Exhibit 1.1
3,450,000 Shares
BREAKAWAY SOLUTIONS, INC.
COMMON STOCK, $0.000125 PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
__________, 1999
__________, 1999
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Deutsche Bank Securities, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Breakaway Solutions, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several underwriters (the "Underwriters")
named in Schedule I to this Underwriting Agreement (the "Agreement") 3,000,000
shares of its common stock, $0.000125 par value per share (the "Firm Shares").
The Company also proposes to issue and sell to the several Underwriters not more
than an additional 450,000 shares of its common stock, $0.000125 par value per
share (the "Additional Shares"), if and to the extent that you, as the managers
of this offering, shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares." The shares of common
stock, $0.000125 par value per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "Common Stock."
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, including a prospectus, relating to
the Shares. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "Prospectus."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement"), then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement.
Morgan Stanley & Co. Incorporated ("Morgan Stanley") has agreed to
reserve a portion of the Shares to be purchased by it under this Agreement for
sale to the Company's directors,
officers, employees and business associates and other parties related to the
Company (collectively, "Participants"), as set forth in the Prospectus under the
heading "Underwriters" (the "Directed Share Program"). The Shares to be sold by
Morgan Stanley and/or Dean Witter Reynolds, Inc., pursuant to the Directed Share
Program are referred to hereinafter as the "Directed Shares." Any Directed
Shares will be offered to the public by the Underwriters as set forth in the
Prospectus unless they are orally confirmed for purchase by any Participants by
the end of the business day on which this Agreement is executed.
1. Representations and Warranties. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or, to the
Company's knowledge, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, 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, (ii) the Registration Statement and the
Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder and (iii) the
Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph
do not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority
to own its property and to conduct
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its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole; 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 of record directly by the Company, free and clear of all
liens, encumbrances, equities or claims (except for director qualifying
shares).
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid
and non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered and paid for by the Underwriters in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive or
similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale
of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(k) There are no (i) legal or governmental proceedings pending or,
to the Company's knowledge, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company
or any of its subsidiaries is
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subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or (ii) 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 or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Securities Act, complied when so
filed in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(p) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company or to require the Company to include such securities with the
Shares registered pursuant to the Registration Statement, and, if so
described, such rights have been waived.
(q) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) the Company
and its subsidiaries have not
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incurred any material liability or obligation, direct or contingent, nor
entered into any material transaction not in the ordinary course of
business; (ii) 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 other than ordinary and
customary dividends; and (iii) there has not been any material change in
the capital stock, short-term debt or long-term debt of the Company and
its subsidiaries, except in each case as described in the Prospectus.
(r) The Company and its subsidiaries have good and marketable title
to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; neither the Company nor its
subsidiaries own any real property; and any real property and buildings
held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are
not material and do not materially interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries, in each case except as described in the Prospectus.
(s) The Company and its subsidiaries own or possess, can acquire on
reasonable terms, or otherwise has the right to use all material patents,
patent rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks and trade names currently employed by them in connection with the
business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice of, or has any knowledge of,
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(t) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in the Prospectus, or,
to the knowledge of the Company, is imminent; and the Company is not aware
of any existing, threatened or imminent labor disturbance by the employees
of any of its principal suppliers, manufacturers or contractors that could
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(u) The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as, in the Company's reasonable judgment, are prudent and
customary in the businesses in which they are engaged; neither the Company
nor any of its subsidiaries has been refused any insurance coverage sought
or applied for; and neither the Company nor any of its
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subsidiaries 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 have a material adverse
effect on the Company and its subsidiaries, taken as a whole, except as
described in the Prospectus.
(v) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses, other than those which, if not so possessed, would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole, and neither the Company nor any of its subsidiaries 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 material adverse effect on the Company and its subsidiaries,
taken as a whole, except as described the Prospectus.
