary of the legal
matters, documents or proceedings referred to therein, have been reviewed by
such counsel and fairly present the information called for with respect to such
legal matters, documents and proceedings in all material respects as required by
the Securities Act and the rules and regulations thereunder;
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(xi) the execution and delivery of this Agreement have been
duly authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company; the issuance,
offering and sale of the Shares to the Underwriters by the Company pursuant to
this Agreement, the compliance by the Company with the other provisions of this
Agreement and the consummation of the other transactions herein contemplated do
not (x) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained or made (and specified in such opinion) or such as may be required by
the securities or Blue Sky laws of the various states of the United States of
America and other U.S. jurisdictions in connection with the offer and sale of
the Shares by the Underwriters, or (y) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, lease or other agreement or instrument,
known to such counsel, to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of their
respective properties are bound, or the charter documents or by-laws of the
Company or any of its subsidiaries, or any statute or any judgment, decree,
order, rule or regulation of any court or other governmental authority or any
arbitrator known to such counsel and applicable to the Company or its
subsidiaries;
(xii) the Company is not an "INVESTMENT COMPANY" and, after
giving effect to the Offering and the application of the proceeds therefrom,
will not be an "INVESTMENT COMPANY", as such term is defined in the 1940 Act;
and
(xiii) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or to which the property of the Company or any of its
subsidiaries is subject that are required to be described in the Registration
Statement or the Prospectus and are not described therein or any statutes,
regulations, contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described therein or filed as required.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdiction other than the States of California and
Delaware or the United States, to the extent satisfactory in form and scope to
counsel for the Underwriters, upon the opinion of other counsel. The foregoing
opinion shall also state that the Underwriters are justified in relying upon
such opinion(s) of other counsel, and copies of such opinion(s) shall be
delivered to the Representatives and counsel for the Underwriters.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion. The opinions of issuer's counsel described herein shall be
rendered to the Underwriters at the request of the Company and shall so state
therein.
(c) The Representatives shall have received a legal opinion from [HUNTON &
WILLIAMS], counsel for the Selling Stockholders, dated the Closing Date, to the
effect that:
(i) such Selling Stockholder has full power (including if such
Selling Stockholder is a corporation or similar entity, corporate power) to
enter into this Agreement, the Custody Agreement and the Power-of-Attorney and
to sell, assign, transfer and deliver the Shares being sold by such Selling
Stockholder hereunder in the manner provided in this Agreement and to perform
its obligations under the Custody Agreement; to the extent such Selling
Stockholder is a corporation or similar entity, the execution and delivery of
this Agreement, the Custody Agreement and the Power-
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of-Attorney have been duly authorized by all necessary corporate action of each
Selling Stockholder; this Agreement, the Custody Agreement and the
Power-of-Attorney have been duly executed and delivered by each Selling
Stockholder; assuming due authorization, execution and delivery by the
Custodian, the Custody Agreement and the Power-of-Attorney are the legal, valid,
binding and enforceable instruments of such Selling Stockholder, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law);
(ii) the delivery by each Selling Stockholder to the several
Underwriters of certificates for the Shares being sold hereunder by such Selling
Stockholder against payment therefor as provided herein, will convey good and
marketable title to such Shares to the several Underwriters, free and clear of
all security interests, liens, encumbrances, equities, claims or other defects;
(iii) the sale of the Shares to the Underwriters by such Selling
Stockholder pursuant to this Agreement, the compliance by such Selling
Stockholder with the other provisions of this Agreement and the Custody
Agreement and the consummation of the other transactions herein contemplated do
not (x) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have been
obtained and such as may be required under state securities or blue sky laws, or
(y) conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which such Selling Stockholder
or any of its subsidiaries is a party or by which such Selling Stockholder or
any of its subsidiaries or any of their respective properties are bound, or, to
the extent such Selling Stockholder is a corporation or similar entity, the
charter documents or by-laws of such Selling Stockholder, or any of its
subsidiaries, or any statute or any judgment, decree, order, rule or regulation
of any court or other governmental authority or any arbitrator applicable to
such Selling Stockholder or any of its subsidiaries.
In rendering such opinion, such counsel may rely, as to matters of fact, to
the extent such counsel deems proper, on certificates of responsible officers of
the Selling Stockholders and public officials and, as to matters involving the
application of laws of any jurisdiction other than the States of California or
Delaware or the United States, to the extent satisfactory in form and scope to
counsel for the Underwriters, upon the opinion of other counsel. The foregoing
opinion shall also state that the Underwriters are justified in relying upon
such opinion of such other counsel, and copies of such opinion shall be
delivered to the Representatives and counsel for the Underwriters.