(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(x) The accountants who have certified or shall certify the
financial statements filed or to be filed with the Commission as part of
the Registration Statement and the Prospectus are independent accountants
as required by the Securities Act. The consolidated financial statements
of the Company and its subsidiaries (together with the related notes
thereto) included in the Registration Statement present fairly the
financial position and results of operations of the Company and its
subsidiaries at the respective dates and for the respective periods to
which they apply, subject to normal year-end adjustments. Such financial
statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as otherwise stated therein. The pro forma financial information of
the Company and its subsidiaries included in the Registration Statement
has been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements, has been properly compiled
on the bases described therein and, in the opinion of the Company and its
subsidiaries, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
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(y) The Shares have been approved for listing on the Nasdaq National
Market, subject to official notice of issuance.
(z) The Registration Statement, the Prospectus and any preliminary
prospectus comply, and any amendments or supplements thereto will comply,
with any applicable laws or regulations of foreign jurisdictions in which
the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share
Program.
(aa) No consent, approval, authorization or order of, or
qualification with, any governmental body or agency, other than those
obtained, is required in connection with the offering of the Directed
Shares in any jurisdiction where the Directed Shares are being offered.
(bb) The Company has not offered, or caused Morgan Stanley to offer,
Shares to any person pursuant to the Directed Share Program with the
specific intent to unlawfully influence (i) a customer or supplier of the
Company to alter the customer's or supplier's level or type of business
with the Company, or (ii) a trade journalist or publication to write or
publish favorable information about the Company or its products.
(cc) The Company and its subsidiaries have implemented a program, as
described in the Prospectus, to analyze and address the risk that the
computer hardware and software used by them and each material supplier,
including financial service organizations, vendor or customer used or
serviced by them may be unable to recognize and properly execute date
sensitive functions involving certain dates prior to and any dates after
December 31, 1999 (the "Year 2000 Problem"), and the Company has no
reason to believe and does not believe that the Year 2000 Problem will
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(dd) To the Company's knowledge, no officer or director of the
Company is in breach or violation of any employment agreement,
non-competition agreement, confidentiality agreement, or other agreement
restricting the nature or scope of employment to which such officer or
director is a party, and, to the Company's knowledge, the conduct of the
Company's business, as described in the Registration Statement and
Prospectus, will not result in a breach or violation of any such
agreement.
(ee) There are no outstanding options to acquire shares of capital
stock of the Company except as disclosed in the Registration Statement and
the Prospectus and except as have been granted under the 1998 Stock
Incentive Plan and 1999 Stock Incentive Plan since June 30, 1999.
2. Agreements to Sell and Purchase. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties
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herein contained, but subject to the conditions hereinafter stated, agrees,
severally and not jointly, to purchase from the Company the respective numbers
of Firm Shares set forth in Schedule I hereto opposite its name at $_______ a
share (the "Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 450,000 Additional
Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to
exercise such option, you shall so notify the Company in writing not later than
30 days after the date of this Agreement, which notice shall specify the number
of Additional Shares to be purchased by the Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, 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 (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof that is described in the
Prospectus or of which the Underwriters have been advised in writing or (C) the
issuance by the Company of shares of Common Stock or options to purchase shares
of Common Stock pursuant to the Company's stock plans as described in the
Prospectus, provided, that, the recipient of any such option or shares shall
exercise and deliver to you on or before the date of such issuance a "lock-up"
agreement substantially in the form of Exhibit A hereto.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the
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public initially at $_______________ a share (the "Public Offering Price") and
to certain dealers selected by you at a price that represents a concession not
in excess of $_______ a share under the Public Offering Price, and that any
Underwriter may allow, and such dealers may reallow, a concession, not in excess
of $______ a share, to any Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made
to the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on _____________, 1999, or at
such other time on the same or such other date, not later than _________, 1999,
as shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date". The closing of the offer and the
sale of the Firm Shares will be held at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts.
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than _______, 1999, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "Option Closing Date". The closing of the offer and the sale of any
Additional Shares will be held at the offices of Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts.
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 4:30 p.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
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(i) if any of the Company's securities are rated by any
"nationally recognized statistical rating organization," as such
term is defined for purposes of Rule 436(g)(2) under the Securities
Act, then 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 according to such
security; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations
of the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 5(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date. The officer signing and delivering such certificate may
rely upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Hale and Dorr LLP, outside counsel for the Company, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified as a foreign
corporation in [list states], which, to such counsel's knowledge are
the only jurisdictions in which the Company owns or leases real
property or maintains an office in the United States;
(ii) to such counsel's knowledge, the Company has no
subsidiaries except as set forth on Exhibit 21.1 of the Registration
Statement, and each domestic subsidiary of the Company listed on
Exhibit 21.1 has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus;
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(iii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(iv) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable;
(v) all of the issued shares of capital stock of each
subsidiary of the Company listed on Exhibit 21.1 have been duly and
validly authorized and issued, are fully paid and non-assessable and
are owned of record directly by the Company, and, to such counsel's
knowledge, are free and clear of all liens, encumbrances, equities
or claims, except as described in the Prospectus;
(vi) the Shares have been duly authorized and, when issued and
delivered and paid for by the Underwriters in accordance with the
terms of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject
to any preemptive rights under the Delaware General Corporation Law,
the certificate of incorporation or by-laws of the Company or, to
such counsel's knowledge, similar right granted by contract;
(vii) this Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company or any
agreement or other instrument binding upon the Company or any of its
subsidiaries that has been filed as an exhibit to the Registration
Statement, or, to such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having jurisdiction
over the Company or any subsidiary specifically naming the Company
or any of its subsidiaries or any of their properties, and no
consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, except such as
may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares;
(ix) the statements (A) in the Prospectus under the captions
"Description of Capital Stock" and the first, second, fourth,
seventh, ninth, eleventh and twelve paragraphs under "Underwriters"
and (B) in the Registration Statement in Items 14 and 15, in each
case insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
present the
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information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to
therein;
(x) after due inquiry, 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 any of the
properties 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 so described or of any statutes, regulations,
contracts or other documents that are required by the Securities Act
or by the rules and regulations thereunder to be described in the
Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement that are not described or filed as
required; and
(xi) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended;
In addition, such counsel shall state that, in connection with the
preparation of the Registration Statement and the Prospectus, such counsel
has participated in conferences with officers and representatives of the
Company, counsel for the Underwriters and the independent accountants of
the Company, at which conferences such counsel made inquiries of such
persons and others and discussed the contents of the Registration
Statement and the Prospectus. Such counsel shall also state that, while
the limitations inherent in the independent verification of factual
matters and the character of determinations involved in the registration
process are such that such counsel is not passing upon and does not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus
(other than the matters referred to in paragraph (ix)), subject to the
foregoing and based on such participation, inquiries and discussions, no
facts have come to such counsel's attention which have caused such counsel
to believe that the Registration Statement and the prospectus included
therein at the time the Registration Statement became effective (but after
giving effect to any changes incorporated pursuant to Rule 430A under the
Act), contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading (except that such
counsel shall express no such view with respect to the financial
statements, including the notes and schedules thereto, or any other
financial or statistical data included therein), that the Prospectus, as
of its date, contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (except that such counsel shall express no such view with
respect to the financial statement, including the notes and schedules
thereto, or any other financial or statistical data included therein), or
that the Registration Statement or the Prospectus, as
-12-
of the Closing Date, contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading (except that such counsel shall express no such view
with respect to the financial statements, including the notes and
schedules thereto, or any other financial data included therein).
The Registration Statement and the Prospectus (other than the
financial statements, including the notes and schedules thereto, and other
financial data, as to which such counsel need not express an opinion)
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder.