References to the Registration Statement and the Prospectus in this
paragraph (c) shall include any amendment or supplement thereto at the date of
such opinion.
(d) The Representatives shall have received a legal opinion from Wilson
Sonsini Goodrich & Rosati, counsel for the Underwriters, dated the Closing Date,
covering the issuance and sale of the Shares, the Registration Statement and the
Prospectus, and such other related matters as the Representatives may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(e) The Representatives shall have received from Price Waterhouse LLP a
letter or letters dated, respectively, the date hereof and the Closing Date, in
form and substance satisfactory to the Representatives, to the effect that:
(i) they are independent accountants with respect to the
Company and its consolidated subsidiaries within the meaning of the Securities
Act and the applicable rules and regulations thereunder;
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(ii) in their opinion, the audited consolidated financial
statements and schedules examined by them and included in the Registration
Statement and the Prospectus comply in form in all material respects with the
applicable accounting requirements of the Securities Act and the related
published rules and regulations;
(iii) on the basis of a reading of the latest available interim
unaudited consolidated financial statements of the Company and its consolidated
subsidiaries and a reading of the unaudited amounts for total revenues and total
and per share amounts of net income (or, as applicable, loss) for the periods
for which "capsule" information is provided and of the unaudited consolidated
financial statements of the Company and its consolidated subsidiaries for the
periods from which such amounts are derived, carrying out certain specified
procedures (which do not constitute an examination made in accordance with
generally accepted auditing standards) that would not necessarily reveal matters
of significance with respect to the comments set forth in this paragraph (iii),
a reading of the minute books of the stockholders, the board of directors and
any committees thereof of the Company and each of its consolidated subsidiaries,
and inquiries of certain officials of the Company and its consolidated
subsidiaries who have responsibility for financial and accounting matters,
nothing came to their attention that caused them to believe that:
(x) the unaudited consolidated financial statements of
the Company and its consolidated subsidiaries included in the Registration
Statement and the Prospectus do not comply in form in all material respects with
the applicable accounting requirements of the Securities Act and the related
published rules and regulations thereunder or are not in conformity with GAAP
applied on a basis substantially consistent with that of the audited
consolidated financial statements included in the Registration Statement and the
Prospectus;
(y) the unaudited amounts for total revenues, and
total and per share amounts of net income (or, as applicable, loss) included in
the Registration Statement and the Prospectus do not agree with the amounts set
forth in any unaudited consolidated financial statements for those same periods
or are not in conformity with GAAP accounting principles applied on a basis
substantially consistent with that of the corresponding amounts in the audited
consolidated financial statements included in the Registration Statement and the
Prospectus; and
(z) at a specific date not more than three business
days prior to the date of such letter, there were any changes in the capital
stock or long-term debt, accumulated deficit or total liabilities of the Company
and its consolidated subsidiaries or any decreases in cash and cash equivalents,
total assets or stockholders' equity of the Company and its consolidated
subsidiaries, in each case compared with amounts shown on the March 31, 1998
unaudited consolidated balance sheet included in the Registration Statement and
the Prospectus, or for the period from one day after the date of the most recent
consolidated balance sheet to such specified date there were any decreases, as
compared with the corresponding period in both the preceding fiscal year and the
preceding fiscal quarter, in total revenues, EBITDA or total or per share
amounts of net income (or, as applicable, loss) of the Company and its
consolidated subsidiaries, except in all instances for changes, decreases or
increases set forth in such letter.
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records of
the Company and its consolidated subsidiaries and are included in the
Registration Statement and the Prospectus under the captions __________________
and in Exhibit 11 to the Registration Statement, and have compared such amounts,
percentages and financial information with such records of the Company and its
consolidated subsidiaries and with information derived from such records and
have found them to be in agreement, excluding any questions of legal
interpretation.
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(v) on the basis of a reading of the unaudited pro forma
consolidated condensed financial statements included in the Registration
Statement and the Prospectus, carrying out certain specified procedures that
would not necessarily reveal matters of significance with respect to the
comments set forth in this paragraph (v), inquiries of certain officials of the
Company and its consolidated subsidiaries and Sprint Corporation who have
responsibility for financial and accounting matters and proving the arithmetic
accuracy of the application of the pro forma adjustments to the historical
amounts in the unaudited pro forma consolidated condensed financial statements,
nothing came to their attention that caused them to believe that the unaudited
pro forma consolidated condensed financial statements do not comply in form in
all material respects with the applicable accounting requirements of Rule 11-02
of Regulation S-X or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of such statements.