(d) The Underwriters shall have received on the Closing Date an
opinion from _____________, counsel to WPL Laboratories, Inc., a
Pennsylvania corporation ("WPL") dated the Closing Date, to the effect
that WPL has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation; and that all of the issued shares of capital stock of WPL
have been duly and validly authorized and issued, are fully paid and
non-assessable, and (except for directors' qualifying shares and except as
otherwise set forth in the Prospectus) are owned directly by the Company;
(d) The Underwriters shall have received on the Closing Date an
opinion of Ropes & Gray, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in Sections 5(c)(vi), 5(c)(vii),
5(c)(ix) (but only as to the statements in the Prospectus under
"Description of Capital Stock" and "Underwriters") and the last two
unenumerated paragraphs of Section 5(c) above.
The opinion of Hale and Dorr LLP described in Section 5(c)
above shall be rendered to the Underwriters at the request of the Company
and shall so state therein.
(e) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the
Underwriters, from KPMG LLP, independent certified public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier than
the date hereof.
(f) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and each of the officers, directors and
beneficial owners of Common Stock of the Company (as defined and
determined according to Rule 13d-3 under the Exchange Act, except that a
180-day period shall be used rather than the 60-day period
-13-
set forth therein) other than those individuals listed on Schedule II
hereto, relating to sales and certain other dispositions of shares of
Common Stock or certain other securities, delivered to you on or before
the date hereof, shall be in full force and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 12:00 p.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment
or supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
-14-
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders
and to you as soon as practicable an earnings statement covering the
twelve-month period ending September 30, 2000 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under
this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all
other fees or expenses in connection with the preparation and filing of
the Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies
thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing any
Blue Sky or Legal Investment memorandum in connection with the offer and
sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under
state securities laws as provided in Section 6(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with
the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the
reasonable fees and disbursements of counsel to the Underwriters incurred
in connection with the review and qualification of the offering of the
Shares by the National Association of Securities Dealers, Inc., (v) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all
costs and expenses incident to listing the Shares on the Nasdaq National
Market, (vi) the cost of printing certificates representing the Shares,
(vii) the costs and charges of any transfer agent, registrar or
depositary, (viii) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with
the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in connection
with the road show presentations with the prior approval of the Company,
travel and lodging expenses of the representatives and officers of the
Company and any such consultants, and the cost of any aircraft chartered
in connection with the road show, (ix) all other costs and expenses
incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section, and (x) all
fees and disbursements of counsel incurred by the Underwriters in
connection with the Directed Share Program and stamp duties, similar taxes
or duties or other taxes, if any,
-15-
incurred by the Underwriters in connection with the Directed Share
Program. It is understood, however, that except as provided in this
Section, Section 7 entitled "Indemnity and Contribution", and the last
paragraph of Section 10 below, the Underwriters will pay all of their
costs and expenses, including fees and disbursements of their counsel,
stock transfer taxes payable on resale of any of the Shares by them and
any advertising expenses connected with any offers they may make.
(g) To place stop transfer orders on any Directed Shares that have
been sold to Participants subject to the three month restriction on sale,
transfer, assignment, pledge or hypothecation imposed by NASD Regulation,
Inc. under its Interpretative Material 2110-1 on free-riding and
withholding to the extent necessary to ensure compliance with the three
month restrictions. Morgan Stanley will notify the Company as to which
Participants will need to be so restricted.
(h) To comply with all applicable securities and other applicable
laws, rules and regulations in each jurisdiction in which the Directed
Shares are offered in connection with the Directed Share Program.
7. Indemnity and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from
and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably
incurred in connection with defending or investigating any such action or
claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from
the Company to such Underwriter, but only with reference to information
relating to such Underwriter furnished to the Company in writing by such
Underwriter
-16-
through you expressly for use in the Registration Statement, any
preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(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 Section 7(a) or 7(b), such
person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party, upon request of the indemnified party, shall
retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii)
the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is
understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel)
for all such indemnified parties and that all such fees and expenses shall
be reimbursed as they are incurred. Such firm shall be designated in
writing by Morgan Stanley, in the case of parties indemnified pursuant to
Section 7(a), and by the Company, in the case of parties indemnified
pursuant to Section 7(b), in each case, unless such firm is retained
pursuant to the first paragraph of this Section 7(c). The indemnifying
party shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there
be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 7(a)
or 7(b) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other
-17-
hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause 7(d)(i) above but also the relative fault of the
Company on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Underwriters on the other hand in connection with the
offering of the Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Shares (before
deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as
set forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares. The relative fault of the
Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 7(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 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.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any
-18-
termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Company, its officers or directors or any person controlling
the Company and (iii) acceptance of and payment for any of the Shares.