In the event that the letters referred to above set forth any such changes,
decreases or increases, it shall be a further condition to the obligations of
the Underwriters that (I) such letters shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (II) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Shares as contemplated by the Registration Statement, as amended as of the date
hereof. References to the Registration Statement and the Prospectus in this
paragraph (e) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(f) The Company shall have furnished or caused to be furnished to the
Underwriters at the Closing a certificate of its Chairman of the Board, its
President or its Chief Executive Officer and its Chief Financial Officer
satisfactory to the Underwriters to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Closing Date; the
Registration Statement, as of its effective date, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Prospectus, as amended or supplemented as of the Closing Date, does not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company has
performed all covenants and agreements and satisfied all conditions on its part
to be performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the best
of the Company's knowledge, are contemplated by the Commission; and
(iii) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, neither the Company
nor any of its subsidiaries has sustained any material loss or interference with
their respective businesses or properties from fire, flood, hurricane, accident
or other calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding, and there has not been any
materially adverse change (including, without limitation, a change in management
or control), or development involving a prospective materially adverse change,
in the condition (financial or otherwise), management, earnings, properties,
business affairs or business prospects, stockholders' equity, net worth or
results of operations of the Company or any of its subsidiaries, except in each
case as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto).
(g) The Representatives shall have received from each Selling Stockholder
a certificate, signed by such Selling Stockholder, dated the Closing Date, to
the effect that:
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(i) the representations and warranties of such Selling
Stockholder in this Agreement are true and correct as if made on and as of the
Closing Date;
(ii) the Registration Statement, as amended as of the Closing
Date, does not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading, and
the Prospectus, as amended or supplemented as of the Closing Date, does not
include any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(iii) such Selling Stockholder has performed all covenants and
agreements on its part to be performed or satisfied at or prior to the Closing
Date.
(h) The Representatives shall have received from each person who is a
director or officer of the Company or who owns more than 5% of the outstanding
shares of Common Stock an agreement (a "LOCK-UP AGREEMENT") dated on or before
the date of this Agreement to the effect that such person will not publicly
announce any intention to and will not, without the prior written consent of the
Representatives on behalf of the Underwriters, (i) offer, pledge, sell, offer to
sell, contract to sell, sell any option or contract to purchase, purchase any
option to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any of the shares of Common
Stock or any securities convertible into, or exercisable or exchangeable for,
Common Stock, or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the shares of
Common Stock or any securities convertible into, or exercisable or exchangeable
for, shares of Common Stock (whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of shares of Common Stock or such
other securities, in cash or otherwise), in each case, beneficially owned
(within the meaning of Rule 13d-3 under the Exchange Act) or otherwise
controlled by such person on the date hereof or hereafter acquired, for a period
beginning from the date hereof and continuing to and including the date 90 days
after the date hereof; provided, however, that such person may, without the
prior written consent of the Representatives on behalf of the Underwriters,
transfer shares of Common Stock or such other securities to members of such
person's immediate family or to trusts for the benefit of members of such
person's immediate family or in connection with bona fide gifts, provided that
any transferee agrees to the transfer restrictions described above.
(i) Prior to the commencement of the Offering, the Company shall have made
an application for the quotation of the Shares on the Nasdaq National Market and
the Shares shall have been included for trading on the Nasdaq National Market,
subject to official notice of issuance.
(j) Subsequent to the execution and delivery of this Agreement and prior
to the Closing Date, there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION", as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act.
(k) On or before the Closing Date, the Representatives and counsel for the
Underwriters shall have received such further certificates, documents or other
information as they may have reasonably requested from the Company and the
Selling Stockholders.
(l) All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
satisfactory in all material respects to the Representatives and counsel for the
Underwriters. The Company and the Selling Stockholders shall furnish to the
Representatives
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such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase and pay
for any Shares shall be subject, in their discretion, to each of the foregoing
conditions to purchase the Shares, except that all references therein to the
Shares and the Closing Date shall be deemed to refer to the Firm Shares or the
Option Shares and the First Closing Date or the related Option Closing Date,
each as applicable.
SECTION 8. DEFAULT OF UNDERWRITERS.