8. Directed Share Program Indemnification.
(a) The Company agrees to indemnify and hold harmless Morgan Stanley
and Dean Witter Reynolds, Inc., and each person, if any, who controls
Morgan Stanley or Dean Witter Reynolds, Inc., within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act
("Morgan Stanley Entities"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating
any such action or claim) (i) caused by any untrue statement or alleged
untrue statement of a material fact contained in any material prepared by
or with the consent of the Company for distribution to Participants in
connection with the Directed Share Program, or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii)
caused by the failure of any Participant to pay for and accept delivery of
Directed Shares which, immediately following the effectiveness of the
Registration Statement, were subject to a properly confirmed agreement to
purchase or (ii) related to, arising out of, or in connection with the
Directed Share Program other than losses, claims, damages or liabilities
(or expenses relating thereto) that are finally judicially determined to
have resulted from the bad faith or negligence of Morgan Stanley Entities.
(b) In case any proceeding (including any governmental
investigation) shall be instituted involving any Morgan Stanley Entity in
respect of which indemnity may be sought pursuant to Section 8(a), the
Morgan Stanley Entity seeking indemnity shall promptly notify the Company
in writing, and the Company, upon request of the Morgan Stanley Entity,
shall retain counsel reasonably satisfactory to the Morgan Stanley Entity
to represent the Morgan Stanley Entity and any other person the Company
may designate in such proceeding and shall pay the fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
Morgan Stanley Entity shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
Morgan Stanley Entity unless (i) the Company shall have agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Company and the Morgan
Stanley Entity and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them. The Company shall not, in respect of the legal expenses of
the Morgan Stanley Entities in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Morgan Stanley Entities. Any such firm for the Morgan Stanley Entities
shall be designated in writing by Morgan Stanley
-19-
unless such firm is retained pursuant to the first sentence of this
Section 8(b). The Company shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Company
agrees to indemnify the Morgan Stanley Entities from and against any loss
or liability by reason of such settlement or judgment. The Company shall
not, without the prior written consent of Morgan Stanley, effect any
settlement of any pending or threatened proceeding in respect of which any
Morgan Stanley Entity is or could have been a party and indemnity could
have been sought hereunder by such Morgan Stanley Entity, unless such
settlement includes an unconditional release of the Morgan Stanley
Entities from all liability on claims that are the subject matter of such
proceeding.
(c) To the extent the indemnification provided for in Section 8(a)
is unavailable to a Morgan Stanley Entity or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then the
Company, in lieu of indemnifying the Morgan Stanley Entity thereunder,
shall contribute to the amount paid or payable by the Morgan Stanley
Entity as a result of such losses, claims, damages or liabilities (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Morgan Stanley Entities on
the other hand from the offering of the Directed Shares or (ii) if the
allocation provided by clause 8(c)(i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause 8(c)(i) above but also the relative fault
of the Company on the one hand and of the Morgan Stanley Entities on the
other hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and of the Morgan Stanley Entities on the other hand in
connection with the offering of the Directed Shares shall be deemed to be
in the same respective proportions as the net proceeds from the offering
of the Directed Shares (before deducting expenses) and the total
underwriting discounts and commissions received by the Morgan Stanley
Entities for the Directed Shares, bear to the aggregate Public Offering
Price of the Directed Shares. If the loss, claim, damage or liability is
caused by an untrue or alleged untrue statement of a material fact, the
relative fault of the Company on the one hand and the Morgan Stanley
Entities on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement or the
omission or alleged omission relates to information supplied by the
Company or by the Morgan Stanley Entities and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(d) The Company and the Morgan Stanley Entities agree that it would
not be just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Morgan Stanley Entities
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in Section 8(c). The amount paid or payable by the Morgan
Stanley Entities as a result of the losses, claims, damages and
liabilities referred to in the
-20-
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by the Morgan Stanley Entities in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of
this Section 8, no Morgan Stanley Entity shall be required to contribute
any amount in excess of the amount by which the total price at which the
Directed Shares distributed to the public were offered to the public
exceeds the amount of any damages that such Morgan Stanley Entity has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The remedies provided for in this
Section 8 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any Morgan Stanley Entity at law or in
equity.