If, at the First Closing, any one or more of the Underwriters shall fail or
refuse to purchase Shares that it has or they have agreed to purchase hereunder
on such date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is ten
percent or less of the aggregate number of the Shares to be purchased on such
date, the other Underwriters may make arrangements satisfactory to the
Representatives for the purchase of such Shares by other persons (who may
include one or more of the non-defaulting Underwriters, including the
Representatives), but if no such arrangements are made by the First Closing
Date, the other Underwriters shall be obligated severally in the proportions
that the number of Firm Shares set forth opposite their respective names in
Schedule 1 hereto bears to the aggregate number of Firm Shares set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as the Representatives may specify, to purchase the Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date. If, at the First Closing, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than ten
per cent of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to the Representatives, the Company and the Selling
Stockholders for the purchase of such Firm Shares are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter, the Company or any Selling Stockholder. In
any such case either the Representatives or the Company shall have the right to
postpone the Closing, but in no event for longer than seven days, in order that
the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, at
any Option Closing, any Underwriter or Underwriters shall fail or refuse to
purchase Option Shares, the non-defaulting Underwriters shall have the option to
(i) terminate their obligation hereunder to purchase Option Shares or
(ii) purchase not less than the number of Option Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. As used in this Agreement, the term "UNDERWRITER" includes any person
substituted for an Underwriter under this Section 8. Any action taken under
this Section 8 shall not relieve any defaulting Underwriter from liability in
respect of any default of such Underwriter under this Agreement.
SECTION 9. TERMINATION.
This Agreement shall be subject to termination in the sole discretion of
the Representatives by notice to the Company and the Selling Stockholders given
prior to any Closing Date in the event that the Company or any Selling
Stockholder shall have failed, refused or been unable to perform all obligations
and satisfy all conditions on its part to be performed or satisfied hereunder at
or prior thereto or, if at or prior to any Closing Date, (a) trading in
securities generally on the New York Stock Exchange or the Nasdaq National
Market shall have been suspended or materially limited or minimum or maximum
prices shall have been established by or on, as the case may be, the Commission
or the New York Stock Exchange or the Nasdaq National Market; (b) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market; (c) a general moratorium on commercial banking
activities shall have been declared by either Federal or New York State
authorities; (d) there shall have occurred (i) an outbreak or escalation of
hostilities between the United States and any foreign power, (ii) an outbreak or
escalation of any other insurrection or armed conflict
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involving the United States, or (iii) any other calamity or crisis or materially
adverse change in general economic, political or financial conditions having an
effect on the U.S. financial markets that, in the sole judgment of the
Representatives, makes it impractical or inadvisable to proceed with the public
offering or the delivery of the Shares as contemplated by the Registration
Statement, as amended as of the date hereof; or (e) the Company or any of its
subsidiaries shall have, in the sole judgment of the Representatives, sustained
any material loss or interference with their respective businesses or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental proceeding,
or there shall have been any materially adverse change (including, without
limitation, a change in management or control), or constitute a development
involving a prospective materially adverse change, in the condition (financial
or otherwise), management, earnings, properties, business affairs or business
prospects, stockholders' equity, net worth or results of operations of the
Company or any of its subsidiaries, except in each case as described in or
contemplated by the Prospectus (exclusive of any amendment or supplement
thereto). Termination of this Agreement pursuant to this Section 9 shall be
without liability of any party to any other party except for the liability of
the Company in relation to expenses as provided in Sections 4 and 10 hereof, the
liability of the Selling Stockholders in relation to expenses as provided in
Sections 4 and 10 hereof, the indemnity provided in Section 6 hereof and any
liability arising before or in relation to such termination.
SECTION 10. REIMBURSEMENT OF EXPENSES.
If the sale of the Shares provided for herein is not consummated because
any condition to the obligations of the Underwriters set forth in Section 7
hereof is not satisfied or because of any termination pursuant to Section 9
hereof (other than by reason of a default by any of the Underwriters), the
Company shall reimburse the Underwriters, severally upon demand, for all
out-of-pocket expenses (including fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Shares. If the Company is required to make any payments to the Underwriters
under this Section 10 because of any Selling Stockholder's refusal, inability or
failure to satisfy any condition to the obligations of the Underwriters set
forth in Section 7 hereof, such defaulting Selling Stockholder, pro rata in
proportion to the percentage of Shares to be sold by each, shall reimburse the
Company on demand for all amounts so paid.
SECTION 11. INFORMATION SUPPLIED BY UNDERWRITERS.
The statements set forth in the last paragraph on the front cover page and
under the heading "Underwriting" in any Preliminary Prospectus or the Prospectus
(to the extent such statements relate to the Underwriters) constitute the only
information furnished by any Underwriter through the Representatives to the
Company for the purposes of Section 5(a)(ii) and Section 6 hereof. The
Underwriters confirm that such statements (to such extent) are correct.
SECTION 12. NOTICES.
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 the Representatives. Any notice or notification in any form to be
given under this Agreement may be delivered in person or sent by telex,
facsimile or telephone (subject in the case of a communication by telephone to
confirmation by telex or facsimile) addressed to: in the case of the Company:
EarthLink Network, Inc.
3100 New York Drive, Pasadena, California 91107
Facsimile:
Attention: Grayson L. Hoberg
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in the case of the Underwriters:
Deutsche Bank Securities Inc.
31 West 52nd Street
New York, New York 10019
Facsimile: (212) 469-8173
Telex: (212) 469-7151
Attention: Thomas Curtis, Esq.
In the case of the Selling Stockholders, any such notice shall be addressed to
the Selling Stockholders at the addresses set forth in Schedule 2 hereto. Any
notice under this Section 12 shall take effect, in the case of delivery, at the
time of delivery and, in the case of telex or facsimile, at the time of
dispatch.
SECTION 13. MISCELLANEOUS.
(a) Time shall be of the essence of this Agreement.
(b) The headings herein are inserted for convenience of reference only and
are not intended to be part of, or to affect, the meaning or interpretation of
this Agreement.
(c) For purposes of this Agreement, (a) "BUSINESS DAY" means any day on
which the New York Stock Exchange is open for trading, and (b) "SUBSIDIARY" has
the meaning set forth in Rule 405 under the Securities Act.
(d) This Agreement may be executed in any number of counterparts, all of
which, taken together, shall constitute one and the same Agreement and any party
may enter into this Agreement by executing a counterpart.
(e) This Agreement shall inure to the benefit of and shall be binding upon
the several Underwriters, the Company, the Selling Stockholders and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person, except that
(i) the indemnities of the Company and the Selling Stockholders contained in
Section 6 hereof shall also be for the benefit of any person or persons who
control any Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters
contained in Section 6 hereof shall also be for the benefit of the directors of
the Company, the officers of the Company who have signed the Registration
Statement, each Selling Stockholder and any person or persons who control the
Company or such Selling Stockholder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act. No purchaser of Shares from
any Underwriter shall be deemed a successor because of such purchase.
(f) The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Company, its officers, the Selling
Stockholders and the several Underwriters set forth in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall remain in
full force and effect, regardless of (i) any investigation made by or on behalf
of the Company, any of its officers or directors, the Selling Stockholders, any
Underwriter or any controlling person referred to in Section 6 hereof and
(ii) delivery of and payment for the Shares. The respective agreements,
covenants, indemnities and other
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statements set forth in Sections 4, 6 and 10 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
SECTION 14. SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 15. GOVERNING LAW.
The validity and interpretation of this Agreement, and the terms and
conditions set forth herein, shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to any provisions
relating to conflicts of laws. If the foregoing is in accordance with your
understanding, please sign and return to us eight (8) counterparts hereof, 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 and the Company. It is understood that your acceptance
of this letter on behalf of each of the Underwriters is pursuant to the
authority set forth in the Deutsche Bank Securities Inc. Master Agreement Among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
EARTHLINK NETWORK, INC.
By:
----------------------------
Name:
---------------------------
Title:
--------------------------
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SELLING STOCKHOLDERS
By:
-----------------------------
Attorney-in-Fact
The foregoing Agreement is hereby confirmed and
accepted as of the date first above written.
DEUTSCHE BANK SECURITIES INC.
INVEMED ASSOCIATES, INC.
THE ROBINSON-HUMPHREY COMPANY
By: DEUTSCHE BANK SECURITIES INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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SCHEDULE 1
THE UNDERWRITERS
Number of
Firm Shares
Underwriter To Be Purchased
------------ ----------------
Deutsche Bank Securities Inc.
Invemed Associates, Inc.
The Robinson-Humphrey Company
TOTAL FIRM SHARES:
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SCHEDULE 2
THE SELLING STOCKHOLDERS
Name and Address of Number of Firm Shares
Selling Stockholders To Be Sold
-------------------- -----------------------
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