(e) The indemnity and contribution provisions contained in this
Section 8 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by
or on behalf of any Morgan Stanley Entity or the Company, its officers or
directors or any person controlling the Company and (iii) acceptance of
and payment for any of the Directed Shares.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, 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 not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall
-21-
be obligated severally in the proportions that the number of Firm Shares set
forth opposite their respective names in Schedule I 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 you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If, on
the Closing Date, 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 one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you and the Company 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 or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, 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, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
-22-
13. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
BREAKAWAY SOLUTIONS, INC.
By:_____________________________
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Deutsche Bank Securities, Inc.
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By:______________________________
Name:
Title:
-23-
SCHEDULE I
Number of
Firm Shares
Underwriter To Be
Purchased
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Deutsche Bank Securities, Inc.
[NAMES OF OTHER UNDERWRITERS]
-------------------------
Total ........
=========================
24
SCHEDULE II
[Individuals]
25
Exhibit A
_______________, 1999
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Deutsche Bank Securities, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("Morgan Stanley") proposes to enter into an Underwriting Agreement (the
"Underwriting Agreement") with Breakaway Solutions, Inc., a Delaware corporation
(the "Company"), providing for the public offering (the "Public Offering") by
the several Underwriters named therein, including Morgan Stanley (the
"Underwriters"), of shares (the "Shares") of the common stock, par value $0.0001
per share, of the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, the undersigned will not, during the period
commencing on the date hereof and ending 180 days after the date of the final
prospectus relating to the Public Offering (the "Prospectus"), (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, 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 (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (a)
the sale of any Shares to the Underwriters pursuant to the Underwriting
Agreement, (b) transactions relating to shares of Common Stock or other
securities acquired in open market transactions after the completion of the
Public Offering, or (c) the sale of any Shares acquired from the Underwriters.
In addition, the undersigned agrees that, without the prior written
consent of Morgan Stanley on behalf of the Underwriters, it will not, during the
period commencing on the date
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hereof and ending 180 days after the date of the Prospectus, make any demand for
or exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
Notwithstanding the foregoing (i) gifts and transfers by will or intestacy
or (ii) transfers to (A) the undersigned's members, partners, affiliates or
immediate family or (B) a trust, the beneficiaries of which are the undersigned
and/or members of the undersigned's immediate family, shall not be prohibited by
this agreement; provided, that (x) the donee or transferee agrees in writing to
be bound by the foregoing in the same manner as it applies to the undersigned
and (y) if the donor or transferor is a reporting person subject to Section
16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), any gifts or
transfers made in accordance with this paragraph shall not require such person
to, and such person shall not voluntarily, file a report of such transaction on
Form 4 under the Exchange Act. "Immediate family" shall mean spouse, lineal
descendants, father, mother, brother or sister of the transferor and father,
mother, brother or sister of the transferor's spouse.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
This agreement shall automatically terminate on the date that the
Underwriting Agreement is terminated, in the event that the Underwriters do not
purchase the Shares and the Underwriting Agreement is terminated pursuant to its
terms.
Very truly yours,
____________________________
(Name)
____________________________
(Address)
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